Red flags beneath the surface

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 1.2500. Next key resistance comes in at 1.3143.

• R2 1.2996 – 27 July high – Strong
• R1 1.2818 – 10 August high – Medium
• S1 1.2616 – 14 August low – Medium
• S2 1.2591 – 29 June low – Strong

GBPUSD – fundamental overview

The Pound was under pressure on Monday but recovered into dips on account of recent healthy economic data out of the UK and rising Gilt yields. The market will now position into a batch of important UK data this week which starts later today. Key standouts on Tuesday’s calendar come from UK employment data, Eurozone and German ZEW reads, Canada inflation, US retail sales, New York empire manufacturing, US import and export prices, and business inventories.

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. 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 on dips. A weekly close back above 145.00 will confirm bullish continuation.

• R2 146.00 – Figure – Medium
• R1 145.58 – 14 August/2023 high – Medium
• S1 143.28 – 10 August low – Medium
• S2 141.51 – 7 August low – Strong

USDJPY – fundamental overview

The Bank of Japan is slowly losing the battle to maintain negative interest rate policy in a rising rate environment. This likely means the next currency intervention  could be less successful and effective than previous attempts. And so the Yen continues to decline as yield differentials weigh on the Japanese currency. Key standouts on Tuesday’s calendar come from UK employment data, Eurozone and German ZEW reads, Canada inflation, US retail sales, New York empire manufacturing, US import and export prices, and business inventories.

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 0.6400-6500 area. Only a monthly close below 0.6500 would give reason for rethink.

• R1 0.6740– 31 July high – Strong
• R2 0.6617 – 10 August high – Medium
• S1 0.6454 – 14 August/2023 low – Strong
• S2 0.6400 – Figure – Medium

AUDUSD – fundamental overview

Most of the latest Aussie weakness we've been seeing comes from downside pressure in commodities, along with a deteriorating APAC FX complex lead by weakness in the Yen and RMB. At the same time, there was some support off fresh yearly lows, helped along by miner demand and a positive close in US equities. Key standouts on Tuesday’s calendar come from UK employment data, Eurozone and German ZEW reads, Canada inflation, US retail sales, New York empire manufacturing, US import and export prices, and business inventories.

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 1.3600 – Figure – Medium
• R1 1.3502 – 8 August high – Medium
• S1 1.3373 – 10 August low – Medium
• S2 1.3319 – 4 August low – Medium

USDCAD – fundamental overview

The Canadian Dollar remains under pressure on lower stocks and an overall deterioration in sentiment, but has managed to outperform against its commodity currency cousins on account of oil demand and distance from a softer APAC region. Key standouts on Tuesday’s calendar come from UK employment data, Eurozone and German ZEW reads, Canada inflation, US retail sales, New York empire manufacturing, US import and export prices, and business inventories.

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 0.6133 – 4 August high – Strong
• R1 0.6025 – 11 August high – Medium
• S1 0.5944 – 14 August/2023 low – Medium
• S2 0.5900 – Figure – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has sunk to a fresh yearly low on the back of an ongoing deterioration in sentiment, falling stocks and commodities, and soft New Zealand PMI data. Recent manufacturing PMIs slumped to a cycle low of 46.3. The local rate market in New Zealand sees zero chance for an RBNZ hike tomorrow. Key standouts on Tuesday’s calendar come from UK employment data, Eurozone and German ZEW reads, Canada inflation, US retail sales, New York empire manufacturing, US import and export prices, and business inventories.

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 4600 will be required to take the immediate pressure off the downside. Next key support comes in at 4376.

• R2 4608 – 27 July/2023 high – Strong
• R1 4541 – 4 August high – Medium
• S1 4441 – 11 August low – Medium
• S2 4376 – 10 July 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. 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 2500.

• R2 2076 – Record high/2020 – Strong
• R1 1988 – 20 July 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.