Next 24 hours: Dollar under pressure as March gets going
Today’s report: Renewed risk appetite on China PMI data
As Wednesday gets going, things are looking up. A lot of this has to do with a solid round of PMI data out of China. It’s also worth noting the repricing of rates in the Eurozone and UK, with both economies contending with that same upward pressure on inflation.
Wake-up call
- France CPI
- terminal rate
- industrial production
- GDP, CPI
- soft GDP
- building permits
- Inflation headache
- Dealers report
Peformance chart: 30 Day Performance vs. US dollar (%)
Suggested reading
- Exuberant US Consumers Are Fatiguing, J. Authers, Bloomberg (March 1, 2023)
- The Business of Formula 1, S. Agini, Financial Times (February 28, 2023)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
The Euro is in the throes of a correction following a run to the topside through 1.1000 earlier this year. Any additional setbacks should be well supported ahead of 1.0200 in favor of the formation of the next major higher low and a bullish continuation. Ultimately, only a monthly close back below parity would give reason for concern.EURUSD – fundamental overview
The Euro has been finding support into dips this week as local rates continue to rise, with peak rates now priced into 2024 for the first time. France CPI just came in at a new record high, while Spain CPI turned up well above forecast. Meanwhile, ECB Lagarde had also signaled her intention for the ECB to hike rates by 50bps in March. Key standouts on Wednesday’s calendar come from German and Eurozone manufacturing PMIs, German employment reads, German CPI data, UK consumer credit, UK mortgage approvals, US ISM manufacturing, and US construction spending.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 recent weekly close back above the September high at 1.1739 strengthens this prospect. Any setbacks should now be well supported ahead of 1.1500. Next key resistance comes in at 1.2668.GBPUSD – fundamental overview
The Pound has been outperforming this week on positive news around Brexit and as UK terminal rate pricing approaches 5%. BOE Mann was on the wires saying cheaper energy risks were boosting core inflation. Key standouts on Wednesday’s calendar come from German and Eurozone manufacturing PMIs, German employment reads, German CPI data, UK consumer credit, UK mortgage approvals, US ISM manufacturing, and US construction spending.USDJPY – technical overview
The major pair has been in the throes of a long overdue correction that was waiting to play out after a parabolic run to the topside to multi-year highs. At this stage, the correction could be getting close to having played out fully, with the market finally approaching critical previous resistance turned support in the 125.00 area.USDJPY – fundamental overview
The combination of expectations the new BOJ regime will stick to the same old and Tuesday's horrid Japan industrial production reading, have been enough to fuel additional setbacks in the Yen. Key standouts on Wednesday’s calendar come from German and Eurozone manufacturing PMIs, German employment reads, German CPI data, UK consumer credit, UK mortgage approvals, US ISM manufacturing, and US construction spending.AUDUSD – technical overview
There are signs of the potential formation of a longer-term base following the recent surge back above 0.6500. The recent weekly close back above previous support now turned resistance at 0.6682 strengthens the outlook for a bullish structural shift. Next key resistance comes in at 0.7284. Setbacks should be well supported ahead of 0.6500.AUDUSD – fundamental overview
The Australian Dollar is defying probability somewhat on this Wednesday, with the currency running higher despite softer than expected Aussie GDP and inflation reads. Perhaps strong China data and a recovery in global sentiment is factoring into the demand. Key standouts on Wednesday’s calendar come from German and Eurozone manufacturing PMIs, German employment reads, German CPI data, UK consumer credit, UK mortgage approvals, US ISM manufacturing, and US construction spending.USDCAD – technical overview
A recent surge back above 1.3000 signals an end to a period of 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.USDCAD – fundamental overview
Reconciling Canadian Dollar underperformance on Tuesday was easy on account of the softer than expected Canada GDP print. Key standouts on Wednesday’s calendar come from German and Eurozone manufacturing PMIs, German employment reads, German CPI data, UK consumer credit, UK mortgage approvals, US ISM manufacturing, and US construction spending.NZDUSD – technical overview
Overall pressure remains on the downside with risk for the current recovery rally to stall out and form a lower top for the next major downside extension. A break back above 0.6577 would be required to take the immediate pressure off the downside.NZDUSD – fundamental overview
Earlier today, New Zealand building permits came in a good deal better than previous, which could be accounting for some of the demand. We're also seeing some renewed risk appetite in global markets and better than expected China data, also helping to prop up the Kiwi rate. Key standouts on Wednesday’s calendar come from German and Eurozone manufacturing PMIs, German employment reads, German CPI data, UK consumer credit, UK mortgage approvals, US ISM manufacturing, and US construction spending.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. A monthly close back above 4300 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in at 3885.US SPX 500 – fundamental overview
We've finally reached a point in the cycle where the Fed recognizes unanchored inflation expectations pose a greater downside risk than over-tightening. This is significant, as it means less investor friendly monetary policy that risks potential recession in the months ahead. Overall, we expect inflation to continue to be a problem in H1 2023 that results in downside pressure into rallies.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 1600 on a monthly close basis ahead of the next major upside extension. The recent break back above 1808 strengthens the bullish outlook. Next major resistance comes in at 2000.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 inflation 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 unnerving climax.