Wednesday could get ugly

Next 24 hours: Speculation not enough to rock this boat

Today’s report: Wednesday could get ugly

It was a tale of two halves for markets on Tuesday. Initially, it was all risk on and Dollar selling, before things reversed course into North America, with risk coming off and the Buck recovering.

Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

The market has been looking for a higher low since topping out in 2021 up at 1.2350. Ideally, setbacks continue to be well supported down towards 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. Only a weekly close below 1.1600 would force a rethink.

  • R2 1.1909 – 30 July high– Strong
  • R1 1.1846 - 31 August high – Medium
  • S1 1.1735 - 27 August low – Medium
  • S2 1.1664 – 20 August/2021 low – Strong

EURUSD – fundamental overview

The Euro is coming off a Tuesday session where it was mostly bid up on the back of a Eurozone CPI surge and comments of taper talk from various ECB members. German jobs data was also better than expected which helped to prop the single currency. However, gains were tempered some risk off flow and mild selling in US equities. Key standouts on Wednesday’s calendar include Aussie manufacturing PMIs, Aussie GDP, German retail sales, UK nationwide house prices, UK manufacturing PMIs, Eurozone unemployment, Canada manufacturing PMIs, US ADP employment, US ISM manufacturing, and US construction spending.

EURUSD - Technical charts in detail

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 1.3846 – 17 August high – Medium
  • R1 1.3808 – 31 August high – Medium
  • S1 1.3680 – 27 August low – Medium
  • S2 1.3572 – 20 July low – Strong

GBPUSD – fundamental overview

The Pound tried its best to extend a recent run but fell short on Tuesday, with soft UK data factoring into some relative weakness. UK consumer borrowing declined unexpectedly, while mortgage approvals were also a disappointment. Key standouts on Wednesday’s calendar include Aussie manufacturing PMIs, Aussie GDP, German retail sales, UK nationwide house prices, UK manufacturing PMIs, Eurozone unemployment, Canada manufacturing PMIs, US ADP employment, US ISM manufacturing, and US construction spending.

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 111.00 – Figure– Medium
  • R1 110.81 – 11 August high – Strong
  • S1 108.72 – 4 August low – Medium
  • S2 108.34 – 7 May low – Strong

USDJPY – fundamental overview

The Nikkei enjoyed a nice bump on Tuesday, while Japan data on the day was also better than expected, as highlighted by industrial production and jobs data. Key standouts on Wednesday’s calendar include Aussie manufacturing PMIs, Aussie GDP, German retail sales, UK nationwide house prices, UK manufacturing PMIs, Eurozone unemployment, Canada manufacturing PMIs, US ADP employment, US ISM manufacturing, and US construction spending.

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 high 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 0.7390 – 11 August high – Medium
  • R1 0.7342 – 31 August high – Medium
  • S1 0.7222 – 27 August low – Medium
  • S2 0.7106 – 20 August/2021 low – Medium

AUDUSD – fundamental overview

Most of the latest gains in the Australian Dollar have come from a bullish monthly close in Chinese markets despite softer China data. Key standouts on Wednesday’s calendar include Aussie manufacturing PMIs, Aussie GDP, German retail sales, UK nationwide house prices, UK manufacturing PMIs, Eurozone unemployment, Canada manufacturing PMIs, US ADP employment, US ISM manufacturing, and US construction spending.

USDCAD – technical overview

Finally signs of a major bottom in the works after a severe decline from the 2020 high. A recent 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 1.2808 – 19 July high – Medium
  • R1 1.2709 – 27 August high – Medium
  • S1 1.2565– 17 August low – Medium
  • S2 1.2500 – Psychological – Medium

USDCAD – fundamental overview

Not a good showing from Canada GDP on Tuesday and the data had a clear impact on the Canadian Dollar, with the currency underperforming. All of this makes things that much more tense ahead of this month's election where PM Trudeau is now behind in the polls. Key standouts on Wednesday’s calendar include Aussie manufacturing PMIs, Aussie GDP, German retail sales, UK nationwide house prices, UK manufacturing PMIs, Eurozone unemployment, Canada manufacturing PMIs, US ADP employment, US ISM manufacturing, and US construction spending.

NZDUSD – technical overview

The market has entered a period of consolidation after running up to a yearly and multi-month high. At this stage, rallies should be well capped and 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 0.7089 – 4 August high – Strong
  • R1 0.7069 – 31 August high – Medium
  • S1 0.6930 – 25 August low – Medium
  • S2 0.6879 – 24 August low – Medium

NZDUSD – fundamental overview

It's back to pressure on the RBNZ to be thinking about raising rates, this after the latest run of surging New Zealand house prices. All of this has resulted in a run of outperformance in the New Zealand Dollar. Key standouts on Wednesday’s calendar include Aussie manufacturing PMIs, Aussie GDP, German retail sales, UK nationwide house prices, UK manufacturing PMIs, Eurozone unemployment, Canada manufacturing PMIs, US ADP employment, US ISM manufacturing, and US construction spending.

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 above 4500, with a break back below 4353 to strengthen the outlook.

  • R2 4550 – Psychological – Strong
  • R1 4546 – 31 August/Record high – Medium
  • S1 4353 – 19 August low – Medium
  • S2 4233 – 19 July 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 1835 – 15 July high – Medium
  • S1 1700 – Round number – Medium
  • S2 1677 – 8 March/2021 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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