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 Busy Friday Features US Jobs Report Wake-up Call The US Dollar heads into Friday in a fairly good mood, trading higher across the board since the weekly open, even against the Euro which is coming off an impressive round of Thursday gains, sitting just off its 2017 high from last week. Technical highlights EURUSD Getting close to a top GBPUSD More consolidation USDJPY Risk for renewed decline EURCHF Trying to break AUDUSD Adhering to major range USDCAD Recovery expected soon NZDUSD Signs of bearish reversal US SPX 500 Focus shifts below 2400 GOLD (spot) Trying for higher low Feature USDZAR Constructive turn Daily Video Fundamental highlights EURUSD ECB Minutes push Euro back to yearly high GBPUSD BOE McCafferty policy reversal comments prop USDJPY BOJ bond operations fuel more Yen weakness EURCHF SNB fighting hard as sentiment deteriorates AUDUSD Slumping base metals prices an added strain USDCAD Canada employment and Ivey PMIs on tap NZDUSD Kiwi finds support after US data disappointment US SPX 500 Strong jobs report not so good for stocks GOLD (spot) Macro players continue to buy aggressively Feature USDZAR Political uncertainty knocks Rand Five day performance v. US dollar Suggested reading (Another) Taper Tantrum, M. Gilbert, Bloomberg (July 6, 2017) British Open Prize Money in Dollars!, J. Detrixhe, Quartz (July 6, 2017) Page 1 of 12

2 EURUSD technical overview This latest break to fresh 2017 highs beyond has confirmed a higher low at opening this latest extension towards , which also coincides with critical longer-term resistance in the area. But daily studies are looking stretched, suggesting any additional upside could be difficult, with the greater risk building for some form of a meaningful bearish reversal in the sessions ahead. Still, the uptrend in 2017 is well intact and a break below back below a confirmed higher low at would be required to officially shift the broader focus back to the downside. R Psychological Strong R Jun/2017 high Medium S Jul low Medium S Jun low Strong EURUSD fundamental overview It didn t take too long for the Euro to resume its 2017 uptrend, with the single currency racing back up on Thursday and contemplating a break to a fresh yearly high towards The catalyst for the move came from the combination of a more hawkish ECB Minutes and softer US data. The ECB Minutes revealed board members having the conversation about dropping the central bank's QE bias, while US ADP employment and US initial jobless claims disappointed. Perhaps the only thing capping the Euro somewhat was the solid US ISM non-manufacturing print and some positioning ahead of today s US employment report. German industrial production is the only notable standout on the European calendar. It s worth noting the Fed s release of its monetary policy report to Congress and Trump s meeting with Putin (for the first time) at the G20 summit should not be overlooked. Page 2 of 12

3 GBPUSD technical overview The market has entered a period of choppy consolidation over the past several sessions but is now expected to be very well supported on dips in favour of a higher low and bullish continuation towards a measured move extension objective at in the weeks ahead. A breakout above critical resistance at back in April triggered a structural shift in the major pair warning of a longer-term base. Only back below would compromise this outlook. Still, in the shorterterm, choppy consolidation in the area should not be ruled out before the market ultimately breaks higher. R May/2017 high Strong R Psychological Medium S Jul low Medium S Jun high Strong GBPUSD fundamental overview There wasn t much going on in the UK on Thursday, though the Pound still managed to find some bids on the back of discouraging US economic data. Both ADP employment and initial jobless claims were a let down, though a solid ISM nonmanufacturing print did help to cap gains somewhat. BOE McCafferty has also helped to keep the Pound supported after commenting the central bank would be needing to take away stimulus given an acceleration in inflation. Looking ahead, today will be a busy day for the Pound. First we get a batch of data out of the UK including industrial production, manufacturing production and trade, and then all of the focus shifts to the US jobs report. It s worth noting the Fed s release of its monetary policy report to Congress and Trump s meeting with Putin (for the first time) at the G20 summit should not be overlooked. Page 3 of 12

