Fed dot plot adjustment shakes up financial markets

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. Setbacks should be well supported above 1.2500 on a monthly close basis.

• R2 1.2834 – 6 November low – Strong
• R1 1.2812 – 6 December high –Medium
• S1 1.2562 – 18 December low – Medium
• S2 1.2500 – Psychological – Strong

GBPUSD – fundamental overview

The Pound stood has taken another hit on the back of the hawkish leaning Fed communication. However, a lot could change between now and end of day with the market now needing to take in the BOE decision. The central bank is expected to hold on rates and it will be interesting to see what kind of communication we get. Key standouts on Thursday’s calendar come from German consumer confidence reads, the Eurozone current account, BOE policy decision, US GDP, initial jobless claims, Philly Fed manufacturing, and existing home sales.

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. The recent weekly close back above 150.00 strengthens the case for longer-term uptrend resumption.

• R2 156.75 – 15 November high – Strong
• R1 155.89 – 20 November high – Medium
• S1 152.45 – 13 December low – Medium
• S2 150.90 – 10 December low – Medium

USDJPY – fundamental overview

The BOJ left rates unchanged and the Fed came out leaning more hawkish despite the widely anticipated cut. The net result is a Yen that has extended its run of declines against the Buck. Yen setbacks may however have been somewhat slowed by the fact that inflation risk in Japan will keep the BOJ thinking about more rate hikes in 2025. Key standouts on Thursday’s calendar come from German consumer confidence reads, the Eurozone current account, BOE policy decision, US GDP, initial jobless claims, Philly Fed manufacturing, and existing home sales.

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 0.6400 – Figure – Medium
• R2 0.6340 – 18 December high – Medium
• S1 0.6199 – 19 December 2024 low – Medium
• S2 0.6170 – 2022 Low – Strong

AUDUSD – fundamental overview

The Australian Dollar is trading at its lowest level in 2 years against the Buck and has taken another hit after the Fed came out and leaned more hawkish with its policy communication. Aussie consumer inflation expectations did however come in a little hotter which perhaps helped to slow the pace of Aussie declines. Key standouts on Thursday’s calendar come from German consumer confidence reads, the Eurozone current account, BOE policy decision, US GDP, initial jobless claims, Philly Fed manufacturing, and existing home sales.

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 1.4500-1.5000 area, exposing a retest of the 2020 high just ahead of 1.4700. Setbacks should be very well supported ahead of 1.3500.

• R2 1.4500 – Psychological – Strong
• R1 1.4468 – 19 December/2024 high – Medium
• S1 1.4200 – Figure – Medium
• S2 1.4120 – 11 December low – Strong

USDCAD – fundamental overview

After already suffering from a weaker economic outlook and political drama, the Canadian Dollar has taken an added hit on the back of a more hawkish leaning Fed communication which has shaken up financial markets. Stocks have come off and oil has traded lower in the aftermath and this has opened more downside pressure on the Loonie. Key standouts on Thursday’s calendar come from German consumer confidence reads, the Eurozone current account, BOE policy decision, US GDP, initial jobless claims, Philly Fed manufacturing, and existing home sales.

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 0.5500 will intensify bearish price action.

• R2 0.5890 – 6 December high – Medium
• R1 0.5818 – 12 December high – Medium
• S1 0.5608 – 19 December/2024 low – Medium
• S2 0.5512 – 2022 Low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar is trading at its lowest level against the US Dollar in 2 years and has taken another big hit after contending with the 1-2 punch of a more hawkish leaning Fed decision and below forecast New Zealand growth data. The negative GDP print puts the economy into recession and increases the likelihood of a 50 or even 75 basis point RBNZ rate cut in February. Key standouts on Thursday’s calendar come from German consumer confidence reads, the Eurozone current account, BOE policy decision, US GDP, initial jobless claims, Philly Fed manufacturing, and existing home sales.

US SPX 500 – technical overview

The longer term uptrend remains intact and dips continue to be exceptionally well supported. Critical support comes in at 5679, 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 6200 – Round Number – Strong
• R1 6112 – 16 December/Record high – Medium
• S1 5838 – 19 November low – Medium
• S2 5697 – 4 November low – Strong

US SPX 500 – fundamental overview

Investors are feeling better about a soft landing in the US economy. Moreover, there has been a fresh wave of market optimism in anticipation of a market bullish Trump presidency. It will however be important to keep an eye on inflation, bigger picture economic data and the latest shift in the Fed dot plot. Any of these variables are capable of easily ruffling some feathers.

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 3000 area. Setbacks should now be well supported above 2500 on a monthly close basis.

• R2 2791 – 31 October/Record high – Strong
• R1 2727 – 12 December high – Medium
• S1 2537 – 14 November low – Medium
• S2 2500 – Round Number – Strong

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.