Will financial markets get some relief as the week closes out?

Today’s report: Will financial markets get some relief as the week closes out?

There’s been no let-up in global growth worries this week and risk off price action has intensified as best reflected through more weakness in US equities. The latest concerns come from discouraging US earnings, ineffective China monetary policy easing efforts, and distressing data out of the Eurozone and UK.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

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 1.0982 – 8 March high – Strong
  • R1 1.0949 - 17 July high – Medium
  • S1 1.0798 - 5 July low– Medium
  • S2 1.0666 – 26 June low – Strong

EURUSD – fundamental overview

Euro area data was broadly soft on Thursday highlighted by German Ifo declines and disappointing French consumer confidence. Nevertheless, healthy bids from medium and longer-term players more than offset downside from the data letdowns. Key standouts on Friday’s calendar come from Japan CPI, Eurozone consumer inflation expectations, Canada wholesale sales, US core PCE, US personal income and spending, and Michigan sentiment.

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 1.2500.

  • R2 1.3100 – Figure – Medium
  • R1 1.3045 – 17 July/2024 high – Strong
  • S1 1.2818 – 4 June high – Medium
  • S2 1.2778 – 9 July low – Strong

GBPUSD – fundamental overview

Thursday's round of UK CBI data was awful and the Pound reacted accordingly, coming under a good deal of pressure. Total orders sunk to -32 from -18 previous and -20 expected. Selling prices dropped to a post-pandemic low and business optimism declined to -9 from +9. Odds for an August BOE rate cut jumped to around 50% from 40%. Key standouts on Friday’s calendar come from Japan CPI, Eurozone consumer inflation expectations, Canada wholesale sales, US core PCE, US personal income and spending, and Michigan sentiment.

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 151.86, with only a weekly close below to delay the constructive outlook. Next major resistance comes in at 165.00.

  • R2 157.87 – 19 July high – Strong
  • R1 156.00 – 24 July high – Medium
  • S1 153.11 – 24 July low – Medium
  • S2 151.86 – 3 May low – Strong

USDJPY – fundamental overview

Odds for a BOJ rate hike next week still sit up around 70%, though after seeing the Yen rally so sharply on the back of a massive carry unwind, we suspect these odds could come down between now and next week's decision. Key standouts on Friday’s calendar come from Japan CPI, Eurozone consumer inflation expectations, Canada wholesale sales, US core PCE, US personal income and spending, and Michigan sentiment.

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 0.6799– 11 July high – Strong
  • R2 0.6703 – 22 July high – Medium
  • S1 0.6507 – 25 July low– Medium
  • S2 0.6465 – 1 May low – Strong

AUDUSD – fundamental overview

The Australian Dollar has extended declines for the ninth day on the back of softer Aussie data, distressed metals, China markets in decline despite BOE easing attempts, and US equities faltering. Key standouts on Friday’s calendar come from Japan CPI, Eurozone consumer inflation expectations, Canada wholesale sales, US core PCE, US personal income and spending, and Michigan sentiment.

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 1.3900 – Figure – Medium
  • R1 1.3849 – 25 July/2024 high – Medium
  • S1 1.3756 – 2 July high – Medium
  • S2 1.3700 – 19 July low – Medium

USDCAD – fundamental overview

The Canadian Dollar slid to a fresh yearly low against the Buck on Thursday, still struggling with lower US equities and this week's BoC rate cut and dovish communication. However, setbacks could have been a lot worse were it not for a nice recovery in the price of oil. Key standouts on Friday’s calendar come from Japan CPI, Eurozone consumer inflation expectations, Canada wholesale sales, US core PCE, US personal income and spending, and Michigan sentiment.

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 0.5982 – 23 July high – Strong
  • R1 0.5958 – 24 July high – Medium
  • S1 0.5874 – 1 May low – Medium
  • S2 0.5852 – 19 April/2024 low – Strong

NZDUSD – fundamental overview

This week's distressing New Zealand trade data along with an ongoing slide in commodities prices and downturn in US equities have proven to be a big weight on the New Zealand Dollar. Key standouts on Friday’s calendar come from Japan CPI, Eurozone consumer inflation expectations, Canada wholesale sales, US core PCE, US personal income and spending, and Michigan sentiment.

US SPX 500 – technical overview

Longer-term technical studies are in the process of unwinding from overbought levels. There is now room for a pullback towards previous resistance turned support in the form of the previous record high from April around 5,290 before the market considers a run to another record high.

  • R2 5679 – 16 July/Record high – Strong
  • R1 5593 – 23 July high – Medium
  • S1 5398 – 25 July low – Medium
  • S2 5352 – 23 May high – 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 a much bigger disruption to stocks.

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 2200 on a monthly close basis.

  • R2 2500 – Psychological– Strong
  • R1 2484 – 17 July/Record high – Medium
  • S1 2350 – 4 July low – Strong
  • S2 2287– 7 June low – 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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