Euro and Pound do good job absorbing political risk

Next 24 hours: Fed Chair Powell testimony in focus

Today’s report: Euro and Pound do good job absorbing political risk

A political gridlock in France and strong reassurances from the incoming UK government seem to have been enough to keep the Euro and Pound supported into this latest rally. Currencies have been better bid across the board, mostly on the back of a fresh wave of US Dollar selling.

Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

The Euro has been in a multi-month consolidation since bottoming out in 2022. Setbacks have since been exceptionally well supported on dips below 1.0500, with a higher platform sought out ahead of the next major upside extension. Look for a push through the 2023 high at 1.1276 to strengthen the constructive outlook and extend the recovery run towards 1.2000. Only back below 1.0400 negates.

  • R2 1.0917 – 4 June high – Strong
  • R1 1.0846 - 8 July high – Medium
  • S1 1.0762 - 18 June high– Medium
  • S2 1.0666 – 26 June low – Strong

EURUSD – fundamental overview

The Euro has been happy to consolidate recent gains in the aftermath of the second round of the French election. It seems the market is taking more comfort in the prospect of a gridlocked government than a Le Pen majority. There are however concerns around the French debt burden and recent German trade data. Looking ahead, the only notable standout on Tuesday’s calendar comes from Fed Chair Powell testimony.

EURUSD - Technical charts in detail

GBPUSD – technical overview

Signs have emerged of the market wanting to put in a longer-term base after collapsing to a record low in September 2022. The door is now open for the next major upside extension towards the 2023 high at 1.3143. Any setbacks should be well supported ahead of 1.2000.

  • R2 1.2894 – 8 March/2024 high – Strong
  • R1 1.2861 – 12 June high – Medium
  • S1 1.2740 – 4 July low – Medium
  • S2 1.2668 – 3 July low – Medium

GBPUSD – fundamental overview

The incoming Chancellor has put growth at the top of the list of objectives for the new government and the UK market has welcomed this news, with the Pound outperforming as a consequence. We've also heard from BOE Haskel who has warned about inflation risk and says he will vote to keep rates steady in August. Looking ahead, the only notable standout on Tuesday’s calendar comes from Fed Chair Powell testimony.

USDJPY – technical overview

The market remains confined to a strong uptrend, most recently extending to a multi-year high through 160.00. Key support comes in at 151.95, with only a weekly close below to delay the constructive outlook. Next major resistance comes in at 165.00.

  • R2 162.00 – Figure – Strong
  • R1 161.96 – 3 July/2024/Multi-Year high – Medium
  • S1 159.60 – 26 June low – Medium
  • S2 158.67 – 21 June low – Medium

USDJPY – fundamental overview

The latest quarterly BOJ survey reported broadening wage growth, with wages seen matching and exceeding the previous year. Market odds for a July BOJ rate hike have now moved up to slightly better than a coin toss. Looking ahead, the only notable standout on Tuesday’s calendar comes from Fed Chair Powell testimony.

AUDUSD – technical overview

There are signs of the potential formation of a longer-term base with the market trading down into a meaningful longer-term support zone. Only a monthly close below 0.6200 would give reason for rethink. Back above 0.6900 will take the big picture pressure off the downside and strengthen case for a bottom.

  • R1 0.6800– Figure – Medium
  • R2 0.6762 – 8 July high – Medium
  • S1 0.6620 – 28 June low – Medium
  • S2 0.6576 – 10 June low – Strong

AUDUSD – fundamental overview

Aussie gains stumbled on Monday after facing headwinds from a metals decline and Aussie home loans turning negative. Looking ahead, the only notable standout on Tuesday’s calendar comes from Fed Chair Powell testimony.

USDCAD – technical overview

Above 1.3000 signals an end to a period of longer-term bearish consolidation and suggests the market is in the process of carving out a more significant longer-term base. Next key resistance now comes in up into the 1.4000 area. Setbacks should be very well supported down into the 1.3000 area.

  • R2 1.3847 – 16 April/2024 high – Strong
  • R1 1.3792 – 11 June high – Medium
  • S1 1.3602 – 5 July low – Medium
  • S2 1.3586 – 10 May low – Strong

USDCAD – fundamental overview

The Canadian Dollar spent Monday consolidating declines after taking a hit on last Friday's softer Canada jobs report. We also got to take in a Canada confidence survey that produced a minor dip. Looking ahead, the only notable standout on Tuesday’s calendar comes from Fed Chair Powell testimony.

NZDUSD – technical overview

Overall pressure remains on the downside with the market continuing to stall out on runs up into the 0.6500 area. At the same time, there are some signs of the market wanting to put in a longer-term base. Ultimately, a break back above 0.6500 would be required to take the medium-term pressure off the downside and encourage this prospect. A monthly close below 0.5800 will intensify bearish price action.

  • R2 0.6222 – 12 June high – Strong
  • R1 0.6200 – Figure – Medium
  • S1 0.6048 – 2 July low – Medium
  • S2 0.6031 – 15 May low – Strong

NZDUSD – fundamental overview

The RBNZ will meet tomorrow, though no change is expected on policy. But it's possible we are seeing some position adjusting and profit taking kicking in ahead of the event risk. Looking ahead, the only notable standout on Tuesday’s calendar comes from Fed Chair Powell testimony.

US SPX 500 – technical overview

Longer-term technical studies continue to look quite extended, begging for a deeper correction ahead. At the same time, the latest bullish breakout to a fresh record high beyond the 2024 high opens the door for the next measured move upside extension targeting the 5650 area. Key support comes in at 5194.

  • R2 5600 – Round Number – Strong
  • R1 5590 – 8 July/Record high – Medium
  • S1 5394 – 14 June low – Medium
  • S2 5321 – 7 June low – Strong

US SPX 500 – fundamental overview

Though we have seen a healthy adjustment of investor expectations towards the amount of rate cuts in 2024, the market still hopes policy will end up erring more towards the investor friendly, accommodative side of things. This bet has kept stocks well bid into dips and consistently pushing record highs. Still, if there is a sense the Fed will need to be more sensitive towards erring on the side of higher rates, it could invite major disruption to the stock market.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and this next major upside extension into the 2500-3000 area. Setbacks should now be well supported above 2000 on a monthly close basis.

  • R2 2451 – 20 May Record high – Strong
  • R1 2400 – Round Number – Medium
  • S1 2277 – 3 May low – Strong
  • S2 2223– 21 March high – Strong

GOLD (SPOT) – fundamental overview

The yellow metal has pushed record highs in 2024 with solid demand from medium and longer-term accounts. These players are more concerned about inflation, geopolitical risk and a less upbeat global growth outlook. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an end.

Peformance chart: 30-Day Performance vs. US dollar (%)

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