Stocks don’t need much to rally

GBPUSD – technical overview

The market is in a corrective phase in the aftermath of the run to fresh 2021 and multi-month highs. At this stage, additional setbacks should be limited to the 1.3500 area ahead of the next major upside extension towards a retest and break of critical resistance in the form of the 2018 high.

• R2 1.3911 – 12 July high – Strong
• R1 1.3775 – 19 July high – Medium
• S1 1.3572 – 20 July low – Medium
• S2 1.3500 – Psychological – Strong

GBPUSD – fundamental overview

A rise in UK virus cases, PM Johnson self-isolating as the UK reopens, and the US advising citizens against travel to the UK have all weighed on the Pound this week. Looking ahead, Wednesday’s calendar is exceptionally thin with no first tier data due.

USDJPY – technical overview

The longer-term trend is bearish despite the recent run higher. Look for additional upside to be limited, with scope for a topside failure and bearish resumption back down towards the 100.00 area. It would take a clear break back above 113.00 to negate the outlook.

• R2 110.70 – 14 July high– Strong
• R1 110.35 – 16 July high – Medium
• S1 109.07 – 19 July low – Medium
• S2 108.34 – 7 May low – Strong

USDJPY – fundamental overview

The Yen was sold on Tuesday with the price action very much coinciding with the recovery in risk sentiment. Looking ahead, Wednesday’s calendar is exceptionally thin with no first tier data due.

AUDUSD – technical overview

The Australian Dollar has been in the process of a healthy correction following the impressive run towards a retest of the 2018 earlier this year. At this stage, there is risk for additional declines, though setbacks are expected to be well supported down into the 0.7000 area.

• R2 0.7504 – 13 July high – Strong
• R1 0.7411 – 19 July high – Medium
• S1 0.7300 – 20 July/2021 low – Strong
• S2 0.7200 – Figure – Medium

AUDUSD – fundamental overview

The RBA is now open to more QE and Westpac's Evans is calling for a Q3 contraction from the lockdowns. Aussie has extended its decline to fresh yearly lows as a result. Looking ahead, Wednesday’s calendar is exceptionally thin with no first tier data due.

USDCAD – technical overview

Finally signs of a major bottom in the works after a severe decline from the 2020 high. The weekly close back above 1.2500 encourages the constructive outlook and opens the door for a push back towards next critical resistance in the 1.3000 area. Any setbacks should be well supported into the 1.2200s.

• R2 1.2882 – 28 January/2021 high – Strong
• R1 1.2808 – 19 July high – Medium
• S1 1.2561– 16 July low – Medium
• S2 1.2425 – 14 July high – Strong

USDCAD – fundamental overview

Oil was back up on Tuesday and so were US equities. This was enough to inspire renewed demand for the Canadian Dollar. Looking ahead, Wednesday’s calendar is exceptionally thin with no first tier data due.

NZDUSD – technical overview

The market has entered a period of consolidation after running up to a yearly and multi-month high. At this stage, there is still room for deeper setbacks into the 0.6500-0.6800 area before we see an attempt at a higher low and resumption of upside pressure.

• R2 0.7106 – 6 July high – Strong
• R1 0.7045 – 15 July high – Medium
• S1 0.6881 – 20 July/2021 low– Medium
• S2 0.6800 – Figure – Strong

NZDUSD – fundamental overview

The New Zealand Dollar had been doing a great job of holding up relative to its peers on hawkish RBNZ expectations. But now that rate markets are backing off tightening odds, we're seeing a pickup in selling pressure. Odds for an August hike have fallen off substantially from 86% to 68%. Looking ahead, Wednesday’s calendar is exceptionally thin with no first tier data due.

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 4500, with a break back below 4139 to strengthen the outlook.

• R2 4394 – 14 July/Record high– Strong
• R1 4338– 20 July high – Medium
• S1 4233 – 19 July low – Medium
• S2 4139 – 21 June low – 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 1917 – 1 June high – Strong
• R1 1850 – Mid-Figure – Medium
• S1 1750 – 29 June low – Medium
• S2 1724 – 13 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.