Even the doves getting hawkish

Next 24 hours: Stock nervous, currencies take a pause

Today’s report: Even the doves getting hawkish

When you hear hawkish comments from the most dovish of Fed officials, it’s probably going to make headlines and shake up the market. That’s what happened on Tuesday when Fed Brainard said the central bank may propose a much faster pace of reduction in the balance sheet.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

A recent breakdown below 1.1100 to fresh multi-month lows now sets up the next major downside extension below 1.1000 towards the multi-year low from 2020 in the 1.0600 area. At this stage, it will take a push back above 1.1500 to force a shift in the outlook.

  • R2 1.1076 – 1 April high – Medium
  • R1 1.0989 - 5 April high high – Medium
  • S1 1.0849 - 8 March low – Medium
  • S2 1.0806 – 7 March/2022 low – Strong

EURUSD – fundamental overview

The Euro was down for a fourth consecutive day on Tuesday as Europe continues to get pressed on Russian energy sanctions. Meanwhile, hawkish Fed speak from the mot dovish of Fed officials has also been a source of Euro weakness. Key standouts on today’s calendar come from ECB speak, Eurozone producer prices, Canada Ivey PMIs, and the Fed Minutes 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 immediate pressure off the downside.

  • R2 1.3225 – 25 March high – Medium
  • R1 1.3183 – 30 March high – Medium
  • S1 1.3045 – 6 April low – Medium
  • S2 1.3000 – Psychological – Medium

GBPUSD – fundamental overview

The Pound has been holding up relatively well this week, with the currency getting some demand from a solid round of UKI PMI data. This has resulted in a an upward revision to BOE rate hike pricing. Still, we have seen weakness against the Buck, as the US Dollar rallies across the board on hawkish Fed speak. Meanwhile, the UK Office for Budget responsibility sees inflation topping 9% this year. Key standouts on today’s calendar come from ECB speak, Eurozone producer prices, Canada Ivey PMIs, and the Fed Minutes late in the day.

USDJPY – technical overview

The market has rocketed higher to fresh multi-month highs and is now staring at a retest of the critical peak from 2015 up ahead of 126.00. Technical studies are however quite extended, with scope for a sizable correction in the weeks ahead.

  • R2 125.86 – 2015 high – Strong
  • R1 125.11 – Figure – Medium
  • S1 122.26 – 4 April low – Medium
  • S2 121.28 – 31 March 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. The BOJ continues with its effort to buy long bonds, with the 30 year JGB settling below 1%, and BOJ Kuroda continues to welcome Yen weakness as a benefit to the economy. Meanwhile, Fed policy continues to lean more hawkish. Key standouts on today’s calendar come from ECB speak, Eurozone producer prices, Canada Ivey PMIs, and the Fed Minutes late in the day.

AUDUSD – technical overview

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

  • R2 0.7700 – Figure – Medium
  • R1 0.7662 – 5 April/2022 high – Strong
  • S1 0.7500 – Psychological– Medium
  • S2 0.7456 – 29 March low – Medium

AUDUSD – fundamental overview

The Australian Dollar has come under some pressure after surging to a fresh 2022 high against the Buck on Tuesday. The currency had been well bid on rallying commodities, surging stocks and solid local data, before getting another boost from a hawkish RBA communication at the latest policy decision. But this latest wave of hawkish Fed speak has opened a resurgence in demand for the US Dollar and concurrent round of risk off flow, which has weighed on Aussie into Wednesday. Key standouts on today’s calendar come from ECB speak, Eurozone producer prices, Canada Ivey PMIs, and the Fed Minutes late in the day.

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 1.2625 – 22 March high – Strong
  • R1 1.2593 – 28 March high  – Medium
  • S1 1.2429 – 30 March low – Medium
  • S2 1.2403 – 5 April/2022 low – Strong

USDCAD – fundamental overview

The Canadian Dollar rallied to a fresh 2022 high against the Buck on reports the US was seeking more Canadian oil. But the rally faded quickly as it became clear the Biden administration is still opposed to the Keystone XL pipeline. Meanwhile, a hawkish round of Fed speak only added to the Canadian Dollar sell-off, as the US Dollar gained momentum into the Tuesday close. Key standouts on today’s calendar come from ECB speak, Eurozone producer prices, Canada Ivey PMIs, and the Fed Minutes late in the day.

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 0.7100 – Figure – Medium
  • R1 0.7035 – 5 April/2022 high – Strong
  • S1 0.6875 – 29 March low – Medium
  • S2 0.6865 – 22 March low – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has been tracking with commodities and risk sentiment. Overall, both have performed well of late, which has helped to drive the currency to yearly highs. The New Zealand rate market is now pricing nine 25 bp hikes in 2022 over the course of the six remaining RBNZ meetings. We have however seen some selling into Wednesday, on the back of risk off flow from hawkish Fed comments. Key standouts on today’s calendar come from ECB speak, Eurozone producer prices, Canada Ivey PMIs, and the Fed Minutes 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. 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.

  • R2 4700 – Round number – Strong
  • R1 4641 – 29 March high – Medium
  • S1 4374 – 18 March low – Medium
  • S2 4330 – 17 March low – Medium

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 1900.

  • R2 2076 – Record high, August 2020 – Strong
  • R1 2071 – 8 March/2022 high – Medium
  • S1 1900 – Round number – 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 (%)

Suggested reading

Daily Reports Global FX Insights   LMAX Exchange  

Any opinions, news, research, analyses, prices or other information ("information") contained on this Blog, constitutes marketing communication and it has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further, the information contained within this Blog does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of, or solicitation for, a transaction in any financial instrument. LMAX Group has not verified the accuracy or basis-in-fact of any claim or statement made by any third parties as comments for every Blog entry.

LMAX Group will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. No representation or warranty is given as to the accuracy or completeness of the above information. While the produced information was obtained from sources deemed to be reliable, LMAX Group does not provide any guarantees about the reliability of such sources. Consequently any person acting on it does so entirely at his or her own risk. It is not a place to slander, use unacceptable language or to promote LMAX Group or any other FX and CFD provider and any such postings, excessive or unjust comments and attacks will not be allowed and will be removed from the site immediately.