Fed rate hike odds shoot back up

Next 24 hours: China GDP data sets the Tuesday tone

Today’s report: Fed rate hike odds shoot back up

We still haven’t seen much reaction from the stock market, with investors seemingly not wanting to give recent news that much attention. But currencies and rates have definitely taken notice, with the US Dollar back on the bid and odds for a Fed hike in May shooting up.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

The Euro remains well supported on dips following a run to the topside through 1.1000 earlier this year. Any additional setbacks should be well supported ahead of 1.0500 in favor of the formation of the next major higher low and a bullish continuation. Ultimately, only a monthly close back below 1.0500 would give reason for concern. Next key resistance comes in the form of the March 2022 high at 1.1185.

  • R2 1.1185– Monthly high, March 2022 – Strong
  • R1 1.1076 - 14 April, 2023 high – Medium
  • S1 1.0908- 12 April low – Medium
  • S2 1.0831 – 10 April low – Strong

EURUSD – fundamental overview

Inability to hold above 1.1000 and a wave of US Dollar upside have opened the door for profit taking on Euro longs. Market odds for a 50 bp rate hike from the ECB in May are still quite low but have risen to about 25%. Key standouts on Tuesday’s calendar come from the RBA Minutes, China GDP, unemployment, and retail sales, UK employment data, Eurozone and German ZEW reads, Eurozone trade, Canada inflation, and US housing starts and building permits.

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 November 2022 monthly close back above 1.2000 strengthens this prospect. Any setbacks should now be well supported ahead of 1.2000. Next key resistance comes in at 1.2667.

  • R2 1.2667 – Monthly high, May 2022 – Strong
  • R1 1.2547 – 14 April/2023 high – Medium
  • S1 1.2344 – 10 April  low– Medium
  • S2 1.2275 – 3 April low – Strong

GBPUSD – fundamental overview

Not much to report out of the UK into Tuesday, with the Pound mostly trading lower on broad based US Dollar demand. Key standouts on Tuesday’s calendar come from the RBA Minutes, China GDP, unemployment, and retail sales, UK employment data, Eurozone and German ZEW reads, Eurozone trade, Canada inflation, and US housing starts and building permits.

USDJPY – technical overview

The major pair has seen a nice recovery following the massive correction out from multi-year highs. Setbacks have finally been well supported ahead of 125.00 in the 127s thus far. At this stage, it looks like the market could be wanting to resume the bigger picture uptrend and head back towards a retest of that multi-year high from October 2022 up at 151.95. Look for any weakness to continue to be well supported in favor of higher lows along the way.

  • R2 135.12 – 15 March high – Strong
  • R1 134.50– 17 April high – Medium
  • S1 130.62 – 5 April low – Medium
  • S2 129.64 – 24 March low – Strong

USDJPY – fundamental overview

It been all about yield differentials and this latest batch of hawkish Fed speak has fueled a round of renewed demand for the Buck against the Yen. Key standouts on Tuesday’s calendar come from the RBA Minutes, China GDP, unemployment, and retail sales, UK employment data, Eurozone and German ZEW reads, Eurozone trade, Canada inflation, and US housing starts and building permits.

AUDUSD – technical overview

There are signs of the potential formation of a longer-term base following the late 2022 surge back above 0.6500. The recent weekly close back above previous support now turned resistance at 0.6682 strengthens the outlook for a bullish structural shift. Next key resistance comes in at 0.7284. Setbacks should be well supported ahead of 0.6500.

  • R1 0.6894 – 13 December 2022 high – Strong
  • R2 0.6806– 14 April high – Medium
  • S1 0.6685– 13 April low – Medium
  • S2 0.6619 – 10 April low – Strong

AUDUSD – fundamental overview

The Australian Dollar has come under pressure on metals weakness and broad US Dollar demand, but has managed to find some support after China markets performed will in Monday trade. Key standouts on Tuesday’s calendar come from the RBA Minutes, China GDP, unemployment, and retail sales, UK employment data, Eurozone and German ZEW reads, Eurozone trade, Canada inflation, and US housing starts and building permits.

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 1.3554 – 10 April high – Strong
  • R1 1.3500 – Psychological – Medium
  • S1 1.3301 – 14 April low – Medium
  • S2 1.3226 – 15 November 2022 low – Strong

USDCAD – fundamental overview

Canada wholesale trade sales came in weak on Monday, and this along with broad based US Dollar demand factored into the run of Canadian Dollar selling. Key standouts on Tuesday’s calendar come from the RBA Minutes, China GDP, unemployment, and retail sales, UK employment data, Eurozone and German ZEW reads, Eurozone trade, Canada inflation, and US housing starts and building permits.

NZDUSD – technical overview

Overall pressure remains on the downside with the market once again stalling out on a run up into the 0.6500 area. Ultimately, a break back above 0.6577 would be required to take the immediate pressure off the downside.

  • R2 0.6391 – 14 February high – Strong
  • R1 0.6350 – Mid-Figure – Medium
  • S1 0.6139– 16 March low – Medium
  • S2 0.6084 – 8 March low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar was already under pressure on an awful New Zealand PMI print at the end of last week, before coming under added pressure on broad based US Dollar demand from hawkish Fed speak and lower NZ food price data. RBNZ May rate hike odds stand at about 70%. Key standouts on Tuesday’s calendar come from the RBA Minutes, China GDP, unemployment, and retail sales, UK employment data, Eurozone and German ZEW reads, Eurozone trade, Canada inflation, and US housing starts and building permits.

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. A monthly close back above 4300 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in at 3806.

  • R2 4198 – 2 February/2023 high – Strong
  • R1 4168 – 14 April high – Medium
  • S1 3921 –  2 March low – Medium
  • S2 3806 – 13 March low – Strong

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 H1 2023 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. The recent break back above 1808 strengthens the bullish outlook. Next major resistance comes in at the record high from 2020 at 2076, above which opens the next extension towards 2,500.

  • R2 2076 – Record high, 2020 – Very Strong
  • R1 2071 – 2022 high – Strong
  • S1 1982 – 10 April low – Medium
  • S2 1934 – 22 March low – Medium

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 (%)

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