Dollar bid, US equities on fire

Next 24 hours: Dollar losing a little momentum

Today’s report: Dollar bid, US equities on fire

There hasn’t been much change to the overall picture as we come into Tuesday. On the FX side, it’s been about a repricing of policy expectations which have shifted back in the US Dollar’s favor. Odds for a 50-basis point Fed rate cut have come off the table, while odds for a 25-basis point ECB cut this week have moved towards a near certainty.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

The Euro has been in a multi-month consolidation since bottoming out in 2022. Setbacks have since been exceptionally well supported on dips below 1.0500, with a higher platform sought out ahead of the next major upside extension. Look for a push through the 2023 high at 1.1276 to strengthen the constructive outlook and extend the recovery run towards 1.2000. Only back below 1.0400 negates.

  • R2 1.1040 – 4 October high – Medium
  • R1 1.0998 - 8 October high – Strong
  • S1 1.0882 - 8 August low – Strong
  • S2 1.0778 – 1 August low – Strong

EURUSD – fundamental overview

The Euro remains under pressure at the moment, as it contends with shifting monetary policy expectations. An ECB that one month ago wasn't thought to be considering a rate cut this month is now expected to cut rates when it meets later this week. At the same time, US economic data has made the Fed shift to a slightly less accommodative outlook. Meanwhile, odds for a recession in the Zone have jumped to 60%. Key standouts on Tuesday’s calendar come from German wholesale prices, UK employment, Eurozone industrial production, Eurozone and German ZEW reads, Canada inflation, NY Empire manufacturing, and US consumer inflation expectations.

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 door is now open for the next major upside extension towards the 2018 high at 1.4377. Any setbacks should be well supported ahead of 1.2500.

  • R2 1.3282 – 3 October high – Medium
  • R1 1.3175 – 4 October high – Medium
  • S1 1.3022 – 10 October low – Medium
  • S2 1.3002 – 11 September low – Strong

GBPUSD – fundamental overview

The Pound has been contending with political updates given uneasiness around the prospect of a 39% capital gains tax which the Prime Minister has denied. Key standouts on Tuesday’s calendar come from German wholesale prices, UK employment, Eurozone industrial production, Eurozone and German ZEW reads, Canada inflation, NY Empire manufacturing, and US consumer inflation expectations.

USDJPY – technical overview

The market is looking to resume the longer-term uptrend after an intense correction in 2024. A higher low is ideally sought out above 140.00 in favor of a bullish continuation. A weekly close back above 150.00 will hint at the start to longer-term uptrend resumption.

  • R2 150.89 – 1 August high – Strong
  • R1 149.99 – 14 October high – Medium
  • S1 145.91 – 4 October low – Medium
  • S2 142.97 – 1 October low – Medium

USDJPY – fundamental overview

The Yen has come back under pressure in recent weeks as BOJ policy leans less hawkish and Fed policy leans less dovish. Meanwhile, the Yen is also getting additional strain as the RMB drags down other export currencies. Key standouts on Tuesday’s calendar come from German wholesale prices, UK employment, Eurozone industrial production, Eurozone and German ZEW reads, Canada inflation, NY Empire manufacturing, and US consumer inflation expectations.

AUDUSD – technical overview

There are signs of the potential formation of a longer-term base with the market trading down into a meaningful longer-term support zone. Only a monthly close below 0.6200 would give reason for rethink. A monthly close back above 0.7000 will take the big picture pressure off the downside and strengthen case for a bottom.

  • R1 0.6943 – 30 September/2024 high – Strong
  • R2 0.6811 – 7 October high – Medium
  • S1 0.6700 – 10 October low– Medium
  • S2 0.6622 – 11 September low – Strong

AUDUSD – fundamental overview

Market participants have been underwhelmed by efforts out of China to offer additional stimulus to the economy. Meanwhile, commodities prices have also been faltering which is added to downside on the Australian Dollar. Key standouts on Tuesday’s calendar come from German wholesale prices, UK employment, Eurozone industrial production, Eurozone and German ZEW reads, Canada inflation, NY Empire manufacturing, and US consumer inflation expectations.

USDCAD – technical overview

A sustained hold above 1.3000 over the past several months signals an end to a period of longer-term 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, with a break to open a retest of the 2020 high just ahead of 1.4700. Setbacks should be very well supported down into the 1.3000 area.

  • R2 1.3947 – 5 August/2024 high – Strong
  • R1 1.3856 – 6 August high – Medium
  • S1 1.3689 – 10 October low – Medium
  • S2 1.3648 – 19 September high – Strong

USDCAD – fundamental overview

The Canadian Dollar has been hit hard lately and is a clear underperformer, taking a beating from broad based USD demand on shifting Fed expectations, and perhaps also on deeper concerns about the outlook for the Canadian economy. Interestingly enough, the relative weakness comes even after a solid Canada employment report. Key standouts on Tuesday’s calendar come from German wholesale prices, UK employment, Eurozone industrial production, Eurozone and German ZEW reads, Canada inflation, NY Empire manufacturing, and US consumer inflation expectations.

NZDUSD – technical overview

Overall pressure remains on the downside with the market continuing to stall out on runs up into the 0.6500 area. At the same time, there are some signs of the market wanting to put in a longer-term base. Ultimately, a break back above 0.6500 would be required to take the medium-term pressure off the downside and encourage this prospect. A monthly close below 0.5800 will intensify bearish price action.

  • R2 0.6379 – 30 September/2024 high – Strong
  • R1 0.6220 – 4 October high – Medium
  • S1 0.6030 – 10 October low – Medium
  • S2 0.5974 – 15 August low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar is having a hard time shaking off a dovish shift in RBNZ policy which has many pricing in another 50-basis point rate cut at the next meeting. Key standouts on Tuesday’s calendar come from German wholesale prices, UK employment, Eurozone industrial production, Eurozone and German ZEW reads, Canada inflation, NY Empire manufacturing, and US consumer inflation expectations.

US SPX 500 – technical overview

The longer term uptrend remains intact and dips continue to be exceptionally well supported. Critical support comes in at 5093, with only a break back below this level to compromise the structure and open the door for a more significant corrective decline. Until then, the focus remains on a continued push to fresh record highs.

  • R2 5900 – Psychological– Medium
  • R1 5880 – 14 October/Record high – Medium
  • S1 5740 – 9 October low – Medium
  • S2 5726 – 2 October low – Strong

US SPX 500 – fundamental overview

The US equities market remains exceptionally well supported in 2024 on the back of an ongoing expectation for more rate cuts than less going forward. Investors are feeling better about a soft landing in the US economy and this has also been accompanied by an accommodative adjustment of Fed policy. It will however be important to keep an eye on inflation, bigger picture economic data, US election and geopolitical risk in the weeks and months ahead.

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 this next major upside extension into the 2500-3000 area. Setbacks should now be well supported above 2300 on a monthly close basis.

  • R2 2700 – Psychological– Strong
  • R1 2686 – 26 September/Record high – Medium
  • S1 2547 – 18 September low – Medium
  • S2 2472– 4 September low – Medium

GOLD (SPOT) – fundamental overview

The yellow metal has pushed record highs in 2024 with solid demand from medium and longer-term accounts. These players are more concerned about inflation, geopolitical risk and a less upbeat global growth outlook. All of this should keep the commodity well supported over the coming months.
 

Peformance chart: 30-Day Performance vs. US dollar (%)

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