4 USDJPY technical overview Despite the latest recovery rally, the overall pressure remains on the downside. In the interim, look for any additional upside to remain capped below , though only a break back above the recent high at will negate the outlook and take the pressure off the downside. R May high Strong R Jul high Medium S Jun high Medium S Jun low Strong USDJPY fundamental overview A disappointing round of Thursday US data and some risk off flow had capped gains in the major pair before the market was bid up again early Friday on the back of BOJ bond operations which saw an increase in purchases and an unlimited fixed rate bond operation for the 5 and 10 year segments. Overall, the more hawkish policy trajectories at the Fed, ECB and BOE have already impacted the Yen in recent days, with the Japanese currency tracking lower (USDJPY higher) as yield differentials widen in favor of the US Dollar, Euro and Pound. However, there is risk all of this central bank hawkishness spooks the global equities market, which could inspire renewed Yen demand on traditional correlations (USDJPY lower). Looking ahead, the key standout on today s calendar is the US employment report. But other events to watch will be Fed s release of its monetary policy report to Congress and Trump s meeting with Putin (for the first time) at the G20 summit. Page 4 of 12

5 EURCHF technical overview A recent break above has taken the short-term pressure off the downside and could be warning of a more significant structural shift. Next key resistance comes in at , with the psychological barrier coinciding with a high from August The establishment above would force a meaningful shift in the structure and open the door for longer-term upside. At the same time, while the market holds below on a daily closes basis the overall trend is still bearish and a break back below would renew downside pressure. R Psychological Strong R Jul high/2017 high Medium S Jun high Medium S Jun low Strong EURCHF fundamental overview Overinflated, record high US equities should be a worry for the SNB as any capitulation on the equity front is likely to invite massive safe haven Franc demand the central bank will have an extremely difficult time offsetting, irrespective of the central bank s negative rate policy and intervention efforts. The SNB is hoping global sentiment will remain artificially elevated and the ECB will continue to paint a more hawkish picture. But it looks like it really should come down to the performance in US equities given the influence on broader sentiment. Any signs of intensification to the downside will likely invite a pickup in Franc demand and unwanted downside pressure on EURCHF. Page 5 of 12

6 AUDUSD technical overview Despite the latest rally, the market continues to be very well capped into medium-term resistance around Ultimately, any moves to the topside are therefore classified as corrective with the market expected to stall out and roll over again. Look for a break back below to strengthen this outlook and accelerate declines. R Jun high Strong R Jul high Medium S Jul low Medium S Jun low Strong AUDUSD fundamental overview The Australian Dollar has taken a healthy hit this week, initially triggered after the RBA failed to deliver a more upbeat, hawkish policy decision many were expecting. Weakness in copper prices, falling coal exports to China, slumping iron ore and worry over a capitulation in risk assets are other factors keeping Aussie weighed down into the latter portion of the week. Even Thursday s discouraging US ADP and jobless claims prints have done little to prop Aussie into setbacks. Looking ahead, the big focus will be on the US jobs report, though the Fed s release of its monetary policy report to Congress and Trump s meeting with Putin (for the first time) at the G20 summit should not be overlooked. Page 6 of 12

7 USDCAD technical overview The latest round of setbacks have taken the pressure off the topside for now, with the market trading back into a longerterm range. The recent break below has opened the door for a more pronounced decline through major psychological support at Ultimately however, the longer-term uptrend remains intact and setbacks should be well supported below the barrier. Still, we would now need to see a bounce in the sessions ahead and break back above at a minimum to strengthen the constructive outlook. R Jun high Strong R Jul high Medium S Jul/2017 low Strong S Figure Medium USDCAD fundamental overview Canada trade data showed a wider than expected deficit, though there were some decent components within the data to offset. Meanwhile, Thursday s round of US data was mixed as well, with ADP and claims missing, but ISM nonmanufacturing coming in better than forecast. In the end, the deciding factor proved to be the price of OIL, with another pullback ultimately resulting in a lower Canadian Dollar on the day. Still, overall, the Canadian Dollar has been well bid in recent weeks, with a very clear hawkish shift in the Bank of Canada s thinking assigned as the primary driver. Looking ahead, it should be a very busy final session of the week for the Loonie, with the currency needing to take in monthly employment reports out of Canada and the US, along with Canada Ivey PMIs. The Fed will also release its monetary policy report to Congress, which could factor into price action. Page 7 of 12

