Can’t get away from the pain

Next 24 hours: Interest rate expectations and monetary policy divergence

Today’s report: Can't get away from the pain

As much as the market would love to see a recovery, it just can’t get away from the harsh reality of where we’re at right now. Where we’re at is a place where the global economy is at risk for recession as inflation continues to rocket higher.

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Wake-up call

Chart talk: Technical & fundamental highlights

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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.

  • R2 1.0643– 10 June high – Strong
  • R1 1.0602 - 16 June high – Medium
  • S1 1.0445 - 17 June low– Medium
  • S2 1.0350 – 13 May/2022 low – Strong

EURUSD – fundamental overview

The market has become impatient of ECB communications which are leaning more towards a lot of talk and less about actual action to appropriately combat inflation. ECB Lagarde has been on the wires with a more balanced take, pledging only a 25bp rate hike next month despite undesirably high inflation. All of this has weighed on the Euro into Wednesday. Key standouts on Wednesday’s calendar come from Aussie retail sales, Eurozone sentiment reads, Eurozone consumer confidence, Eurozone consumer inflation expectations, German inflation, US GDP, and speeches from Fed Chair Powell, ECB Lagarde, and BOE Bailey.

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 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 1.2161 – 22 June low – Medium
  • S2 1.1934 – 14 June/2022 low – Strong

GBPUSD – fundamental overview

The Pound hasn't been getting any help from all the resurfacing of Brexit woes. Former PM May has been making waves after saying an override of the Brexit deal with Northern Ireland would be illegal. Key standouts on Wednesday’s calendar come from Aussie retail sales, Eurozone sentiment reads, Eurozone consumer confidence, Eurozone consumer inflation expectations, German inflation, US GDP, and speeches from Fed Chair Powell, ECB Lagarde, and BOE Bailey.

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 134.26 – 23 June low – Medium
  • S2 131.49 – 16 June low – Medium

USDJPY – fundamental overview

The BOJ is clearly still committed to easy policy despite what's going on with other major central banks. Key standouts on Wednesday’s calendar come from Aussie retail sales, Eurozone sentiment reads, Eurozone consumer confidence, Eurozone consumer inflation expectations, German inflation, US GDP, and speeches from Fed Chair Powell, ECB Lagarde, and BOE Bailey.

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 0.7138 – 10 June high – Medium
  • R2 0.7070 – 16 June high – Medium
  • S1 0.6851 – 14 June low – Medium
  • S2 0.6829 – 12 May/2022 low – Medium

AUDUSD – fundamental overview

The Australian Dollar tried to trade up on Tuesday on the news that China would be shortening the quarantine requirement. But in the end, all of this positive flow was more than offset by another downturn in US equities.  Key standouts on Wednesday’s calendar come from Aussie retail sales, Eurozone sentiment reads, Eurozone consumer confidence, Eurozone consumer inflation expectations, German inflation, US GDP, and speeches from Fed Chair Powell, ECB Lagarde, and BOE Bailey.

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 1.2820 – 28 June low – Medium
  • S2 1.2681 – 10 June low – Medium

USDCAD – fundamental overview

The Canadian Dollar has been outperforming against its peers as oil trades back to the topside. At the same time, the Loonie has been unable to avoid renewed weakness against the Buck as risk off flow fuels broad US Dollar demand. Key standouts on Wednesday’s calendar come from Aussie retail sales, Eurozone sentiment reads, Eurozone consumer confidence, Eurozone consumer inflation expectations, German inflation, US GDP, and speeches from Fed Chair Powell, ECB Lagarde, and BOE Bailey.

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 – Psychological – Medium
  • R1 0.6396 – 16 June high – Medium
  • S1 0.6233– 16 June high – Medium
  • S2 0.6197 – 14 June/2022 low – Strong

NZDUSD – fundamental overview

Risk off flow has worked its way back into the market and as US equities head south, so too has the New Zealand Dollar. Key standouts on Wednesday’s calendar come from Aussie retail sales, Eurozone sentiment reads, Eurozone consumer confidence, Eurozone consumer inflation expectations, German inflation, US GDP, and speeches from Fed Chair Powell, ECB Lagarde, and BOE Bailey.

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 4031 – 10 June high – Medium
  • R1 3950 – 28 June high – Medium
  • S1 3708 – 14 June low – Medium
  • S2 3637 – 17 June/2022 low – Strong

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 1920 – 29 April high – Strong
  • R1 1880 – 13 June 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.

Peformance chart: 30 Day Performance vs. US dollar (%)

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