Global FX Insights by LMAX Exchange Research & Analytics Comprehensive daily market research and analytics, with insightful commentary and charts

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1 Get Global FX Insights via - click here Global FX Insights by LMAX Exchange Research & Analytics Comprehensive daily market research and analytics, with insightful commentary and charts US Dollar Retains Offered Tone into Thursday Wake-up call The Fed Minutes was the big risk on Wednesday's, but in the end, didn't produce much volatility, with the central bank keeping to its balanced line of gradual rate hikes while needing to keep a close eye on downside risks that could derail the normalization timeline, with US administration trade policy one of those key risks. Technical highlights Daily Video EURUSD More upside needed for shift GBPUSD Run through changes USDJPY Expected to find good resistance EURCHF Rallies seen well capped AUDUSD Signs of minor relief USDCAD Plenty of choppy price action NZDUSD Pressure on downside for now US SPX 500 Major double top in works GOLD (spot) Basing structure still alive BTCUSD Dips supported for now ETHUSD Upside remains corrective Fundamental highlights EURUSD Euro gets a nice lift from wages jump GBPUSD Nice recovery on solid data, CBI trades due USDJPY No surprises from the latest Fed Minutes EURCHF SNB intervention policy alive and well AUDUSD Aussie rally helped by upbeat Debelle USDCAD OIL rallies most in two months NZDUSD Kiwi carrying momentum from retail sales US SPX 500 Fed model will be important to watch GOLD (spot) Plenty of institutional demand BTCUSD Crypto constraints still capping rallies ETHUSD Extended equities a worry for Ether Performance v. US dollar since weekly open Suggested reading Lessons for the World s Biggest Sovereign Wealth Fund, M. Gilbert, Bloomberg (August 21, 2018) 5 Ways Trump Could Weaken the US Dollar, V. Patel, Think.ING (August 21, 2018) Page 1 of 14

2 EURUSD technical overview The market has been trying to correct back up following a breakdown below a multi-week consolidation that resulted in a fresh 2018 low in the previous week. Look for a daily close back above to signal that the market has bottomed out and could be looking for a more significant bullish reversal. But while below on a daily close basis, the pressure remains on the downside. R Figure Medium R Aug high Strong S Aug low Medium S Aug low Medium EURUSD fundamental overview The Euro got a nice boost from economic data which showed the biggest jump in wages in six years, helping to bolster optimism about a Eurozone economy on the right path.the Fed Minutes was the big risk on Wednesday's calendar, but in the end, didn't produce too many fireworks, with the central bank maintaining its outlook for gradual rate hikes, while being mindful of various downside risks that could derail the normalization timeline, with US administration trade policy one of those key risks. The market was perhaps also reserved ahead of Friday s Powell speech in Jackson Hole on the subject of monetary policy in a changing economy. Looking at Thursday s calendar, the ECB Minutes stand out, along with German and Eurozone manufacturing PMIs, some Eurozone consumer confidence readings, US initial jobless claims, US manufacturing PMIs and US new home sales. Page 2 of 14

3 EURUSD Technical charts in detail Watch now Page 3 of 14

4 GBPUSD technical overview The 2018 breakdown has extended into the s, which roughly coincides with a massive previous resistance zone from back in 2016 off the +30 year low. Technical studies are starting to turn back up from extended territory, and any additional weakness is expected to be well supported above Still, a break and close back above will be required to strengthen the case for a meaningful low and start to a much bigger recovery back towards the 2018 high up in the s. R Aug high Strong R Aug high Medium S Aug low Medium S Aug low Strong GBPUSD fundamental overview There weren t any surprises from the Fed Minutes and this allowed the Pound to hold onto its impressive recovery run out from its recent 2018 low. Overall, things have been looking up in the UK, with a solid run of economic data and less drama on the Brexit front helping to stabilise the currency. We ve also seen a bout of profit taking on long US Dollar exposure, further contributing to the bounce. Looking ahead, we get some UK CBI trades data, followed up by some US data that includes initial jobless claims, manufacturing PMIs and new home sales. GBPUSD Technical charts in detail Watch now Page 4 of 14

