Sound the alarms

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Today’s report: Sound the alarms

Tuesday’s batch of data out of the US may have rattled the market a bit. While there were some solid results, it was the dump in retail sales and run up in producer prices that sounded the alarms. Headline core PPI hit its highest level on record.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

The market has been looking for a higher low since topping out in 2021 up at 1.2350. Ideally, this next higher low is sought out ahead of 1.1600 in favour of the next major upside extension back through 1.2350 and towards a retest of the 2018 high at 1.2555 further up.

  • R2 1.2267 – 25 May high– Strong
  • R1 1.2218 - 9 June high – Medium
  • S1 1.2093 - 11 June low – Medium
  • S2 1.2051 – 13 May low – Strong

EURUSD – fundamental overview

Euro longs have been getting frustrated with the lack of follow through in recent sessions and slight downward revisions to French and Italian CPI reads hasn't been helping the single currency's cause. Key standouts on today’s calendar come in the form of UK inflation reads, Eurozone wage growth, Canada inflation reads, US housing starts and building permits, and the FOMC decision late in the day.

EURUSD - Technical charts in detail

GBPUSD – technical overview

Technical studies are in the process of consolidating from stretched levels after the push to fresh multi-month highs. This leaves room for additional consolidation, before the market considers a meaningful bullish continuation towards a retest of the 2018 high. But look for setbacks to now be very well supported into the 1.3500 area.

  • R2 1.4250 – 1 June/2021 high – Strong
  • R1 1.4200 – Figure – Medium
  • S1 1.4034 – 15 June low – Medium
  • S2 1.4006 – 13 May low – Strong

GBPUSD – fundamental overview

The Pound was unable to hold onto gains from the positives around Tuesday's UK employment data, instead worrying about a five year high in long-term unemployment and broad based US Dollar demand. Key standouts on today’s calendar come in the form of UK inflation reads, Eurozone wage growth, Canada inflation reads, US housing starts and building permits, and the FOMC decision late in the day.

USDJPY – technical overview

The major pair has run into massive resistance in the form of the monthly Ichimoku cloud, and has since stalled out. This translates to a longer-term trend that is still bearish despite the run up we saw in 2021, with risk for deeper setbacks ahead. It would take a clear break back above 113.00 to negate the outlook.

  • R2 110.97 – 31 March/2021 high – Strong
  • R1 110.33 – 4 June high – Strong
  • S1 109.19– 7 June low – Medium
  • S2 108.34 – 7 May low – Strong

USDJPY – fundamental overview

We've been seeing mild weakness in the Yen this week, with most of the price action attributed to yield differentials that have been moving in the US Dollar's favour. Key standouts on today’s calendar come in the form of UK inflation reads, Eurozone wage growth, Canada inflation reads, US housing starts and building permits, and the FOMC decision late in the day.

AUDUSD – technical overview

Technical studies have turned up in recent months, after the market traded down to its lowest levels since 2003 in 2020. There is evidence of a longer-term bottom following the latest push back through 0.7000, though at this stage, there is risk for a deeper pullback to allow for shorter term studies to unwind. Setbacks should now be well supported ahead of 0.7400.

  • R2 0.7892 – 10 May high – Strong
  • R1 0.7776 – 11 Jun high – Medium
  • S1 0.7645 – 3 June low – Strong
  • S2 0.7600 – Figure – Medium

AUDUSD – fundamental overview

On Tuesday, the Australian Dollar took a hit on the more dovish read of the RBA Minutes. The central bank said monetary policy likely needed to remain accommodative for some time. Key standouts on today’s calendar come in the form of UK inflation reads, Eurozone wage growth, Canada inflation reads, US housing starts and building permits, and the FOMC decision late in the day.

USDCAD – technical overview

Has been in major decline since topping out in 2021 above 1.4600. At this stage, with the decline now well extended, the market is likely to find solid support into the 1.2000 area ahead of a resumption of gains. Ultimately, only a weekly close below 1.2000 would suggest otherwise. Back above 1.2352 will strengthen the outlook.

  • R2 1.2252 – 5 May low – Strong
  • R1 1.2205 – 15 June high – Medium
  • S1 1.2057– 7 June low – Medium
  • S2 1.2007 – 1 June/2021 low – Strong

USDCAD – fundamental overview

The Canadian Dollar has come under some pressure in recent sessions, with a lot of the flow driven off broad based US Dollar demand. But we've also been seeing softer Canada data as well, most recently in the form of declining home sales. Key standouts on today’s calendar come in the form of UK inflation reads, Eurozone wage growth, Canada inflation reads, US housing starts and building permits, and the FOMC decision late in the day.

NZDUSD – technical overview

The market has been very well supported in recent months and there is evidence of a longer-term base. Look for setbacks to hold up above 0.7100, with sights set on a run back towards the 0.7500 area.

  • R2 0.7317 – 26 May high – Strong
  • R1 0.7243 – 7 June high – Medium
  • S1 0.7105 – 15 June low– Strong
  • S2 0.7100 – Figure – Medium

NZDUSD – fundamental overview

Most of the latest selling in the New Zealand Dollar comes from bigger picture flow including broad demand for the US Dollar and a bearish close in US equities. Key standouts on today’s calendar come in the form of UK inflation reads, Eurozone wage growth, Canada inflation reads, US housing starts and building permits, and the FOMC decision late in the day.

US SPX 500 – technical overview

Longer-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high. Look for rallies to be well capped ahead of 4300, with a break back below 4000 to strengthen the outlook.

  • R2 4300 – Psychological – Strong
  • R1 4267 – 15 June/Record high – Medium
  • S1 4036 – 13 May low – Medium
  • S2 4000 – Psychological – Strong

US SPX 500 – fundamental overview

We're trading just off fresh record highs, and yet, 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 coronavirus fallout and risk of rising inflation should weigh more heavily on investor sentiment into the second half of 2021.

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 an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1600.

  • R2 1960 – 6 January/2021 high – Strong
  • R1 1917 – 1 June high – Strong
  • S1 1809 – 13 May low – Medium
  • S2 1756 – 29 April 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 exhausted monetary policy, extended global equities, and coronavirus fallout. 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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