Next 24 hours: Waiting on the US market response to politics
Today’s report: Expect added volatility after Biden drops out of race
As the week gets going, the market will be contending with the latest bout of risk off flow which saw US equities reverse sharply off record highs. The flight to safety intensified in the latter portion of the previous week and Dollar demand picked up as well.
Wake-up call
- producer prices
- retail sales
- hike odds
- AUDUSD Copper down 17% over past two months
- retail sales
- sentiment deteriorates
- Fed outlook
- Macro themes
Peformance chart: 30-Day Performance vs. US dollar (%)
Suggested reading
- Three Big Things Happening in the US Economy, S. Varghese, Carson Group (July 18, 2024)
- Donald Trump Versus the US Dollar, A. Rajadhyaksha, Financial Times (July 19, 2024)
Chart talk: Technical & fundamental highlights
Choose pair:
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.EURUSD – fundamental overview
The Euro is trying to find its footing after a dovish ECB decision. Friday's round of hotter than expected German producer prices have certainly contributed to the support for the single currency into dips. Monday’s economic calendar is exceptionally thin with only the Chicago Fed national activity index standing out.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 1.2500.GBPUSD – fundamental overview
The Pound has come under some pressure after last week's cooler UK wages data and discouraging UK retail sales print. Odds for an August BOE rate cut have pushed back up as a consequence. Monday’s economic calendar is exceptionally thin with only the Chicago Fed national activity index standing out.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.USDJPY – fundamental overview
Odds for a BOJ rate hike at the end of the month have now cooled off to around 45% from 60% a week ago. The latest softer than expected Japan core CPI read could be factoring into the renewed Yen selling. Monday’s economic calendar is exceptionally thin with only the Chicago Fed national activity index standing out.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.AUDUSD – fundamental overview
It's been a tough stretch for the Australian Dollar with the currency suffering from struggling Chinese markets, sliding copper, and a downturn in US equities. Monday’s economic calendar is exceptionally thin with only the Chicago Fed national activity index standing out.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.USDCAD – fundamental overview
The Canadian Dollar sold off into the end of last week on a Canada retail sales miss and intense bearish performance in the price of oil. The slide in US equities did nothing to help the Canadian Dollar's cause either. Monday’s economic calendar is exceptionally thin with only the Chicago Fed national activity index standing out.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.NZDUSD – fundamental overview
Most of the latest round of setbacks in the New Zealand Dollar have been attributed to the downturn in US equities and global sentiment. Monday’s economic calendar is exceptionally thin with only the Chicago Fed national activity index standing out.US SPX 500 – technical overview
Longer-term technical studies continue to look quite extended, begging for a deeper correction ahead. The latest rally has extended to reach and even exceed a 355 point measured move extension target objective in the 5,640 area, adding to the case for an imminent correction. At this stage, additional upside should be limited to allow for overbought studies to unwind. There is now room for a pullback towards previous resistance turned support in the form of the previous record high from April around 5,290.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 2200 on a monthly close basis.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.