Major currencies run hot

Next 24 hours: Waiting on US inflation data

Today’s report: Major currencies run hot

Tuesday was another day of the US Dollar under pressure. However on Tuesday, most of the action happened in the major currencies, with the Euro, Franc, Yen and Pound all extending recent runs against the Buck.

Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

The Euro remains well supported on dips following a run to the topside through 1.1000 earlier this year. Any additional setbacks should be well supported ahead of 1.0500 in favor of the formation of the next major higher low and a bullish continuation. Ultimately, only a monthly close back below 1.0500 would give reason for concern. Next key resistance comes in the form of the March 2022 high at 1.1185.

  • R2 1.1027 – 11 July high – Medium
  • R1 1.1000 - Psychological – Medium
  • S1 1.0834 - 6 July low – Medium
  • S2 1.0779 – 2 June high – Strong

EURUSD – fundamental overview

The Euro rallied up to its highest level in over two months on the back of broad based US Dollar outflows against the major currencies, before giving back those gains into the latter portion of the day as German and Eurozone ZEW reads fell to their lowest levels of the year. Meanwhile, ECB Villeroy offered up some more downside pressure after saying "we are starting to have good news on inflation" and that the Eurozone was close to peak rates. Key standouts on Wednesday’s calendar come from US inflation data and the Bank of Canada interest rate decision.

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 November 2022 monthly close back above 1.2000 strengthens this prospect. Any setbacks should now be well supported ahead of 1.2000. Next key resistance comes in at 1.3000.

  • R2 1.3000 – Psychological – Strong
  • R1 1.2935 – 11 July/2023 high – Medium
  • S1 1.2855 – 11 July low – Medium
  • S2 1.2726 – 7 July low – Medium

GBPUSD – fundamental overview

UK wage growth rose at its fastest pace on record and this along with broad based US Dollar outflows against the major currencies served as the fuel to rocket the Pound to yet another yearly high just shy of the critical psychological barrier at 1.3000. The IMF was also out stating that should UK inflationary pressures show signs of further persistence, the BoE policy rate may have to be raised further and would need to remain higher for longer. Key standouts on Wednesday’s calendar come from US inflation data and the Bank of Canada interest rate decision.

USDJPY – technical overview

The major pair has seen a nice recovery following the massive correction out from multi-year highs. Setbacks have finally been well supported ahead of 125.00 in the 127s thus far. At this stage, it looks like the market could be wanting to resume the bigger picture uptrend and head back towards a retest of that multi-year high from October 2022 up at 151.95. Look for any weakness to continue to be well supported in favor of higher lows along the way.

  • R2 143.01 – 10 July high – Medium
  • R1 141.47 – 11 July high– Medium
  • S1 140.16 – 11 July low – Medium
  • S2 140.00 – Psychological – Strong

USDJPY – fundamental overview

There have been more calls of late for a shift in BOJ policy at the upcoming meeting, with many viewing the central bank's ultra accommodative stance as stale and needing of some tweaks that lean more hawkish. We have since seen the Yen benefit in recent sessions as a consequence. Sell stops getting hit on US Dollar longs has also added to the upside momentum in the Yen. Key standouts on Wednesday’s calendar come from US inflation data and the Bank of Canada interest rate decision.

AUDUSD – technical overview

There are signs of the potential formation of a longer-term base following the late 2022 surge back above 0.6500. Next key resistance comes in at 0.7284. Setbacks should continue to be well supported in the 0.6500 area. Only a monthly close below 0.6500 would give reason for rethink.

  • R1 0.6806 – 22 June high – Strong
  • R2 0.6721 – 27 June high – Medium
  • S1 0.6595 – 29 June low – Medium
  • S2 0.6564 – 10 March low – Strong

AUDUSD – fundamental overview

The Australian Dollar found some demand on Tuesday, getting a boost from solid consumer confidence and business confidence reads, along with rallying US equities. Key standouts on Wednesday’s calendar come from US inflation data and the Bank of Canada interest rate decision.

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.

  • R2 1.3387 – 7 July high – Strong
  • R1 1.3300 – Figure – Medium
  • S1 1.3203 – 4 July low – Strong
  • S2 1.3117 – 27 June/2023 low – Strong

USDCAD – fundamental overview

The Canadian Dollar put in a solid performance on Tuesday, getting a boost from higher commodities prices, higher equities and pre-event risk positioning. Many are looking for the Bank of Canada to go ahead with another 25 basis point hike later today. Interestingly enough, bank of America disagrees, calling for no move considering the recent rise in the unemployment rate. Key standouts on Wednesday’s calendar come from US inflation data and the Bank of Canada interest rate decision.

NZDUSD – technical overview

Overall pressure remains on the downside with the market once again stalling out on a run up into the 0.6500 area. Ultimately, a break back above 0.6577 would be required to take the immediate pressure off the downside. A monthly close below 0.6000 would intensify bearish price action.

  • R2 0.6248 – 16 June high – Strong
  • R1 0.6225 – 11 July high – Medium
  • S1 0.6132 – 6 July low – Medium
  • S2 0.6051 – 29 June low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has underperformed relative to its peers despite higher commodities and US equities. It seems as though the market is less inclined to be wanting to buy Kiwi ahead of today's policy decision in which the central bank is expected to hold. Key standouts on Wednesday’s calendar come from the already mentioned RBNZ decision, US inflation data and the Bank of Canada interest rate decision.

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. A monthly close back above 4400 will be required to take the immediate pressure off the downside. Next key support comes in at 4260.

  • R2 4500 – Psychological – Strong
  • R1 4464 – 30 June/2023 high – Medium
  • S1 4328 – 26 June low – Medium
  • S2 4260 – 8 June low – Strong

US SPX 500 – fundamental overview

We've finally reached a point in the cycle where the Fed recognizes unanchored inflation expectations pose a greater downside risk than over-tightening. This is significant, as it means less investor friendly monetary policy that risks potential recession in the months ahead. Overall, we expect inflation to continue to be a problem in 2023 that results in downside pressure into rallies despite market expectations that would argue otherwise.

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 1600 on a monthly close basis ahead of the next major upside extension. The recent break back above 1808 strengthens the bullish outlook. Next major resistance comes in at 2100, above which opens the next extension towards 2,500.

  • R2 2076 – Record high/2020 – Strong
  • R1 1986 – 24 May high – Medium
  • S1 1900 – Round Number – Medium
  • S2 1893 – 29 June low – 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 inflation 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 unnerving climax.

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

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