8 NZDUSD technical overview Despite the intense surge over the past several days, the overall pressure remains on the downside with the market expected to be very well capped in the s. The longer-term chart is reflective of this fact as it looks like we re seeing the formation of a major top off the 2016 high. Only a clear break back above would compromise the outlook, while back below strengthens the bearish case. R Feb/2017 high Strong R Jun high Medium S Jul low Medium S Jun low Strong NZDUSD fundamental overview The New Zealand Dollar has put in an impressive rally in recent weeks, but is starting to show signs of exhaustion. This week s wave of US Dollar demand and another negative GDT auction showing have factored into the mild Kiwi selloff. Meanwhile, fear of vulnerability in global equities is acting as an additional strain for Kiwi. We did however see some demand emerge on Thursday following the disappointing US ADP employment and initial jobless claims prints. Looking ahead, the big focus will be on the US jobs report, though the Fed s release of its monetary policy report to Congress and Trump s meeting with Putin (for the first time) at the G20 summit should not be overlooked. Page 8 of 12

9 US SPX 500 technical overview Any setbacks have been exceptionally mild thus far and at a minimum, a daily close back below 2400 would be required to take the immediate pressure off the topside, though only a break below 2320 would signal a meaningful shift in the structure. But for now, until we see a daily close below 2400, the market is capable of extending its record run towards the next measured move extension target at 2480 further up. R Measured Move Strong R Jun/Record high Medium S May low Medium S May low Strong US SPX 500 fundamental overview The US equity market has done a good job proving it s easily supported into any dip and can keep pushing to record highs as it focuses on rates staying lower for longer and the Fed continuing to underdeliver on forward guidance. But this bet will be put to the test in a big way going forward, with the Fed upgrading its commitment to policy normalisation and other major central bank jumping on the monetary policy reversal bandwagon. The major takeaway is that central banks are sending a clear message that an era of artificial support is finally coming to an end. Today s US jobs report is in focus and could open the door for an intensified liquidation if the data is strong and has investors reconsidering dovish bets, Page 9 of 12

10 GOLD (SPOT) technical overview The market has come under intense pressure since rallying to a fresh 2017 high in June, with setbacks accelerating. However, overall, setbacks have been very well supported for many months now, with the yellow metal putting in a series of higher highs and higher lows since basing out in As such, look for additional declines to be limited, with the market ideally holding above the previous higher low at 1214 on a daily close basis ahead of the next major upside extension and bullish resumption. R Jun/2017 high Strong R Jun high Medium S Jul low Medium S May low Strong GOLD (SPOT) fundamental overview Solid demand from medium and longer-term players continues to emerge on dips, with these players more concerned about exhausted monetary policy, extended global equities, political uncertainty, systemic risk and geopolitical threats. All of this should continue to keep the commodity in demand, 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. Certainly the US Dollar under pressure in 2017 is adding to the metal s bid tone as well, but there is a growing sense that even in a scenario where the US Dollar is bid, gold may continue to find bids on risk off macro implications. Page 10 of 12

11 Feature technical overview USDZAR is showing signs of the formation of a meaningful base since bottoming out around earlier this year. The latest push back above strengthens this outlook and sets the stage for a continuation of gains towards next key resistance at further up. Any setbacks should ideally be well supported ahead of 12.55, with only a break back below this level to negate the constructive outlook. R May high Strong R May high Medium S Jun low Medium S Jun low Strong Feature fundamental overview The South African Rand is finally succumbing to a wave of negative drivers on the domestic front, with the currency dropping to a seven week low against the Buck. The latest Rand slide has been attributed to jitters at the ANC conference earlier this week after the ruling party proposed nationalising the central bank and expropriating land without compensation. The proposals are viewed as quite radical, something that is unsettling to an investor base already nervous about a never ending string of political uncertainty, including corruption charges surrounding Zuma. Throw in persisting recessionary forces in South Africa and the prospect for a material reversal in elevated global equities and it all points to the greater risk for Rand weakness going forward. Page 11 of 12

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