Risk assets finally looking up after scary Monday

Today’s report: Risk assets finally looking up after scary Monday

A lot has changed since Monday. Markets had come under severe pressure on Monday on fear of a major slowdown in the global economy and on an escalation in geopolitical tension. Since then, the market has slowly recovered and even started to make its way back up.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

The Euro has been in a multi-month consolidation since bottoming out in 2022. Setbacks have since been exceptionally well supported on dips below 1.0500, with a higher platform sought out ahead of the next major upside extension. Look for a push through the 2023 high at 1.1276 to strengthen the constructive outlook and extend the recovery run towards 1.2000. Only back below 1.0400 negates.

  • R2 1.1046 – 2 January/2024 high – Strong
  • R1 1.1010 - 5 August high – Medium
  • S1 1.0850 - 31 July high– Medium
  • S2 1.0778 – 1 August low – Strong

EURUSD – fundamental overview

Absence of first tier data out of the Eurozone on Thursday had the market still worrying about recent economic data that has been showing signs of a cool down in the economy. Setbacks were however mitigated by broad based US Dollar outflows on account of renewed risk on flow. Key standouts on Friday’s calendar come from China inflation, German inflation, and the Canada employment report.

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 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 1.2861 – 12 June high – Strong
  • R1 1.2800 – Figure – Medium
  • S1 1.2665 – 8 August low – Medium
  • S2 1.2613 – 27 June low – Strong

GBPUSD – fundamental overview

The Pound enjoyed a nice recovery on Thursday, getting a boost from bigger picture risk on flow and broad based US Dollar selling. The market also seemed to be less worried about the social unrest in the UK, which helped to calm nerves and benefit the local currency. Key standouts on Friday’s calendar come from China inflation, German inflation, and the Canada employment report.

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

Most of the Thursday price action in the Yen was a carryover from Wednesday's reaction in which the Yen sold off after the BOJ communication that the central bank wouldn't be looking to move away from accommodative policy despite the recent rate hike. The Yen was further sold on a renewed wave of risk appetite. Key standouts on Friday’s calendar come from China inflation, German inflation, and the Canada employment report.

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 0.6618– 24 July high – Strong
  • R2 0.6600 – Figure – Medium
  • S1 0.6472 – 6 August low– Medium
  • S2 0.6349 – 5 August/2024 low – Strong

AUDUSD – fundamental overview

The Australian Dollar enjoyed a nice pop on the back of hawkish comments from RBA Bullock who said the central bank explicitly considered a rate hike this week and the RBA wouldn't hesitate to raise rates going forward if needed. We also saw added demand as investor risk appetite returned. Key standouts on Friday’s calendar come from China inflation, German inflation, and the Canada employment report.

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 1.3900 – Figure – Medium
  • S1 1.3721 – 7 August low – Medium
  • S2 1.3700 – 19 July low – Medium

USDCAD – fundamental overview

Another jump in the price of oil, broad based US Dollar selling, and renewed risk appetite were all behind the latest wave of demand for the Canadian Dollar. Key standouts on Friday’s calendar come from China inflation, German inflation, and the Canada employment report.

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 0.6049 – 19 July high – Medium
  • R1 0.6028 – 22 July high – Medium
  • S1 0.5900 – Figure – Medium
  • S2 0.5850 – 5 August/2024 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has enjoyed a renewed wave of demand as investor risk appetite turns back up. At the same time, there has been concern from bulls on account of the latest cooling off in New Zealand inflation expectations, the slowest since Q1 2021. This puts market odds for a rate cut next week at around 75%. Key standouts on Friday’s calendar come from China inflation, German inflation, and the Canada employment report.

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.

  • R2 5443 – 2 August high – Medium
  • R1 5334 – 7 August high – Medium
  • S1 5093 – 5 August low – Medium
  • S2 4928 – 19 April low – Strong

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.

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

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