5 USDJPY technical overview Rallies continue to be very well capped, with the medium-term outlook still favouring lower tops and lower lows. Look for a daily close back below to strengthen the bearish outlook, opening the door for the start to a move back down towards which guards against the area 2018 low. R Aug high Strong R Aug high Medium S Jun low Medium S Jun low Strong USDJPY fundamental overview Overall, the Yen hasn t really been moving on domestic fundamentals and has instead been consumed with traditional drivers of global sentiment and positioning in the US Dollar. We didn t get much of a reaction to the Fed Minutes, with the central bank update coming in as expected, offering no surprises. The Fed kept a balanced outlook of wanting to stick to gradual rate increases but also wanting to be mindful of downside risks to the economy, including US trade policy. The ongoing bid in US equities has been a source of demand for the major pair, though the onset of Dollar profit taking and plenty of uncertainty in the air surrounding the global outlook, have many looking to sell into rallies. BOJ Ishida s upbeat comments calling for a reduction in stimulus even before the inflation target was met, didn t seem to have any influence. We also found out that Governor Kuroda will be sending Deputy Governor Wakatabe in his place to Jackson Hole. As far as data goes, we get a batch of US releases on Thursday that include initial jobless claims, manufacturing PMIs and new home sales. Watch now Page 5 of 14

6 EURCHF technical overview A recent breakdown to a fresh 2018 low has put the pressure back on the downside and now exposes deeper setbacks towards next key support which comes in the form of the 2016 high at Look for rallies to be well capped, with only a break back above to negate. R Aug high Strong R Figure Medium S Figure Medium S Aug/2018 low Strong EURCHF fundamental overview The SNB hasn t been too pleased with the recent appreciation in the Franc and made a point of letting the market know last week, through the words of Fritz Zurbruegg. The central banker made it a point to remind the market that negative interest rate policy and intervention tools were still justified, which helped to put a stop to the Franc s run against the Euro to a fresh 2018 high (EURCHF low). The SNB will need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook. Any signs of sustained risk liquidation in the second half of this year, will likely invite a very large wave of demand for the Franc, which will put the SNB in the more challenging position of needing to back up its talk with action it may not have as much luxury to implement at this point in the monetary policy cycle. Page 6 of 14

7 AUDUSD technical overview The market is in the process of correcting out from a 2018 and multi-month low down around Overall however, rallies should be well capped, with only a break back above to suggest otherwise. R Figure Medium R Aug high Medium S Aug low Medium S Aug low Strong AUDUSD fundamental overview The news of the renewed trade talks between the US and China have already been helping to inspire an Aussie recovery out from 2018 lows, while President Trump s complaints about the Fed raising interest rates, has opened some more USD profit taking to help lift Aussie further off the lows. An ongoing bid in US equities, upbeat RBA Debelle inflation comments and solid Aussie construction readings have also helped to lift the Aussie rate. There wasn t much market reaction to the Fed Minutes, which offered no new updates on the central bank s outlook. Looking ahead, we get a batch of US releases on Thursday that include initial jobless claims, manufacturing PMIs and new home sales. Page 7 of 14

8 USDCAD technical overview The market has been trending up in 2018, extending its run of gains and thinking about a push to retest of the 2017 high around The uptrend has however entered a corrective phase, which could still invite a deeper corrective decline before the next upside extension gets underway. Still, look for any weakness to be well supported ahead of , with only a break back below this level to negate the constructive outlook. R Aug high Strong R Figure Medium S Psychological Medium S Jun low Strong USDCAD fundamental overview The Canadian Dollar has been slowly building on a recent run of gains, on the back of solid economic data, and some optimism around the fate of NAFTA. Wednesday s Canada retail sales did nothing to change this picture after coming in as expected. The Loonie upside has also been helped along by broad based profit taking on long US Dollar exposure and a recovery in the price of OIL. OIL is coming off its best daily performance in two months. Wednesday s Fed Minutes didn t have much impact, with the central bank offering no new updates on the outlook. Looking ahead, absence of first tier data out of Canada on Thursday will leave the focus on US readings that include initial jobless claims, manufacturing PMIs and new home sales. Page 8 of 14

