Next 24 hours: The Dollar is having a day
Today’s report: Quiet warnings from the Fed
It didn’t get as much attention as it probably needed to, but the Fed’s semi-annual Financial Stability Report released earlier this week raised some red flags on risk, highlighting stretched valuations and widespread vulnerabilities.
Wake-up call
- ECB Knot
- outlook warning
- equities falter
- sentiment deteriorating
- oil demand
- RBNZ pricing
- Stocks vulnerable
- Dealers report
Peformance chart: 30 Day Performance vs. US dollar (%)
Suggested reading
- The Bond Market's Spasm Over a Brainard Fed Makes Little Sense, J. Authers, Bloomberg (November 10, 2021)
- EG Group: Building an Empire on Debt-Fueled Growth, K. Wiggins, Financial Times (November 8, 2021)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
The market has been looking for a higher low since topping out in 2021 up at 1.2350. Ideally, setbacks continue to be well supported above 1.1500 on a weekly close basis in favour of the next major upside extension back through 1.2350 and towards a retest of the 2018 high at 1.2555 further up. Only a weekly close below 1.1500 would force a rethink.EURUSD – fundamental overview
The solid expectations component of the German ZEW has helped to support the Euro on dips. Meanwhile, the wave of dovish rhetoric continues, with ECB Knot saying a rate hike is unlikely in 2022. Still, virus resurgence in Germany and a downturn in US equities could weigh into rallies. Key standouts on today’s calendar come in the form of German inflation reads, US CPI, and US initial jobless claims.EURUSD - Technical charts in detail
GBPUSD – technical overview
The market is in a consolidation phase in the aftermath of the run to fresh 2021 and multi-month highs. At this stage, additional setbacks should be limited to the 1.3200 area ahead of the next major upside extension towards a retest and break of critical resistance in the form of the 2018 high.GBPUSD – fundamental overview
NIESR hasn't been kind to the Pound this week, after warning Britain faces a future of stagflation due to pandemic and Brexit. Key standouts on today’s calendar come in the form of German inflation reads, US CPI, and US initial jobless claims.USDJPY – technical overview
The longer-term trend is bearish despite the recent run higher. Look for additional upside to be limited, with scope for a topside failure and bearish resumption back down towards the 100.00 area. It would take a clear break back above 114.55 to negate the outlook.USDJPY – fundamental overview
More demand for the Yen this week on traditional correlations, as US equities falter. Key standouts on today’s calendar come in the form of German inflation reads, US CPI, and US initial jobless claims.AUDUSD – technical overview
The Australian Dollar has been in the process of a healthy consolidation following the impressive run towards a retest of the 2018 high earlier this year. At this stage, there are signs of the market wanting to turn back up and any setbacks should be well supported down into the 0.7200 area. Look for a weekly close above 0.7500 to strengthen the outlook and force a shift in the structure.AUDUSD – fundamental overview
Metals and mining stocks have taken a hit, and risk sentiment is heading south into the mid-week. This has weighed on the Australian Dollar. Key standouts on today’s calendar come in the form of German inflation reads, US CPI, and US initial jobless claims.USDCAD – technical overview
Finally 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.USDCAD – fundamental overview
The Canadian Dollar has been able to shrug off most of this latest downturn in risk assets, outperforming its peer group on the back of ongoing demand for oil. Key standouts on today’s calendar come in the form of German inflation reads, US CPI, and US initial jobless claims.NZDUSD – technical overview
The market has entered a period of consolidation after running up to a yearly and multi-month high. Back above the April high at 0.7317 would be required to force a shift in the structure.NZDUSD – fundamental overview
The New Zealand Dollar has been outperforming on a perceived monetary policy divergence, this after the ECB, RBA, Fed and BOE all came out leaning on the more accommodative side of policy at their latest meetings. Meanwhile, we're seeing added demand after PM Ardern indicated Covid restrictions in Auckland would be progressively eased further. Key standouts on today’s calendar come in the form of German inflation reads, US CPI, and US initial jobless claims.US SPX 500 – technical overview
Longer-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high. At the same time, the latest breakout above 4600 introduces the possibility for the next major upside extension through 4800. At this stage, it will take a break back below 4500 to take the immediate pressure off the topside.US SPX 500 – fundamental overview
We're trading just off fresh record highs, and yet, 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 and risk of rising inflation should weigh more heavily on investor sentiment in Q4 2021.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 an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1600.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, and coronavirus fallout. 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.