All eyes on the Fed Chair

Today’s report: All eyes on the Fed Chair

We didn’t get any major surprises out of Jackson Hole on Thursday and this in conjunction with the earlier news of fresh China stimulus, seemed to be what helped to prop up sentiment, and risk assets by extension.

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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 months, with setbacks accelerating below the critical multi-year low from 2017 at 1.0340. This has set up a dip below monumental support in the form of parity. At the same time, technical studies are tracking in oversold territory, suggesting additional setbacks should be limited. Back above 1.0500 would be required to take the immediate pressure off the downside.

  • R2 1.0269 – 15 August high – Medium
  • R1 1.0204 - 17 August high – Medium
  • S1 0.9900 - 23 August/2022 low – Strong
  • S2 0.9800 – Figure – Strong

EURUSD – fundamental overview

The Euro saw a nice little bounce on Thursday, with the single currency popping above parity on solid German IFO reads and an upward revision to German GDP, before ultimately getting sold back on concerns about the ongoing energy crisis. Key standouts on Friday’s calendar include German GfK consumer confidence, US personal income and spending, the US advanced goods trade balance, US core PCE, Michigan sentiment, and a Fed Chair Powell speech.

EURUSD - Technical charts in detail

GBPUSD – technical overview

The market continues to be exceptionally well supported on dips below 1.2000. Unless we see a monthly close below 1.2000, we expect this to continue to be the case. Look for a push back above 1.2300 to strengthen the case for the establishment of a meaningful base.

  • R2 1.2004– 5 August low – Strong
  • R1 1.1937 – 19 August high – Medium
  • S1 1.1718 – 23 August/2022 low – Medium
  • S2 1.1700 – Figure – Strong

GBPUSD – fundamental overview

Thursday's recovery in the Pound was mostly attributed to the decent UK CBI data. Key standouts on Friday’s calendar include German GfK consumer confidence, US personal income and spending, the US advanced goods trade balance, US core PCE, Michigan sentiment, and a Fed Chair Powell speech.

USDJPY – technical overview

Technical studies are in the process of unwinding, with scope for correction in the days and weeks ahead. Look for additional upside from here to be well capped. Next key support comes in at 130.00.

  • R2 138.00 – Figure – Medium
  • R1 137.71 – 23 August high – Medium
  • S1 134.65 – 18 August low – Medium
  • S2 133.91 –17 August low – Strong

USDJPY – fundamental overview

As much as the Yen has been sold of late, the currency has at least managed to stabilize in recent sessions. It seems rocketing inflation in Japan has been difficult for even the BOJ to ignore, something that could at least force policy that is somewhat less accommodative than what we've come to see from the central bank. Key standouts on Friday’s calendar include German GfK consumer confidence, US personal income and spending, the US advanced goods trade balance, US core PCE, Michigan sentiment, and a Fed Chair Powell speech.

AUDUSD – technical overview

Overall pressure remains on the downside despite the recent recovery and conditions remain quite choppy. A break back above 0.7137 would be required to take the pressure off the downside. Until then, scope exists for a lower top below 0.7284 and deeper setbacks towards 0.6500.

  • R1 0.7200 – Figure – Medium
  • R2 0.7137 – 11 August high – Medium
  • S1 0.6856 – 23 August low – Strong
  • S2 0.6800 – Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar had been worried about the Chinese economic outlook earlier in the week before getting a nice pop on the back of the news of the latest China stimulus. Key standouts on Friday’s calendar include German GfK consumer confidence, US personal income and spending, the US advanced goods trade balance, US core PCE, Michigan sentiment, and a Fed Chair Powell speech.

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 high – Strong
  • R1 1.3064 – 23 August high  – Medium
  • S1 1.2828 – 17 August low – Medium
  • S2 1.2728 – 11 August low – Strong

USDCAD – fundamental overview

The Canada August CFIB Business Barometer advanced to 53.5 from 52.7 previous. This along with higher stocks and broad based US Dollar selling, helped to open some upside in the Canadian Dollar despite downside pressure in the oil market. Key standouts on Friday’s calendar include German GfK consumer confidence, US personal income and spending, the US advanced goods trade balance, US core PCE, Michigan sentiment, and a Fed Chair Powell speech.

NZDUSD – technical overview

Overall pressure remains on the downside despite the recent recovery and conditions remain quite choppy. A break back above 0.6469 would be required to take the pressure off the downside. Until then, scope exists for a lower top below 0.6577 and deeper setbacks below 0.6000.

  • R2 0.6500 – Psychological – Strong
  • R1 0.6469 – 12 August high – Medium
  • S1 0.6157– 22 August low – Medium
  • S2 0.6061 – 14 July/2022 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar managed to recover on Thursday, though the currency underperformed against its peers in the aftermath of softer Kiwi retail sales and worry around the local housing market. Key standouts on Friday’s calendar include German GfK consumer confidence, US personal income and spending, the US advanced goods trade balance, US core PCE, Michigan sentiment, and a Fed Chair Powell speech.

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 4,500 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in around 3,400.

  • R2 4422 – 3 March high – Strong
  • R1 4328 – 16 August high – Strong
  • S1 4080 – 2 August low – Medium
  • S2 4000 – Psychological – 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. We have seen an attempt at recovery in recent weeks, with softer CPI reads helping. But overall, we expect inflation to continue to be a problem that results in renewed 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 1700 on a monthly close basis.

  • R2 1880 – 13 June high – Strong
  • R1 1815 – 4 July high – Medium
  • S1 1700 – Round Number – Strong
  • S2 1681 – 21 July/2022 low – Strong

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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