Euro sinks to 5 year low

Next 24 hours: US Dollar still broadly bid

Today’s report: Euro sinks to 5 year low

The Euro sinking to a 5-year low should not go unnoticed or unmentioned. The single currency has been struggling with monetary policy divergence between the ECB and Fed, and has also been struggling with worry around fallout from the Russia-Ukraine war and impact on access to oil.

Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

A recent breakdown below 1.1100 to fresh multi-month lows now sets up the next major downside extension towards the multi-year low from 2017 in the 1.0300 area. At this stage, it will take a push back above 1.1500 to force a shift in the outlook.

  • R2 1.0989 – 5 April high – Medium
  • R1 1.0937 - 21 April high high – Strong
  • S1 1.0634 - 27 April/2022 low – Medium
  • S2 1.0600 – Figure – Strong

EURUSD – fundamental overview

The Euro has traded down to a 5 year low on the back of ongoing stress around fallout from the Russia-Ukraine war, global growth concerns and yield differentials with the US Dollar. Fear Russia may halt gas supplies to European countries that refuse to pay in Rubles has really taken its toll on the single currency in recent sessions. Key standouts on today’s calendar come from US pending home sales and an ECB Lagarde speech.

EURUSD - Technical charts in detail

GBPUSD – technical overview

The market is in a correction phase in the aftermath of the run to fresh multi-month highs in 2021. At this stage, additional setbacks should be limited to the 1.2500 area ahead of the next major upside extension towards a retest and break of critical resistance in the form of the 2018 high. Back above 1.3148 takes immediate pressure off the downside.

  • R2 1.2973 – 13 April low – Medium
  • R1 1.2839 – 25 April high – Medium
  • S1 1.2560 – 27 April/2022 low – Medium
  • S2 1.2500 – Psychological – Strong

GBPUSD – fundamental overview

UK economic data has been awful of late. UK debt service and public sector wage costs have exploded. BOE Bailey has been sounding less hawkish. And yield differentials continue to play into the Dollar's favor. Key standouts on today’s calendar come from US pending home sales and an ECB Lagarde speech.

USDJPY – technical overview

The market has rocketed higher to its highest levels since 2002 after breaking through the 2015 high. Technical studies are however quite extended, with scope for a sizable correction in the weeks ahead. Look for additional upside from here to be limited to the 130.00 area for now.

  • R2 130.00 – Psychological – Strong
  • R1 129.41 – 20 April/2022 high – Medium
  • S1 126.95 – 27 April low – Medium
  • S2 125.08 – 14 April low – Strong

USDJPY – fundamental overview

The Yen continues to take its hits from the massive yield differential and monetary policy divergence between the BOJ and Fed, recently trading to its lowest levels against the Buck in 20 years. It is however worth noting that we have seen some Yen demand in recent sessions on the back of this latest round of intense risk off flow. We've also seen the Japanese government unveil a $49 billion inflation and energy relief package. Key standouts on today’s calendar come from US pending home sales and an ECB Lagarde speech.

AUDUSD – technical overview

At this stage, the market has found a bottom and is trying to work back to the topside. Still, the overall pressure remains on the downside and ultimately, it will take a weekly close back above 0.7600 to officially shift the focus back on the topside.

  • R2 0.7378 – 22 April high – Medium
  • R1 0.7252 – 25 April high – Medium
  • S1 0.7119 – 26 April low – Medium
  • S2 0.7095 – 24 February low – Strong

AUDUSD – fundamental overview

The Australian Dollar is attempting to recover from setbacks on Monday and Tuesday, getting a boost from the recovery in global sentiment and rebound in commodities prices. We've also seen added Aussie demand from more hawkish RBA pricing in the aftermath of the latest hot inflation data. Key standouts on today’s calendar come from US pending home sales and an ECB Lagarde speech.

USDCAD – technical overview

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 1.2830 – 27 April high – Medium
  • R1 1.2800 – Figure  – Medium
  • S1 1.2677 – 13 April high – Medium
  • S2 1.2567 – 22 April low – Strong

USDCAD – fundamental overview

Monday's round of hawkish comments from Bank of Canada Macklem perhaps helped to slow the pace of Canadian Dollar declines. However, the Loonie has mostly been under pressure on the back of a wave of global risk liquidation and downside pressure on commodities. Key standouts on today’s calendar come from US pending home sales and an ECB Lagarde speech.

NZDUSD – technical overview

The market has been trending lower since topping out in 2021, making a series of lower highs and lower lows. Look for the latest recovery rally to set up the next lower top for a bearish continuation below 0.6500. Back above 0.7200 would be required to negate and force a shift in the structure.

  • R2 0.6737 – 22 April high – Medium
  • R1 0.6639 – 25 April high – Medium
  • S1 0.6561 – 27 April low – Medium
  • S2 0.6530 – 28 January/2022 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar downside has been buffered into Wednesday on a hawkish rate outlook, with the local market pricing 7 RBNZ hikes of 25bps over the next 5 meetings. We've also seen some renewed risk appetite as well. Key standouts on today’s calendar come from US pending home sales and an ECB Lagarde speech.

US SPX 500 – technical overview

Longer-term technical studies are in the process of unwinding from extended readings off record highs. Look for rallies to be well capped in favor of lower tops and lower lows. Back above 4,700 will be required at a minimum to take the immediate pressure off the downside. Below 4105 opens next downside extension.

  • R2 4401 – 22 April high – Medium
  • R1 4300– Round Number – Medium
  • S1 4144 – 26 April low – Medium
  • S2 4105 – 24 February/2022 low – Strong

US SPX 500 – fundamental overview

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, rising inflation, and geopolitical tension should weigh more heavily on investor sentiment in Q2 2022.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs. Setbacks should now be well supported above 1800.

  • R2 1999 – 18 April high – Strong
  • R1 1959 – 20 April high – Medium
  • S1 1892 – 25 April low – Medium
  • S2 1878 – 16 November high – 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, coronavirus fallout, inflation risk, and geopolitical tension. 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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