Today’s report: Dollar Dips, Pound Recovers, Gold Advances
The US Dollar was already under pressure into the latter half of the week, on the back of another wave of soft Dollar trade policy talk out of the US administration, before taking another hit late Thursday, after Fed Williams upgraded his dovish outlook. Meanwhile the Pound extended its recovery on data and more encouraging Brexit news.
- dovish ECB
- Brexit news
- BOJ Kuroda
- SNB policy
- jobs data
- CPI result
- Kiwi outperforms
- Fed incentives
- Macro players
- Higher profile
- global downturn
Chart talk: Technical & fundamental highlights
EURUSD – technical overviewThe major pair has extended its run of declines off the 2008 high, trading down to a fresh multi-month low in May. But with the downtrend looking exhausted, the prospect for a meaningful higher low is more compelling, with a higher low sought out above the multi-year low from 2017, ahead of the next major upside extension. Only a weekly close back below the psychological barrier at 1.1000 would compromise this outlook. Back above 1.1450 will strengthen the view.
- R2 1.1348 – 7 June high – Strong
- R1 1.1286 - 11 July high – Medium
- S1 1.1194 - 9 July low – Medium
- S2 1.1181 – 15 June low – Strong
EURUSD – fundamental overviewThere has been an ongoing wave of support for the Euro into dips, and the recovery is looking like it wants to turn into something more constructive as we head towards the weekly close. Despite talk of ECB adjustments to policy, in which the central bank would err back on the accommodative side, the Euro has been propped up on the combination of above forecast Eurozone data this week, soft Dollar trade policy talk out from the US administration and upgraded dovishness from Fed Williams. Looking ahead, key standouts on the Friday calendar come from German producer prices, Michigan sentiment and Fed speak from Bullard and Rosengren.
EURUSD - Technical charts in detail
GBPUSD – technical overviewThe major has been well supported on dips in 2019, but will need to hold up above 1.2400 on a weekly close basis, to keep the constructive outlook intact. If the market can hold up above 1.2400, it will set up a higher low above the +30 year low from 2016, ahead of the next major upside extension. If however the market puts in a weekly close below 1.2400, this will open the door for a retest of the sub-1.2000 2016 low.
- R2 1.2579 – 12 July high – Strong
- R1 1.2559 – 17 July low – Medium
- S1 1.2424 – 18 July low – Medium
- S2 1.2382 – 17 July/2019 low – Strong
GBPUSD – fundamental overviewThings have been looking up for the Pound after the UK currency sunk to a 27 month low earlier in the week. The combination of solid UK economic data and brighter Thursday news relating to Brexit, have been primary drivers behind the currency's relative strength, though Dollar weakness from a dovish Fed Williams has also factored into the Pound's recovery. On Thursday, UK retail sales beat, The Irish PM was confident the border issue could be resolved and EU negotiator Barnier expressed willingness to seek out alternatives to the Irish backstop. Meanwhile, the UK House of Commons voted to back an amendment designed to make it tougher for the next PM to suspend Parliament in an effort to force a no-deal Brexit. We also heard from incoming European Commission President Von derLeyen, who said the Brexit deadline could be extended and the EU and UK must do whatever it takes to achieve an orderly Brexit. Looking ahead, key standouts on the Friday calendar come from UK public sector net borrowing, Michigan sentiment and Fed speak from Bullard and Rosengren.
USDJPY – technical overviewThe longer-term downtrend remains firmly intact, with the major pair gravitating back towards a retest of major support in the form of the 2018 and 2019 lows respectively, down in the 104s. Any rallies should now be well capped below 110.00, though only a break back above the yearly high at 112.40 would compromise the bearish outlook.
- R2 108.61 – 12 July high – Strong
- R1 108.00 – Figure – Medium
- S1 107.00 – Figure – Medium
- S2 106.78 – 25 June low – Strong
USDJPY – fundamental overviewThe Yen has been finding its way back to the topside (USDJPY lower) as we head into the weekly close, with the currency getting a boost from US administration soft Dollar policy talk, signs of downside pressure in the stock market and upgraded dovishness From Fed Williams. In Japan, Finance Minister Taro Aso said he's 'ready to act if risks materialize,' while BoJ Governor Kuroda said the central bank will 'continue powerful easing persistently'. Looking ahead, key standouts on the Friday calendar come from Japan inflation readings, Michigan sentiment and Fed speak from Bullard and Rosengren.
EURCHF – technical overviewThe recent breakdown below critical range support in the 1.1200 area, has opened the door for the next wave of declines targeting a move back towards initial support in the form of the 1.1000 psychological barrier. The market is trading at its lowest levels in nearly two years and at this point, it would take a daily close back above 1.1279 to take the immediate pressure off the downside.
- R2 1.1265 – 12 June high – Strong
- R1 1.1173 – 2 July high – Medium
- S1 1.1057 – 16 July/2019 low – Medium
- S2 1.1000 – Psychological – Strong
EURCHF – fundamental overviewThe SNB remains uncomfortable with Franc appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook. Any signs of sustained risk liquidation, will likely invite a very large wave of demand for the Franc that will put the SNB in the more challenging position of needing to back up its talk with action, that ultimately, may not prove to be as effective as it once was, given where we're at in the monetary policy cycle.
AUDUSD – technical overviewThe market has been very well supported on dips since breaking down in early January to multi-year lows. The price action suggests we could be seeing the formation of a major base, though it would take a clear break back above 0.7100 to strengthen this outlook. In the interim, look for setbacks to continue to be well supported ahead of 0.6800.
