Next 24 hours: Recession worry ramps up
Today’s report: World Bank slashes global growth forecast
We would chalk up Tuesday’s recovery in stocks as more rebound within a bearish consolidation than anything else. Lowered guidance from retail giant Target, downgraded global growth forecasts from the World Bank, and ongoing hawkish talk out from the Fed, should all be enough to call the stock market bounce into question.
Wake-up call
- factory orders
- composite PMI
- easy policy
- AUDUSD RBA decision more hawkish leaning
- Ivey PMIs
- Slumping dairy
- Stocks vulnerable
- Dealers report
Peformance chart: 30 Day Performance vs. US dollar (%)
Suggested reading
- Mrs. Watanabe Is Giving Cover to the Yen Carry Trade, J. Authers, Bloomberg (June 8, 2022)
- The Extraordinary Toshiba Saga, L. Lewis, Financial Times (June 8, 2022)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
The market has come under intense pressure in recent weeks, with setbacks accelerating to retest the multi-year low from 2017. A clear break below 1.0300 now sets up the next downside extension towards parity. At the same time, technical studies have been in the process of unwinding from oversold. But back above 1.1000 would be required at a minimum to take the immediate pressure off the downside.EURUSD – fundamental overview
The Euro got another knock on Tuesday after we saw a round of poor German data. German factory orders came in much lower than expected at -2.7% versus calls for a +0.4% print. Setbacks were however mitigated somewhat by a rise in the Eurozone Sentix survey. Key standouts on today’s calendar come from UK construction PMIs, Eurozone GDP and employment, and US wholesale inventories.EURUSD - Technical charts in detail
GBPUSD – technical overview
The market continues to be exceptionally well supported on dips down into the 1.2000 area, with the latest setback once again holding up ahead of the barrier. Overall, the daily trend remains bearish, though there are signs of the market wanting to put in a meaningful bottom ahead of the next major upside extension. Look for a clear break back above 1.3000 to strengthen this outlook.GBPUSD – fundamental overview
Not much impact on the Pound from all the political swirl this week after PM Johnson survived a no confidence vote. We have seen some mild relative outperformance in the Pound on account of Tuesday better than expected UK composite PMI reads. Key standouts on today’s calendar come from UK construction PMIs, Eurozone GDP and employment, and US wholesale inventories.USDJPY – technical overview
The market has rocketed higher to its highest levels since 2002 after breaking through the 2015 high. Technical studies are however looking stretched, with scope for a sizable consolidation and correction in the weeks ahead. Look for additional upside from here to be limited to the 2002 high 135.00 area. A break back below 130.00 would take the immediate pressure off the topside.USDJPY – fundamental overview
Policy divergence continues to play a strong hand here, with market participants once again focusing on yield differentials that weigh heavily in the US Dollar's favor. The BOJ is clearly still committed to easy policy despite what's going on with other major central banks and the impact on the Yen, now at a 20 year low against the Buck. On the data front, the final read of Japan's Q1 GDP was unexpectedly revised up, though this did nothing to factor into price action. Key standouts on today’s calendar come from UK construction PMIs, Eurozone GDP and employment, and US wholesale inventories.AUDUSD – technical overview
The market has been in recovery mode since bottoming out off the yearly low. Overall however, conditions remain quite choppy, and while the short-term pressure has been taken off the downside, rallies towards 0.7500 should be very well offered.AUDUSD – fundamental overview
There Australian Dollar was able to hold up better than most other currencies on Tuesday, in the aftermath of the more hawkish than expected RBA decision in which the central bank raised rates by 50 basis points and communicated a commitment to do what is necessary to ensure that inflation returns to target. Key standouts on today’s calendar come from UK construction PMIs, Eurozone GDP and employment, and US wholesale inventories.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 1.3500 area. Setbacks should be very well supported down into the 1.2500 area.USDCAD – fundamental overview
The Canadian Dollar found some more demand on Tuesday, with an impressive Canada Ivey PMI read helping the cause. Reports now have the market thinking more seriously about the idea of a 75 basis point rate hike from the Bank of Canada in July. Key standouts on today’s calendar come from UK construction PMIs, Eurozone GDP and employment, and US wholesale inventories.NZDUSD – technical overview
The market has been in recovery mode since bottoming out off the yearly low. Overall however, conditions remain quite choppy, and while the short-term pressure has been taken off the downside, rallies should be very well offered.NZDUSD – fundamental overview
Broad based risk off flow has resulted in renewed downside pressure in the New Zealand Dollar. We've also seen Kiwi selling on cross related demand for AUDNZD in the aftermath of Tuesday's hawkish leaning RBA decision. Not helping matters either has been a decline in ANZ May commodity prices and a slump in dairy. Key standouts on today’s calendar come from UK construction PMIs, Eurozone GDP and employment, and US wholesale inventories.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 4,312 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in around 3,400.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 continue to weigh more heavily on investor sentiment in 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 1700.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.