Fed maintains hawkish tone

Today’s report: Fed maintains hawkish tone

The market has been trying hard to pressure the Fed into a pivot, but just isn’t having any success in doing so. On Thursday, we got another round of Fed speak and that round of speak was decidedly hawkish.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

Technical studies are turning up from oversold territory, suggesting additional setbacks should be limited in favour of some form of a meaningful correction and consolidation. A weekly close back above parity will take the immediate pressure off the downside.

  • R2 1.0000 – 04 October high – Strong
  • R1 0.9950 - Mid-Figure – Medium
  • S1 0.9753 - 3 October low – Medium
  • S2 0.9735 – 30 September low – Medium

EURUSD – fundamental overview

The Euro has come back under pressure into the end of the week, taking its hits from the combination of weaker Eurozone economic data, a dovish ECB Minutes, and hawkish rhetoric out from Fed officials. German industrial orders and Eurozone retail sales came in below expectation. Key standouts on today’s calendar come from German industrial production and retail sales, the Canada jobs report, and the monthly employment report out of the US.

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. A break above the September high at 1.1739 will solidify the recovery. Until then, look for setbacks to be well supported ahead of 1.0800.

  • R2 1.1739– 13 September high – Strong
  • R1 1.1496 – 5 October high – Medium
  • S1 1.1085– 3 October low – Medium
  • S2 1.1025 – 30 September low – Medium

GBPUSD – fundamental overview

The Pound couldn't ignore the bad news around a downgrade from Fitch to the UK credit outlook. The rating agency cited concerns about the government's plan to get growth back on track given the new proposed policies. Meanwhile, UK construction PMIs were the weakest since May of 2020. Key standouts on today’s calendar come from German industrial production and retail sales, the Canada jobs report, and the monthly employment report out of the US.

USDJPY – technical overview

Technical studies are looking quite stretched on the longer-term chart, warning of consolidation and correction in the days and weeks ahead. Look for additional upside from here to be well capped into the 145.00 area. Next key support comes in at 140.35.

  • R2 146.00 – Figure – Medium
  • R1 145.90 – 22 September/2022 high – Strong
  • S1 141.76 – 23 September low – Medium
  • S2 140.35 –22 September low – Strong

USDJPY – fundamental overview

The Yen sits just off multi-year low levels and back around pre-intervention levels from September, despite the BOJ's aggressive attempts to force a reversal of flow last month. Also seen weighing on the Yen is a plan by the government to introduce an energy relief plan by the end of the month. Meanwhile, there has been activity around the news of North Korea firing two more missiles. Key standouts on today’s calendar come from German industrial production and retail sales, the Canada jobs report, and the monthly employment report out of the US.

AUDUSD – technical overview

Overall pressure remains on the downside with the market confined to a well defined downtrend. A break back above 0.6682 would be required to take the pressure off the downside. Until then, scope exists for deeper setbacks towards 0.6000.

  • R1 0.6682 – 14 July low – Strong
  • R2 0.6548 –4 October high – Medium
  • S1 0.6363 – 28 September/2022 low – Medium
  • S2 0.6300 – Figure – Strong

AUDUSD – fundamental overview

The Australian trade surplus shrunk on higher costs for fuel imports, while risk markets came back under pressure in Thursday trade. This has resulted in renewed downside pressure on the Australian Dollar. Key standouts on today’s calendar come from German industrial production and retail sales, the Canada jobs report, and the monthly employment report out of the US.

USDCAD – technical overview

A recent surge back above 1.3000 signals an end to a period of 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. Setbacks should be very well supported down into the 1.3000 area.

  • R2 1.3836 – 30 September/2022 high – Strong
  • R1 1.3696 – 5 October high – Medium
  • S1 1.3503 – 4 October low – Medium
  • S2 1.3409 – 22 September low – Medium

USDCAD – fundamental overview

The Canadian Dollar has come under pressure into the end of the week, getting mostly hit from the downturn in global sentiment. Canada Ivey PMIs also cooled off, which may have accounted for additional selling of the currency. Bank of Canada Macklem couldn't do much to help the Loonie's cause, despite a hawkish round of talk on Thursday. Key standouts on today’s calendar come from German industrial production and retail sales, the Canada jobs report, and the monthly employment report out of the US.

NZDUSD – technical overview

Overall pressure remains on the downside with the focus on a retest of the critical low from 2020 at 0.5469. A break back above 0.5755 would be required to take the immediate pressure off the downside.

  • R2 0.5857 – 23 September high – Medium
  • R1 0.5814 – 6 October high – Strong
  • S1 0.5625– 27 September low – Medium
  • S2 0.5565 – 28 September/2022 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar is back under pressure into the end of the week, taking hits from a downturn in global sentiment and some less impressive data in the form of global manufacturing PMI reads. Key standouts on today’s calendar come from German industrial production and retail sales, the Canada jobs report, and the monthly employment report out of the US.

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 3922 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in around 3200.

  • R2 3922 – 20 September high – Strong
  • R1 3808 – 5 October high – Medium
  • S1 3559 – 3 October/2022 low – Medium
  • S2 3500 – Round Number – Medium

US SPX 500 – fundamental overview

We've finally reached a point in the cycle where the Fed recognizes unanchored inflation expectations pose a greater downside risk than over-tightening. This is significant, as it means less investor friendly monetary policy that risks potential recession in the months ahead. Overall, we expect inflation to continue to be a problem in 2022 that results in downside pressure into rallies.

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 1600 on a monthly close basis ahead of the next major upside extension.

  • R2 1766 – 25 August high – Strong
  • R1 1736 – 12 September high – Medium
  • S1 1615 – 28 September/2022 low – Medium
  • S2 1600 – Round Number – 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 inflation risk and a less upbeat global growth outlook. 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.