In the thick of the summer doldrums

Next 24 hours: Pound outperforms on solid employment data

Today’s report: In the thick of the summer doldrums

We’re in the thick of the summer doldrums and markets have for the most part been confined to some tight consolidation trade. The economic calendar has been rather anemic as well, further contributing to the uneventful price action. We do however get a run of first-tier data from now through the end of week.

Wake-up call

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.

  • R2 1.1046 – 2 January/2024 high – Strong
  • R1 1.1010 - 5 August high – Medium
  • S1 1.0850 - 31 July high– Medium
  • S2 1.0778 – 1 August low – Strong

EURUSD – fundamental overview

The Euro has traded sideways for the fourth day. Absence of first tier data and thin summer trade are accounting for the lackluster price action. Key standouts on Tuesday’s calendar come from UK employment, Eurozone and German ZEW reads, US producer prices, and Fed speak.

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.

  • R2 1.2861 – 12 June high – Strong
  • R1 1.2800 – Figure – Medium
  • S1 1.2665 – 8 August low – Medium
  • S2 1.2613 – 27 June low – Strong

GBPUSD – fundamental overview

The Pound has enjoyed a nice recovery in recent sessions, getting a boost from bigger picture risk on flow and broad based US Dollar selling. The market has also been less worried about the social unrest in the UK, helping to calm nerves and benefit the local currency. Key standouts on Tuesday’s calendar come from UK employment, Eurozone and German ZEW reads, US producer prices, and Fed speak.

USDJPY – technical overview

The market has entered a period of correction after extending the uptrend to a multi-year high through 160.00. Critical support comes in around 140.00, with only a monthly close below the barrier to compromise the bullish outlook. A higher low is ideally sought out over the coming sessions in favor of a bullish continuation.

  • R2 149.78 – 2 August high – Medium
  • R1 147.91 – 7 August high – Medium
  • S1 143.62 – 6 August low – Medium
  • S2 141.69 – 5 August low – Strong

USDJPY – fundamental overview

Former BOJ board member Sakurai has backed up the recent rhetoric out from the BOJ, saying the central bank won't be hiking again any time soon. The Yen has extended declines to the lowest levels since the central bank hiked the other week. Key standouts on Tuesday’s calendar come from UK employment, Eurozone and German ZEW reads, US producer prices, and Fed speak.

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 0.6618– 24 July high – Strong
  • R2 0.6606 – 9 August high– Medium
  • S1 0.6472 – 6 August low– Medium
  • S2 0.6349 – 5 August/2024 low – Strong

AUDUSD – fundamental overview

Things have been mostly quiet out there, though this latest impressive recovery in metals prices has helped Aussie to retain a bid. Key standouts on Tuesday’s calendar come from UK employment, Eurozone and German ZEW reads, US producer prices, and Fed speak.

USDCAD – technical overview

A sustained hold above 1.3000 over the past several months 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, with a break to open a retest of the 2020 high just ahead of 1.4700. Setbacks should be very well supported down into the 1.3000 area.

  • R2 1.3947 – 5 August/2024 high – Strong
  • R1 1.3900 – Figure – Medium
  • S1 1.3716 – 12 August low – Medium
  • S2 1.3700 – 19 July low – Medium

USDCAD – fundamental overview

The Canadian Dollar underperformed on Monday after housing data was down big for the second month. The local rate market has begun to ptice in the possibility of a bigger 50 basis point rate hike in September (10% chance). Key standouts on Tuesday’s calendar come from UK employment, Eurozone and German ZEW reads, US producer prices, and Fed speak.

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 0.6098 – 17 July high – Medium
  • R1 0.6049 – 19 July high – Medium
  • S1 0.5977 – 8 August low – Medium
  • S2 0.5850 – 5 August/2024 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has enjoyed a renewed wave of demand as investor risk appetite turns back up. At the same time, there has been concern from bulls on account of the latest cooling off in New Zealand inflation expectations, the slowest since Q1 2021. This puts market odds for a rate cut tomorrow at around 66%. Key standouts on Tuesday’s calendar come from UK employment, Eurozone and German ZEW reads, US producer prices, and Fed speak.

US SPX 500 – technical overview

Longer-term technical studies are in the process of unwinding from overbought levels. There is now room for a pullback towards previous resistance turned support in the form of the previous record high from January 2022 at 4820 before the market considers a resumption of the bigger picture uptrend.

  • R2 5443 – 2 August high – Medium
  • R1 5374 – 12 August high – Medium
  • S1 5157 – 8 August low – Medium
  • S2 5093 – 5 August 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 a much bigger disruption to stocks than what we've already seen.

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.

  • R2 2500 – Psychological– Strong
  • R1 2484 – 17 July/Record high – Medium
  • S1 2350 – 4 July low – Strong
  • S2 2287– 7 June low – 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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