Questioning the latest run of US Dollar weakness

Next 24 hours: US Dollar fighting back on Monday

Today’s report: Questioning the latest run of US Dollar weakness

We are a little surprised with the price action that was seen to close out the previous week. The surprise comes mostly from the FX side where the US Dollar took a hard hit in the aftermath of a discouraging NFP print.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

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 1.1013 – 22 June high – Strong
  • R1 1.0977 - 27 June high – Medium
  • S1 1.0834 - 6 July low – Medium
  • S2 1.0779 – 2 June high – Strong

EURUSD – fundamental overview

Absence of meaningful data out of the Eurozone at the end of last week, left all of the focus on the US and with it, some major broad based US Dollar selling in the aftermath of a discouraging NFP number. Key standouts on Monday’s calendar come from Aussie building permits, China inflation reads, US wholesale inventories, consumer inflation expectations, Fed speak, and a BOE Governor Bailey appearance.

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 1.2900 – Figure – Medium
  • R1 1.2849 – 7 July/2023 high – Strong
  • S1 1.2726 – 7 July low – Medium
  • S2 1.2673 – 6 July low – Medium

GBPUSD – fundamental overview

The discouraging US NFP print put more strain on a yield differential that continues to lean in the Pound's favor. Peak rates in the US sit at 5.5% versus 6.5% priced in the UK. Meanwhile, BOE Mann sees increasing evidence of embedded inflation. Key standouts on Monday’s calendar come from Aussie building permits, China inflation reads, US wholesale inventories, consumer inflation expectations, Fed speak, and a BOE Governor Bailey appearance.

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 145.08 – 30 June high – Strong
  • R1 145.00 – Psychological – Medium
  • S1 141.61 – 22 June low – Medium
  • S2 141.21 – 20 June low – Strong

USDJPY – fundamental overview

A solid round of Japan data via labor cash earnings and the leading index, along with broad based US Dollar demand and falling equities on the softer US NFP print, have all factored into the latest recovery in the Yen. Key standouts on Monday’s calendar come from Aussie building permits, China inflation reads, US wholesale inventories, consumer inflation expectations, Fed speak, and a BOE Governor Bailey appearance.

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

A rebound in commodities prices and broad based selling in the US Dollar post a discouraging US NFP print, have been behind the latest upside in the Australian Dollar. Key standouts on Monday’s calendar come from Aussie building permits, China inflation reads, US wholesale inventories, consumer inflation expectations, Fed speak, and a BOE Governor Bailey appearance.

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

Contrasting data has been behind the latest surge in the Canadian Dollar. This past Friday, Canada employment data came in on the stronger side, all while US jobs data disappointed. Odds for a Bank of Canada rate hike later this week now sit at 75%. Key standouts on Monday’s calendar come from Aussie building permits, China inflation reads, US wholesale inventories, consumer inflation expectations, Fed speak, and a BOE Governor Bailey appearance.

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 0.6220 – 7 July high – Medium
  • S1 0.6132 – 6 July low – Medium
  • S2 0.6051 – 29 June low – Strong

NZDUSD – fundamental overview

A rebound in commodities prices and broad based selling in the US Dollar post a discouraging US NFP print, have been behind the latest upside in the New Zealand Dollar. Key standouts on Monday’s calendar come from Aussie building permits, China inflation reads, US wholesale inventories, consumer inflation expectations, Fed speak, and a BOE Governor Bailey appearance.

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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