- R2 0.7140 – 23 April high – Strong
- R1 0.7100 – Figure – Medium
- S1 0.6996 – 17 July low – Strong
- S2 0.6911 – 10 July low – Strong
AUDUSD – fundamental overviewThe Australian Dollar handled some setbacks earlier in the week and has rallied back to the topside into Friday, with the commodity currency benefiting from the latest Aussie employment report, rallying metals prices, soft US Dollar protectionist talk out from President Trump and upgraded dovishness from Fed Williams. Looking ahead, key standouts on the Friday calendar come from Michigan sentiment and Fed speak from Bullard and Rosengren.
USDCAD – technical overviewThe market has come under intense pressure over the past several weeks, extending declines to a fresh 2019 low. However, the longer-term structure remains constructive, with dips expected to be well supported for fresh upside, eventually back above the 2018/multi-month high at 1.3665. At this point, only a weekly close below the psychological barrier at 1.3000 would delay the outlook.
- R2 1.3146– 1 July high – Strong
- R1 1.3100 - Figure – Medium
- S1 1.3018 – 12 July/2019 low – Strong
- S2 1.3000 – Psychological – Strong
USDCAD – fundamental overviewOIL has come back under pressure this week, though the Canadian Dollar has held up well in the face of this, with the Loonie benefiting from renewed soft US Dollar protectionist talk out from President Trump, an above forecast Canada CPI reading, and upgraded dovishness from Fed Williams. Looking ahead, key standouts on the Friday calendar come from Canada retail sales, Michigan sentiment and Fed speak from Bullard and Rosengren.
NZDUSD – technical overviewDespite recent weakness, there's a case to be made for a meaningful low in place at 0.6425 (2018 low). As such, look for setbacks to be well supported above the latter, in anticipation of renewed upside, with only a close below to compromise the outlook. The most recent rally has triggered a double bottom projecting a measured move upside extension towards 0.7000, further strengthening the constructive outlook. The daily chart now shows the next confirmed higher low in place at 0.6568.
- R2 0.6838 – 1 April high – Strong
- R1 0.6800 – Figure – Medium
- S1 0.6683 – 15 July low – Medium
- S2 0.6641 – 11 July low – Strong
NZDUSD – fundamental overviewThe New Zealand Dollar has performed well over the past several days, with the currency getting another jolt this week, on the back of some above forecast Kiwi inflation data, renewed soft US Dollar protectionist talk out from President Trump, and upgraded dovishness from Fed Williams. Looking ahead, key standouts on the Friday calendar come from Michigan sentiment and Fed speak from Bullard and Rosengren.
US SPX 500 – technical overviewThere have been signs of a major longer term top, after an exceptional run over the past decade. Any rallies from here, are expected to be very well capped, in favour of renewed weakness targeting an eventual retest of strong longer-term previous resistance turned support in the form of the 2015 high at 2140. The initial level of major support comes in at 2729, with a break below to strengthen the outlook. A monthly close above 3000 would be required to compromise the outlook calling for a top.
- R2 3050 – Psychological – Strong
- R1 3021 – 15 July/Record high – Medium
- S1 2960 – 9 July low – Medium
- S2 2911 – 26 June low – Strong
US SPX 500 – fundamental overviewAlthough we've seen the market extend to another record high in 2019, on Fed signals of additional rate cuts, with so little room for additional easing, given an already depressed interest rate environment, the prospect for a meaningful extension of this record run, on easy money policy incentives, should no longer be as enticing to investors as it once was. Meanwhile, expected renewed tension on the global trade front, should continue to be a drag on investor sentiment. We recommend keeping a much closer eye on the equities to ten year yield comparative going forward, as the movement here is something that could be a major stress to the financial markets looking out.
GOLD (SPOT) – technical overviewThe recent breakout above the 2016 high at 1375 was a significant development, and suggests the market is in the early stages of a bullish move that follows a multi-month consolidation. The next major level of resistance comes in around 1500, while in the interim, look for any setbacks to be well supported above 1400.
- R2 1488 – May 2013 high – Strong
- R1 1449 – 17 July/2019 high – Strong
- S1 1382 – 1 July low – Strong
- S2 1358 – 20 June low – Strong
GOLD (SPOT) – fundamental overviewThe yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about exhausted monetary policy, extended global equities, political uncertainty, systemic risk and trade war threats. 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 unnerving climax.
BTCUSD – technical overviewOverall, look for additional upside to be limited for now, as the market continues to correct and consolidate, in the aftermath of a major surge in the second quarter of 2019. Any setbacks should be very well supported ahead of 7,000, with an eventual higher low sought out in favour of a bullish continuation back above the 2019 high at 13,748. Only a weekly close below 7,000 would compromise the constructive outlook.
- R2 13,748– 26 June/2019 high – Strong
- R1 11,031 – 16 July high – Medium
- S1 9,075 – 17 July low – Strong
- S2 8,935 – 19 June low – Strong
BTCUSD – fundamental overviewBitcoin enjoyed a spectacular run in the second quarter of 2019, racing to fresh yearly highs, surging towards 14k, on the back of increased adoption and more openness from the traditional investor community. The news of tech giants now turning towards the world of crypto has invited a higher profile that should be a net positive in the long run, but that has also exposed the ethos to critique from higher levels at the central bank and government levels. The market is also going through a period of technical adjustment after the fierce run up, though we anticipate renewed demand from institutional players into dips.
BTCUSD - Technical charts in detail
ETHUSD – technical overviewThe market is in the process of a major correction after a surge in the second quarter of 2019. Look for setbacks to be well supported above of previous resistance turned support at 170 on a weekly close basis, in favour of the next major higher low and bullish resumption back towards and through the 2019 high up at 363. Ultimately, only a weekly close below 170 would compromise the longer term constructive outlook.
- R2 325 – 30 June high – Strong
- R1 290 – 11 July high – Medium
- S1 191 – 16 July low – Strong
- S2 170 – 24 February High – Strong