Biden SOTU later today

Next 24 hours: Euro struggles from Russia-Ukraine fallout

Today’s report: Biden SOTU later today

There continues to be plenty of uncertainty around the Russia-Ukraine outlook and the market will be needing more clarity on this front. Reports have not been all that encouraging, and yet despite this, we have seen a stabilization in risk assets.

Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

The market has been confined to a choppy consolidation, between 1.1100 and 1.1500. A clear break back above 1.1500 will suggest the market could be getting ready to turn back up. Back below 1.1100 will set up the next major downside extension to fresh multi-month lows below 1.1000 towards the multi-year low from 2020 in the 1.0600 area.

  • R2 1.1396 – 16 February high – Strong
  • R1 1.1310 - 24 February high – Medium
  • S1 1.1186 - 24 November low – Medium
  • S2 1.1106 – 24 February/2022 low – Strong

EURUSD – fundamental overview

The ECB unsurprisingly urged patience on policy changes, while ECB Panetta was out saying it would be unwise to commit to policy steps before knowing the extent of the Ukraine fallout. Key standouts on today’s calendar come from UK manufacturing PMIs, German inflation, Canada and US manufacturing reads, US construction spending Dallas Fed manufacturing, and a President Biden State of the Union late in the day.

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 1.3550 – 24 February high – Medium
  • S1 1.3273 – 24 February low – Strong
  • S2 1.3200 – Figure – Medium

GBPUSD – fundamental overview

The Pound has seen some relative outperformance in recent sessions given the benefit of the UK being more distanced from Russia-Ukraine fallout. Key standouts on today’s calendar come from UK manufacturing PMIs, German inflation, Canada and US manufacturing reads, US construction spending Dallas Fed manufacturing, and a President Biden State of the Union late in the day.

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 115.70 – 24 February high – Medium
  • S1 114.41 – 24 February low – Medium
  • S2 113.47 – 24 January low – Strong

USDJPY – fundamental overview

We’ve seen a bit of an unwinding of the safe haven trade as the week gets going, which has factored into some of the latest round of renewed offers in the Yen. Key standouts on today’s calendar come from UK manufacturing PMIs, German inflation, Canada and US manufacturing reads, US construction spending Dallas Fed manufacturing, and a President Biden State of the Union late in the day.

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 0.7300 – Figure – Strong
  • R1 0.7290 – 1 March high – Medium
  • S1 0.7095 – 24 February low – Medium
  • S2 0.7052 – 4 February low – Strong

AUDUSD – fundamental overview

Commodities prices are running strong and risk appetite is on the uptick as tensions fade a little on the geopolitical front. This along with solid Aussie retail sales have helped to keep Aussie supported in recent sessions. Key standouts on today’s calendar come from UK manufacturing PMIs, German inflation, Canada and US manufacturing reads, US construction spending Dallas Fed manufacturing, and a President Biden State of the Union late in the day.

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 1.2878 – 24 February high – Strong
  • R1 1.2800 – Figure – Medium
  • S1 1.2650 – Mid-Figure – Medium
  • S2 1.2636 – 10 February low – Medium

USDCAD – fundamental overview

The Canadian Dollar is finding bids into Tuesday on rallying commodities prices and solid local data as reflected through this latest industrial product prices print. Key standouts on today’s calendar come from UK manufacturing PMIs, German inflation, Canada and US manufacturing reads, US construction spending Dallas Fed manufacturing, and a President Biden State of the Union late in the day.

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 0.6810 – 23 February high – Strong
  • R1 0.6800 – Figure – Medium
  • S1 0.6592 – 14 February low – Medium
  • S2 0.6530 – 28 January/2022 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has rallied on the recovery in risk sentiment and higher commodities prices, but has also lagged relative to its peers after New Zealand business confidence cratered in February. Key standouts on today’s calendar come from UK manufacturing PMIs, German inflation, Canada and US manufacturing reads, US construction spending Dallas Fed manufacturing, and a President Biden State of the Union late in the day.

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 4594 – 2 February high – Strong
  • R1 4490 – 16 February high – Medium
  • S1 4105 – 24 February low – Strong
  • S2 4035 – 13 May 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 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 1700.

  • R2 1993 – September 2020 high – Strong
  • R1 1975 – 24 February high – Medium
  • S1 1910 – 24 February 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, 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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