Stocks not bothered by rallying US Dollar

Today’s report: Stocks not bothered by rallying US Dollar

The most perplexing takeaway from price action this week is the divergence between stocks and currencies. The US Dollar has been well bid and gaining momentum, all while US stocks have continued to rally to record highs.

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 1.1976 – 25 June high– Strong
  • R1 1.1910 - 30 June high – Medium
  • S1 1.1795 - 6 April low – Medium
  • S2 1.1704 – 31 March/2021 low – Strong

EURUSD – fundamental overview

The Euro tried to find some early bids on Thursday from the drop in Eurozone unemployment and upward revisions to Eurozone, German and French manufacturing PMIs. Nevertheless, none of this was enough to keep the Euro from extending declines as the broad based US Dollar demand persisted. Key standouts on today’s calendar come in the form of Eurozone producer prices, Canada trade, Canada manufacturing PMIs, and the monthly employment report out of the US.

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 1.4002 – 23 June high – Strong
  • R1 1.3884 – 29 June high – Medium
  • S1 1.3716 – 16 April low – Medium
  • S2 1.3669 – 12 April low – Strong

GBPUSD – fundamental overview

PM Johnson opened up the door to more doubt around the possibility for a July 19 reopening and BOE Bailey pushed back on rate hike speculation. All of this in conjunction with ongoing broad demand for the US Dollar, continued to open downside pressure on the Pound. Key standouts on today’s calendar come in the form of Eurozone producer prices, Canada trade, Canada manufacturing PMIs, and the monthly employment report out of the US.

USDJPY – technical overview

The major pair has run into massive resistance in the form of the monthly Ichimoku cloud. This translates to a longer-term trend that is still bearish despite the latest run higher. Look for additional upside to be limited, with scope for a topside failure and bearish resumption over the coming sessions. It would take a clear break back above 113.00 to negate the outlook.

  • R2 112.00 – Figure– Medium
  • R1 111.64 – 1 July/2021 high – Medium
  • S1 109.71– 21 June low – Medium
  • S2 109.19 – 7 June low – Strong

USDJPY – fundamental overview

US equities keep running higher, and all at a time when the US Dollar has been in demand as well. This has translated to fresh yearly lows in the Yen. Key standouts on today’s calendar come in the form of Eurozone producer prices, Canada trade, Canada manufacturing PMIs, and the monthly employment report out of the US.

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 0.7617 – 25 June high – Strong
  • R1 0.7528 – 30 Jun high – Medium
  • S1 0.7450 – Mid-Figure – Medium
  • S2 0.7400 – Figure – Strong

AUDUSD – fundamental overview

There have been plenty of negative drivers for the Australian Dollar this week. These include renewed measures as the virus ticks back up, broad US Dollar demand, a miss on the Aussie trade surplus and talk of a cooling housing market. Key standouts on today’s calendar come in the form of Eurozone producer prices, Canada trade, Canada manufacturing PMIs, and the monthly employment report out of the US.

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 1.2500 will strengthen the outlook.

  • R2 1.2487 – 21 June high – Strong
  • R1 1.2450 – Mid-Figure – Medium
  • S1 1.2252– 23 June low – Medium
  • S2 1.2204 – 13 June high – Strong

USDCAD – fundamental overview

Canadian markets were closed for Canada Day and most of the price action revolved around more Loonie selling from ongoing broad based US Dollar demand. Key standouts on today’s calendar come in the form of Eurozone producer prices, Canada trade, Canada manufacturing PMIs, and the monthly employment report out of the US.

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 0.6800, with sights set on a run back towards the 0.7500 area.

  • R2 0.7096 – 25 June high – Strong
  • R1 0.7011 – 1 July high – Medium
  • S1 0.6950 – Mid-Figure– Medium
  • S2 0.6923 – 18 June/2021 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar hasn't been immune to broad based US Dollar demand this week, though we did seen the New Zealand Dollar hold up relative to its peers on Thursday, getting help from the surge in New Zealand housing prices. Key standouts on today’s calendar come in the form of Eurozone producer prices, Canada trade, Canada manufacturing PMIs, and the monthly employment report out of the US.

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 4350, with a break back below 4139 to strengthen the outlook.

  • R2 4350 – Psychological – Strong
  • R1 4321 – 1 July/Record high – Medium
  • S1 4200 – Round number – 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 1826 – 17 June high – 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.

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

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