9 NZDUSD technical overview The market is in the process of correcting out from a 2018 and +2.5 year low down at Overall however, rallies should be well capped, with only a break back above to suggest otherwise. R Aug high Strong R Aug high Medium S Figure Medium S Aug/2018 low Strong NZDUSD fundamental overview Last week s hotter producer prices have been followed up with a very strong Kiwi retail sales showing and these results, along with ongoing support for US equities and broad based profit taking on US Dollar longs, have all helped to offset Kiwi bearishness after the New Zealand Dollar had traded down to a two and a half year low against the Buck the other week. Looking ahead, we get a batch of US releases on Thursday that include initial jobless claims, manufacturing PMIs and new home sales. Page 9 of 14

10 US SPX 500 technical overview A market that has been extended on the monthly chart is showing signs of potentially starting to top out, with the possibility for a massive double top formation. Any rallies should now continue to be very well capped around the record high from January, in favour of renewed weakness back below the 2530 area yearly low (double top neckline) and towards a retest of strong longer-term resistance turned support in the form of the 2015 high at R Jan/Record high Strong R Aug high Medium S Jul low Medium S Jul low Strong US SPX 500 fundamental overview Stocks have been bid right back towards the record highs in August, though investor immunity to downside risk is not as strong these days. The combination of Fed policy normalisation (four rate hikes now signaled in 2018), US protectionism, ongoing White House drama and geopolitical tension are all warning of capitulation ahead, despite this latest run. The Fed has also finally acknowledged inflation no longer running below target in 2018, something that could very well result in less attractive equity market valuations given the implication on rates. We recommend keeping a much closer eye on the equities to ten year yield comparative going forward, as this could be something that inspires a more aggressive decline in this second half of Page 10 of 14

11 GOLD (SPOT) technical overview Despite a recent run of of declines, the overall outlook remains constructive, with the market in the process of carving out a longer term base off the 2015 low. Look for any additional weakness to be well supported above 1150 on a daily close basis, in favour of the next major upside extension back towards critical resistance in the form of the 2016 high at Key resistance comes in at 1235, with a push back above to strengthen the outlook. R Jul high Strong R Jul high Strong S Aug/2018 low Medium S Psychological Strong GOLD (SPOT) fundamental overview Despite intense setbacks in the yellow metal over the past several days, there continues to be solid demand from medium and longer-term accounts. These players more concerned about exhausted monetary policy, extended global equities, political uncertainty, systemic risk and trade war threats. 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. Page 11 of 14

12 BTCUSD technical overview The latest topside failure keeps the downtrend firmly intact and puts the pressure back on the downside, with a fresh lower top sought out around $8,490, to be confirmed on a bearish continuation below the 2018 low. Only a break back above $8,490 would negate and force a bullish structural shift, while back below the yearly low could open a more intensified decline towards $3,000. R2 7,145 6Aug high Strong R1 6,635 15Aug high Medium S1 5,860 14Aug low Medium S2 5,755 24Jun/2018 low Strong BTCUSD fundamental overview Bitcoin is doing its best to try and hold up above $6,000 after undergoing a massive decline in At the moment, the market is trying to find some stability, while also looking for additional clarity on the regulatory front. The recent news of the SEC delaying its decision on a cryptocurrency ETF and the latest headlines out of China that it has banned all crypto related commercial activities, have been the latest thorns at Bitcoin s side. While it looks like there s lots of light at the end of the tunnel for Bitcoin, we suspect the market will need to get back above $8,500 to really turn heads. BTCUSD Technical charts in detail Watch now Page 12 of 14

13 ETHUSD technical overview The market remains under pressure in 2018, extending its run of intense declines to fresh 2018 lows. The next level of major support comes in around $160, which goes back to the low from July Daily studies are however extended, which could warn of a corrective bounce ahead, though it would take a break back above $370 to officially take the pressure off the downside. R Aug high Medium R Aug high Strong S Aug/2018 low Medium S2 230 September 2017 low Strong ETHUSD fundamental overview We ve been seeing quite a bit of weakness in the price of Ether in 2018 and there is still legitimate risk for deeper setbacks, given technical hurdles within the Ethereum protocol, ongoing regulatory oversight and a global macro backdrop exposing risk correlated projects on the Ethereum blockchain. This latest news of China banning all crypto related commercial activities has been yet another negative driver. Meanwhile, monetary policy normalisations around the globe and an anticipated reduction in global risk appetite are placing a tremendous strain on ERC20 projects that have yet to even produce proper use cases and proof of concept. Page 13 of 14

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