Are we done with the rebound?

Next 24 hours: Slow go out there

Today’s report: Are we done with the rebound?

We haven’t seen a whole lot of action this week. But what little we have seen has been risk off in nature, with the US Dollar generating some demand and stocks under mild pressure.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

Setbacks have been well supported below 1.1200, with the market sharply reversing course and pushing back towards the yearly high. A clear break back above 1.1500 will suggest the market could be getting ready to turn back up. Inability to sustain above 1.1500 will keep the pressure on the downside.

  • R2 1.1500 – Psychological – Medium
  • R1 1.1484 - 4 February/2022 high – Medium
  • S1 1.1331 - 2 February high – Medium
  • S2 1.1267 – 2February low – Strong

EURUSD – fundamental overview

The Euro has eased off a bit after ECB officials pushed back on rate hike expectations post last week's ECB decision. A June hike is now priced at 85% in the European rate market, but ECB Knot, who is a hawk, doesn't see a rate hike until late 2022. Meanwhile, ECB Lagarde has said there is no reason to rush to conclusions. The ECB is obviously trying to mitigate interest rate pain among member countries in the wake of pandemic debt splurge. Tuesday’s economic calendar is thin with no major first-tier data due. The only notable standouts come in the form of Canada and US trade.

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 1.3000 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 1.3835 takes pressure off the downside.

  • R2 1.3662 – 20 January high – Strong
  • R1 1.3628 – 3 February high – Medium
  • S1 1.3493 – 7 February low – Medium
  • S2 1.3434 – 1 February low – Medium

GBPUSD – fundamental overview

The Pound has come off a bit with the rest of the currency market, in the aftermath of rallies from last week's BOE and ECB communications. But despite the selling against the US Dollar, we have seen relative strength, perhaps as PM Johnson reshuffles his team. Tuesday’s economic calendar is thin with no major first-tier data due. The only notable standouts come in the form of Canada and US trade.

USDJPY – technical overview

The longer-term trend is bearish despite the recent run higher. Look for additional upside to be limited, with scope for a topside failure and bearish resumption back down towards the 100.00 area. It would take a clear break back above 117.00 to negate the outlook.

  • R2 116.36 – 4 January high – Strong
  • R1 115.69 – 28 January high – Medium
  • S1 114.47 – 27 January low – Medium
  • S2 113.47 – 24 January low – Strong

USDJPY – fundamental overview

The Yen has been finding some bids this week on the back of a renewed wave of risk off flow. Meanwhile, the US will drop Japan 25% steel tariffs. Tuesday’s economic calendar is thin with no major first-tier data due. The only notable standouts come in the form of Canada and US trade.

AUDUSD – technical overview

The Australian Dollar has been in the process of a healthy correction following the impressive run towards a retest of the 2018 high in 2021. At this stage, the correction is starting to look stretched and setbacks should be well supported above 0.7000 on a weekly close basis. A weekly close below 0.7000 will force a bearish shift.

  • R2 0.7188 – 24 January high – Strong
  • R1 0.7169 – 3 February high – Medium
  • S1 0.6968 – 28 January/2022 low – Medium
  • S2 0.6921 – July 2020 low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been holding up well of late, getting help from an impressive Aussie retail sales print and news that Australia will be reopening its borders for international travel. Tuesday’s economic calendar is thin with no major first-tier data due. The only notable standouts come in the form of Canada and US trade.

USDCAD – technical overview

Finally 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 1.2814 – 6 January high – Strong
  • R1 1.2797 – 28 January high – Medium
  • S1 1.2560 – 26 January low– Strong
  • S2 1.2450 – 19 January low – Medium

USDCAD – fundamental overview

The Canadian Dollar has been getting a lot of help in the face of last week's discouraging Canada jobs report. The ongoing rally in the price of oil has proven to be an offsetting factor. Tuesday’s economic calendar is thin with no major first-tier data due. The only notable standouts come in the form of Canada and US trade.

NZDUSD – technical overview

Setbacks have intensified in recent weeks with the market trading down to fresh multi-month lows. A recent breakdown below the 0.6700 area opens the door for a drop towards 0.6500 in the sessions ahead.

  • R2 0.6728 – 24 January high – Strong
  • R1 0.6702 – 26 January high – Medium
  • S1 0.6530 – 28 January/2022 low – Medium
  • S2 0.6500 – Psychological – Medium

NZDUSD – fundamental overview

The New Zealand Dollar finally found some demand last week after getting slammed to multi-month lows, with the currency propped up on the rebound in stocks, hawkish expectations from the RBNZ in 2022, improved Kiwi economic data and a better COVID outlook. The market will now be looking ahead to tomorrow's Kiwi inflation expectations survey. Tuesday’s economic calendar is thin with no major first-tier data due. The only notable standouts come in the form of Canada and US trade.

US SPX 500 – technical overview

Longer-term technical studies are in the process of unwinding from extended readings off record highs. The latest breakdown below 4,272 opens the door for the next major downside extension towards 3,500. Back above 4,612 will be required at a minimum to take the immediate pressure off the downside.

  • R2 4612 – 19 January high – Strong
  • R1 4600 – Round Number – Medium
  • S1 4403 – 31 January low – Medium
  • S2 4220 – 24 January/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 and risk of rising inflation should weigh more heavily on investor sentiment in Q1 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 and an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1600.

  • R2 1917 – 1 June high – Strong
  • R1 1878 – 16 November high – Medium
  • S1 1753 – 15 December low – Medium
  • S2 1722 – 29 September low – 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, and coronavirus fallout. 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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