Investors feeling good about softer US inflation

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 1.2888 – 29 July high – Medium
• R1 1.2873 – 13 August high – Medium
• S1 1.2759 – 13 August low – Medium
• S2 1.2665 – 8 August low – Strong

GBPUSD – fundamental overview

The Pound is coming out of a session of underperformance after taking in a round of softer UK inflation data. This has increased the odds for a BOE rate cut next month, which are approaching 50%. Key standouts on Thursday’s calendar come from UK GDP, industrial production, trade, and construction output, Canada wholesale sales, and US initial jobless claims, retail sales, empire manufacturing, the Philly Fed, industrial production, business inventories, and NAHB housing.

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

Politics have been front and center in Japan after the news broke Japan's PM Kishida will not be running for the leadership of the LDP, which means we should see a new Prime Minister very soon. Meanwhile, Japan GDP data was impressive, coming in at its strongest in yearly growth in five years. However, this had little impact on the Yen. Key standouts on Thursday’s calendar come from UK GDP, industrial production, trade, and construction output, Canada wholesale sales, and US initial jobless claims, retail sales, empire manufacturing, the Philly Fed, industrial production, business inventories, and NAHB housing.

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 0.6703– 22 July high – Medium
• R2 0.6643 – 14 August high– Medium
• S1 0.6563 – 15 August low– Medium
• S2 0.6507 – 8 August low – Medium

AUDUSD – fundamental overview

Aussie consumer inflation expectations turned up, while Aussie employment data was solid. This along with broad based selling of the US Dollar on the back of overall softer inflation reads this week, along with an uptick in risk sentiment have been behind the ongoing wave of demand. Key standouts on Thursday’s calendar come from UK GDP, industrial production, trade, and construction output, Canada wholesale sales, and US initial jobless claims, retail sales, empire manufacturing, the Philly Fed, industrial production, business inventories, and NAHB housing.

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 1.3791 – 7 August high – Medium
• S1 1.3689 – 14 August low – Medium
• S2 1.3566 – 17 July low – Medium

USDCAD – fundamental overview

The Canadian Dollar has been caught between offsetting flows. On the one side, the Canadian Dollar has been finding demand on higher equities and broad based US Dollar outflows post softer US inflation data. On the other side, the Canadian Dollar has been weighed down on a decline in commodities prices, highlighted by weakness in oil. Key standouts on Thursday’s calendar come from UK GDP, industrial production, trade, and construction output, Canada wholesale sales, and US initial jobless claims, retail sales, empire manufacturing, the Philly Fed, industrial production, business inventories, and NAHB housing.

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 0.6084 – 14 August 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 been a clear laggard since the RBNZ semi-surprised the market with a rate cut earlier this week. The fact that RBNZ governor Orr added that the central bank was even considering a 50 basis point cut has only added further to the downside pressure on the commodity currency. At the same time, setbacks have been supported on solid risk sentiment and broad based selling in the US Dollar post a softer round of US inflation data. Key standouts on Thursday’s calendar come from UK GDP, industrial production, trade, and construction output, Canada wholesale sales, and US initial jobless claims, retail sales, empire manufacturing, the Philly Fed, industrial production, business inventories, and NAHB housing.

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. Look for rallies to be well capped below 5500.

• R2 5570 – 1 August high – Strong
• R1 5500 – Round Number – Medium
• S1 5326 – 12 August low – Medium
• S2 5157 – 8 August low – Medium

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.