Wall of worry ahead of Fed Chair testimony

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 around 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 1.2700 to strengthen this outlook. A monthly close below 1.2000 would force a rethink of the outlook.

• R2 1.2518 – 10 June high – Medium
• R1 1.2407 – 16 June high – Medium
• S1 1.2100 – Round number – Medium
• S2 1.1934 – 14 June/2022 low – Strong

GBPUSD – fundamental overview

The Pound has come under pressure into Wednesday following reports from the Resolution Foundation that Brexit has reduced the competitiveness of the British economy, with alarming implications for productivity and wages. We've also seen downside pressure on the back of risk off flow and broad USD demand. Key standouts on today’s calendar come from UK inflation reads, ECB Guindos and Elderson speeches, a BOE Cunliffe speech, Canada inflation, Fed Chair Powell testimony, and Fed speak from Evans, Harker and Barkin.

USDJPY – technical overview

The market has rocketed higher to its highest levels since 1998 after breaking through the 2002 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 well capped ahead of 140.00. A break back below 130.00 would take the immediate pressure off the topside.

• R2 137.00 – Figure – Strong
• R1 136.72 – 22 June/2022 high – Strong
• S1 134.92 – 21 June low – Medium
• S2 134.53 – 20 June low – Medium

USDJPY – fundamental overview

Overall, there has been no official change to the BOJ stance and policy divergence continues to play a strong hand here, with market participants 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. Key standouts on today’s calendar come from UK inflation reads, ECB Guindos and Elderson speeches, a BOE Cunliffe speech, Canada inflation, Fed Chair Powell testimony, and Fed speak from Evans, Harker and Barkin.

AUDUSD – technical overview

Overall pressure remains on the downside and conditions remain quite choppy. A break back above 0.7900 would be required to force a shift in the structure and suggest we are seeing a more significant bullish reversal. Until then, scope exists for a retest and break of the yearly low.

• R1 0.7198 – 9 June high – Medium
• R2 0.7138 – 10 June high – Medium
• S1 0.6851 – 14 June low – Medium
• S2 0.6829 – 12 May/2022 low – Medium

AUDUSD – fundamental overview

Most of the turnaround we're seeing in the Australian Dollar comes from risk off flow and renewed US Dollar demand. Key standouts on today’s calendar come from UK inflation reads, ECB Guindos and Elderson speeches, a BOE Cunliffe speech, Canada inflation, Fed Chair Powell testimony, and Fed speak from Evans, Harker and Barkin.

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.

• R2 1.3079 – 17 June/2022 high – Strong
• R1 1.3000 – Psychological  – Medium
• S1 1.2861 – 16 June low – Medium
• S2 1.2681 – 10 June low – Medium

USDCAD – fundamental overview

The Canadian Dollar is back under pressure despite Tuesday's better than expected retail sales, this as oil reverses sharply to the downside and global risk sentiment turns down. Key standouts on today’s calendar come from UK inflation reads, ECB Guindos and Elderson speeches, a BOE Cunliffe speech, Canada inflation, Fed Chair Powell testimony, and Fed speak from Evans, Harker and Barkin.

NZDUSD – technical overview

Overall pressure remains on the downside and conditions remain quite choppy. A break back above 0.6600 would be required to force a shift in the structure and suggest we are seeing a more significant bullish reversal. Until then, scope exists for fresh yearly lows and a retest of the 2015 low down towards 0.6100.

• R2 0.6500 – 7 June high – Medium
• R1 0.6462 – 9 June high – Medium
• S1 0.6200– Figure – Medium
• S2 0.6197 – 14 June/2022 low – Strong

NZDUSD – fundamental overview

Most of the turnaround we're seeing in the New Zealand Dollar comes from risk off flow and renewed US Dollar demand. Key standouts on today’s calendar come from UK inflation reads, ECB Guindos and Elderson speeches, a BOE Cunliffe speech, Canada inflation, Fed Chair Powell testimony, and Fed speak from Evans, Harker and Barkin.

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 4,206 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in around 3,400.

• R2 4206 – 30 May high – Strong
• R1 4031 – 10 June high – Medium
• S1 3700 – Round number – Medium
• S2 3637 – 17 June/2022 low – Medium

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 rising inflation and slower growth 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.

• R2 1999 – 18 April high – Strong
• R1 1920 – 29 April high – Medium
• S1 1805 – 14 June low – Strong
• S2 1787 – 16 May 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 exhausted monetary policy, extended global equities, and inflation risk. 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.