Is today the day the Euro breaks below parity?

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Today’s report: Is today the day the Euro breaks below parity?

We were already seeing early demand for the US Dollar this week on the back of momentum from last Friday’s strong US NFP print, which has made the prospect for a 75 basis point rate hike from the Fed later this month that much more real.

Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

The market has come under intense pressure in recent months, with setbacks accelerating below the critical multi-year low from 2017 at 1.0340. This sets up a test of monumental support in the form of parity. At the same time, technical studies are tracking in oversold territory, suggesting additional setbacks should be limited. Back above 1.0500 would be required to take the immediate pressure off the downside.

  • R2 1.0400– Figure – Medium
  • R1 1.0278 - 6 July high – Medium
  • S1 1.0034 - 11 July/2022 low– Medium
  • S2 1.0000 – Parity – Very Strong

EURUSD – fundamental overview

The Euro sits at its lowest level in twenty years and is on the verge of a breakdown below parity. Clearly the energy crisis is having a major impact, with the Nordstream gas pipeline closure only adding additional strain. Monetary policy divergence between the ECB and FED has also been a major driver of Euro weakness. Key standouts on today’s calendar come from Eurozone and German ZEW sentiment reads, US consumer inflation expectations, and a BOE Bailey speech.

EURUSD - Technical charts in detail

GBPUSD – technical overview

The market continues to be exceptionally well supported on dips below 1.2000. Unless we see a monthly close below 1.2000, we expect this to continue to be the case. Look for a break back above 1.2200 to take the immediate pressure off the downside.

  • R2 1.2214– 29 June high – Medium
  • R1 1.2056 – 8 July high – Medium
  • S1 1.1900 – Figure – Medium
  • S2 1.1867 – 11 July/2022 low – Strong

GBPUSD – fundamental overview

The Pound is already suffering from yield differentials with the US Dollar, but has come under additional pressure as labor unions press demands, adding to the strain of the struggling UK economy. We saw postal strikes on Monday, while eight rail companies voted to walk out. Key standouts on today’s calendar come from Eurozone and German ZEW sentiment reads, US consumer inflation expectations, and a BOE Bailey speech.

USDJPY – technical overview

The market has rocketed higher to its highest levels since 1998 after breaking through the 2002 high. Technical studies are however looking stretched, with scope for a sizable consolidation and correction in the weeks ahead. Look for additional upside from here to be well capped ahead of 140.00. A break back below 134.00 would take the immediate pressure off the topside.

  • R2 138.00 – Figure – Strong
  • R1 137.76 – 11 July/2022 high – Strong
  • S1 135.93 – 11 July low – Medium
  • S2 134.26 – 23 June low – Strong

USDJPY – fundamental overview

The Kishida election victory has all but assured a continuation of current BOJ policy, which clearly supports more Yen weakness. Key standouts on today’s calendar come from Eurozone and German ZEW sentiment reads, US consumer inflation expectations, and a BOE Bailey speech.

AUDUSD – technical overview

Overall pressure remains on the downside and conditions remain quite choppy. A break back above 0.7070 would be required at a minimum to take the immediate pressure off the downside. Until then, scope exists for deeper setbacks towards 0.6500.

  • R1 0.6965 – 28 June high – Medium
  • R2 0.6875 – 8 July high – Medium
  • S1 0.6715 – 11 July/2022 low – Medium
  • S2 0.6700 – Figure – Strong

AUDUSD – fundamental overview

Most of the latest slide to fresh yearly lows in the Australian Dollar have come from renewed worry around the coronavirus in China. Meanwhile, a sharp decline in the price of iron oil has also contributed to the Aussie weakness. Key standouts on today’s calendar come from Eurozone and German ZEW sentiment reads, US consumer inflation expectations, and a BOE Bailey speech.

USDCAD – technical overview

A recent surge back above 1.3000 signals an end to a period of 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 1.3500 area. Setbacks should be very well supported down into the 1.2500 area.

  • R2 1.3079 – 17 June/2022 high – Strong
  • R1 1.3000 – Psychological  – Medium
  • S1 1.2820 – 28 June low – Medium
  • S2 1.2681 – 10 June low – Medium

USDCAD – fundamental overview

While the Canadian Dollar has suffered against the US Dollar in recent sessions, the Loonie has held up well against its peers on account of supported oil prices. Key standouts on today’s calendar come from Eurozone and German ZEW sentiment reads, US consumer inflation expectations, and a BOE Bailey speech.

NZDUSD – technical overview

Overall pressure remains on the downside and conditions remain quite choppy. A break back above 0.6400 would be required to force a shift in the structure and suggest we are seeing a more significant bullish reversal. Until then, scope exists for fresh yearly lows and a retest of the major psychological barrier at 0.6000.

  • R2 0.6327 – 27 June high – Medium
  • R1 0.6260 – 29 June high – Medium
  • S1 0.6097– 11 July/2022 low – Medium
  • S2 0.6000 – Psychological – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has extended declines to a fresh yearly low, this on the back of ongoing monetary policy divergence with the FOMC and broad based risk off flow. The market will start to focus in on the RBNZ decision which is due early Wednesday. The RBNZ shadow committee has been out calling for a 50 basis point hike. Key standouts on today’s calendar come from Eurozone and German ZEW sentiment reads, US consumer inflation expectations, and a BOE Bailey speech.

US SPX 500 – technical overview

Longer-term technical studies are in the process of unwinding from extended readings off record highs. Look for rallies to be well capped in favor of lower tops and lower lows. Back above 4,206 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in around 3,400.

  • R2 4031 – 10 June high – Medium
  • R1 3950 – 28 June high – Medium
  • S1 3708 – 14 June low – Medium
  • S2 3637 – 17 June/2022 low – Strong

US SPX 500 – fundamental overview

With so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, ongoing worry associated with rising inflation and slower growth should continue to weigh more heavily on investor sentiment in 2022.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs. Setbacks should now be well supported above 1700.

  • R2 1880 – 13 June high – Strong
  • R1 1815 – 4 July high – Medium
  • S1 1728 – 8 July/2022 low – Medium
  • S2 1700 – Round Number – Strong

GOLD (SPOT) – fundamental overview

The 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, and inflation risk. 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.

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

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