US Dollar weakness trumps all

Today’s report: US Dollar weakness trumps all

It’s been a week of softer data out of the Eurozone, softer data out of the UK, ongoing stress around the French election, and what is expected to be a massive defeat for the Tories in the UK. Yet with all that going on, the Euro and Pound have been rallying along with the rest of the currency market.

Wake-up call

Chart talk: Technical & fundamental highlights

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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 1.0853 – 12 June high – Strong
  • R1 1.0818 - 3 July high – Medium
  • S1 1.0666 - 26 June low– Strong
  • S2 1.0650 – 1 May low – Medium

EURUSD – fundamental overview

This week's round of softer US economic data highlighted by ADP, claims, factory orders, and ISM services has been behind a healthy wave of US Dollar selling and dovish repricing of Fed expectations, which has helped to drive the Euro higher. Softer economic data out of the Eurozone has mostly been shrugged off. As far as takeaways from the ECB Minutes go, they were that that not everyone believed in a strong recovery scenario, wage growth remained key and there was a growing confidence in the ECB's own forecasts. Key standouts on Friday’s calendar come from German industrial production, Eurozone retail sales, the monthly employment reports out of the US and Canada, Canada Ivey PMIs, and an ECB Lagarde speech. Trading conditions are thinner on account of the US holiday and won't be getting back to normal until after the weekend.

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 1.2000.

  • R2 1.2894 – 8 March/2024 high – Strong
  • R1 1.2778 – 3 July high – Medium
  • S1 1.2613 – 27 June low – Medium
  • S2 1.2578 – 15 May low – Medium

GBPUSD – fundamental overview

This week's round of softer US economic data highlighted by ADP, claims, factory orders, and ISM services has been behind a healthy wave of US Dollar selling and dovish repricing of Fed expectations which has helped to drive the Pound higher. Softer economic data out of the UK has mostly been shrugged off, and the election, which is expected to produce a landslide win for the Labour Party, has been more or less priced in. Key standouts on Friday’s calendar come from German industrial production, Eurozone retail sales, the monthly employment reports out of the US and Canada, Canada Ivey PMIs, and an ECB Lagarde speech. Trading conditions are thinner on account of the US holiday and won't be getting back to normal until after the weekend.

USDJPY – technical overview

The market remains confined to a strong uptrend, most recently extending to a multi-year high through 160.00. Key support comes in at 151.95, with only a weekly close below to delay the constructive outlook. Next major resistance comes in at 165.00.

  • R2 162.00 – Figure – Strong
  • R1 161.96 – 3 July/2024/Multi-Year high – Medium
  • S1 159.60 – 26 June low – Medium
  • S2 158.67 – 21 June low – Medium

USDJPY – fundamental overview

The Yen has very much welcomed this week's wave of softer than expected data out of the US, which has opened broad based US Dollar outflows and a repricing of Fed bets. Yield differentials have moved back towards the Yen and we've seen a mild recovery in the Yen off multi-year low levels. Surely, local officials have been happy to get even the smallest of breathing room. Key standouts on Friday’s calendar come from German industrial production, Eurozone retail sales, the monthly employment reports out of the US and Canada, Canada Ivey PMIs, and an ECB Lagarde speech. Trading conditions are thinner on account of the US holiday and won't be getting back to normal until after the weekend.

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 0.6800– Figure – Medium
  • R2 0.6734 – 3 July high – Medium
  • S1 0.6576– 10 June low – Medium
  • S2 0.6558 – 8 May low – Strong

AUDUSD – fundamental overview

This week's round of softer US economic data highlighted by ADP, claims, factory orders, and ISM services has been behind a healthy wave of US Dollar selling and dovish repricing of Fed expectations, which has helped to drive the Australian Dollar higher. Key standouts on Friday’s calendar come from German industrial production, Eurozone retail sales, the monthly employment reports out of the US and Canada, Canada Ivey PMIs, and an ECB Lagarde speech. Trading conditions are thinner on account of the US holiday and won't be getting back to normal until after the weekend.

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 1.3847 – 16 April/2024 high – Strong
  • R1 1.3792 – 11 June high – Medium
  • S1 1.3600 – Figure – Medium
  • S2 1.3586 – 10 May low – Strong

USDCAD – fundamental overview

This week's round of softer US economic data highlighted by ADP, claims, factory orders, and ISM services has been behind a healthy wave of US Dollar selling and dovish repricing of Fed expectations, which has helped to drive the Canadian Dollar higher. Key standouts on Friday’s calendar come from German industrial production, Eurozone retail sales, the monthly employment reports out of the US and Canada, Canada Ivey PMIs, and an ECB Lagarde speech. Trading conditions are thinner on account of the US holiday and won't be getting back to normal until after the weekend.

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 0.6222 – 12 June high – Strong
  • R1 0.6200 – Figure – Medium
  • S1 0.6048 – 2 July low – Medium
  • S2 0.6031 – 15 May low – Strong

NZDUSD – fundamental overview

This week's round of softer US economic data highlighted by ADP, claims, factory orders, and ISM services has been behind a healthy wave of US Dollar selling and dovish repricing of Fed expectations, which has helped to drive the New Zealand Dollar higher. Key standouts on Friday’s calendar come from German industrial production, Eurozone retail sales, the monthly employment reports out of the US and Canada, Canada Ivey PMIs, and an ECB Lagarde speech. Trading conditions are thinner on account of the US holiday and won't be getting back to normal until after the weekend.

US SPX 500 – technical overview

Longer-term technical studies continue to look quite extended, begging for a deeper correction ahead. At the same time, the latest bullish breakout to a fresh record high beyond the 2024 high opens the door for the next measured move upside extension targeting the 5650 area. Key support comes in at 5194.

  • R2 5600 – Round Number – Strong
  • R1 5577 – 4 July/Record high – Medium
  • S1 5394 – 14 June low – Medium
  • S2 5321 – 7 June 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 major disruption to the stock market.

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 2000 on a monthly close basis.

  • R2 2451 – 20 May Record high – Strong
  • R1 2388 –7 June high – Medium
  • S1 2277 – 3 May low – Strong
  • S2 2223– 21 March high – 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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