Yen declines accelerate back towards major low

Today’s report: Yen declines accelerate back towards major low

Yen declines have accelerated in recent sessions, with the currency trading back to its lowest level since late April when it put in a multi-year low against the Buck. Key standouts on Friday’s calendar come from UK retail sales, public borrowing, and PMI reads, Eurozone PMI reads, Canada retail sales and producer prices, and US manufacturing PMI data and existing home sales.

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 1.0917 – 4 June high – Strong
  • R1 1.0853 - 12 June high – Medium
  • S1 1.0668 - 14 June low– Strong
  • S2 1.0650 – 1 May low – Medium

EURUSD – fundamental overview

Indeed, the European election fallout has unsettled the Euro, though we have seen the single currency trying to find its footing in recent sessions. Initially, it was reassurances from Marine LePen that she would work with Macron. We've also seen support on a eave of ECB speak that has mostly cast doubt on the prospect for back to back rate cuts. Thursday's softer German producer prices have halted the Euro recovery somewhat. Key standouts on Friday’s calendar come from UK retail sales, public borrowing, and PMI reads, Eurozone PMI reads, Canada retail sales and producer prices, and US manufacturing PMI data and existing home sales.

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 1.2740 – 19 June high – Medium
  • S1 1.2643 – 16 May low – Strong
  • S2 1.2600 – Figure – Medium

GBPUSD – fundamental overview

The BOE left rates on hold as widely expected but caught the market off guard with a more dovish overall communication. The vote was a split vote and the decision not to cut rates was described as finely balanced. The Pound was sold aggressively in the aftermath and market odds for a August cut doubled to about 60%. Key standouts on Friday’s calendar come from UK retail sales, public borrowing, and PMI reads, Eurozone PMI reads, Canada retail sales and producer prices, and US manufacturing PMI data and existing home sales.

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.

  • R2 160.21 – 29 April/2024 high – Strong
  • R1 159.13 – 21 June high – Medium
  • S1 157.52 – 18 June low – Medium
  • S2 156.57 – 13 June low – Medium

USDJPY – fundamental overview

Japan inflation data came in softer than expected, while flash PMI results showed a shar deterioration in economic conditions across the manufacturing and services sectors. Unsurprisingly, the Yen extended declines in the aftermath. Key standouts on Friday’s calendar come from UK retail sales, public borrowing, and PMI reads, Eurozone PMI reads, Canada retail sales and producer prices, and US manufacturing PMI data and existing home sales.

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 0.6715– 16 May high – Strong
  • R2 0.6705 – 12 June high – Medium
  • S1 0.6576– 10 June low – Medium
  • S2 0.6558 – 8 May low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been finding some offers into rallies on Friday after Aussie services and manufacturing PMI data produced discouraging results overall. Key standouts on Friday’s calendar come from UK retail sales, public borrowing, and PMI reads, Eurozone PMI reads, Canada retail sales and producer prices, and US manufacturing PMI data and existing home sales.

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 1.3662 – 7 June low – Medium
  • S2 1.3586 – 10 May low – Strong

USDCAD – fundamental overview

Things haven't been all that pretty for the Canada economy of late, though we have seen a mild recovery in the Canadian Dollar this week as the price of oil shoots back to the topside. Key standouts on Friday’s calendar come from UK retail sales, public borrowing, and PMI reads, Eurozone PMI reads, Canada retail sales and producer prices, and US manufacturing PMI data and existing home sales.

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 0.6083 – 22 May low – Medium
  • S2 0.6031 – 15 May low – Strong

NZDUSD – fundamental overview

Weakness in Asian currencies will make New Zealand less competitive as an export economy, while setbacks in US equities could also be pointing to downside pressure on the risk correlated commodity currency. Key standouts on Friday’s calendar come from UK retail sales, public borrowing, and PMI reads, Eurozone PMI reads, Canada retail sales and producer prices, and US manufacturing PMI data and existing home sales.

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 5524 – 20 June/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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