Hawkishness is here to stay

Today’s report: Hawkishness is here to stay

The market was already pricing a hawkish Fed Chair heading into this past Friday’s speech, yet somehow, the Fed Chair still managed to exceed these expectations.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

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 has done a nice job avoiding a further extension to multi-year lows, with the currency almost numb to bad news at this point. The latest plunge in German consumer confidence reads, ongoing energy crisis woes, and monetary policy divergence between the ECB and Fed are all weighing on the single currency right now. Absence of first-tier data on Monday’s calendar will leave the market focused on bigger picture themes.

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. Next key support comes in at the multi-year low from 2020 in the 1.1400 area. Look for a push back above 1.1900 to take the immediate pressure off the downside.

  • R2 1.2004– 5 August low – Strong
  • R1 1.1901 – 26 August high – Strong
  • S1 1.1656 – 29 August/2022 low – Medium
  • S2 1.1600 – Figure – Strong

GBPUSD – fundamental overview

The Pound can't catch a break right now. There's been plenty of worry around the energy crisis and costs to households, all while Goldman Sachs downgrades its outlook for the UK economy. Absence of first-tier data on Monday’s calendar will leave the market focused on bigger picture themes.

USDJPY – technical overview

Technical studies are looking quite stretched on the longer-term chart, warning of consolidation and correction in the days and weeks ahead. Look for additional upside from here to be well capped into the 140.00 area. Next key support comes in at 135.81.

  • R2 139.39 – 14 July/2022 high – Strong
  • R1 139.00 – Figure – Medium
  • S1 135.81 – 23 August low – Strong
  • S2 134.65 –18 August low – Medium

USDJPY – fundamental overview

As much as the Yen has been sold of late, the currency has at least managed to avoid extending fresh multi-year declines against the Buck. 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. Absence of first-tier data on Monday’s calendar will leave the market focused on bigger picture themes.

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 0.6848 – 29 August low – Medium
  • S2 0.6800 – Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar has been struggling of late with the pullback in risk assets on account of the latest hawkish speak out from Fed Chair Powell. Absence of first-tier data on Monday’s calendar will leave the market focused on bigger picture themes.

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 1.3074 – 29 August high  – Medium
  • S1 1.2828 – 17 August low – Medium
  • S2 1.2728 – 11 August low – Strong

USDCAD – fundamental overview

The Canadian Dollar has succumb to broader macro pressures, with the currency hit hard as risk comes off and as yield differentials move further in the US Dollar's favor in the aftermath of this latest hawkish Fed speak from Jerome Powell. Even the recovery in the price of oil has failed to do much to support the Canadian Dollar. Absence of first-tier data on Monday’s calendar will leave the market focused on bigger picture themes.

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 0.6102– 29 August low – Medium
  • S2 0.6061 – 14 July/2022 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been struggling of late with the pullback in risk assets on account of the latest hawkish speak out from Fed Chair Powell. Adding insult to injury has been additional downside pressure as the RBNZ takes note of the slowing New Zealand economy. Absence of first-tier data on Monday’s calendar will leave the market focused on bigger picture themes.

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 4007 – 29 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 (%)

Suggested reading

Daily Reports Global FX Insights   LMAX Exchange  

Any opinions, news, research, analyses, prices or other information ("information") contained on this Blog, constitutes marketing communication and it has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further, the information contained within this Blog does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of, or solicitation for, a transaction in any financial instrument. LMAX Group has not verified the accuracy or basis-in-fact of any claim or statement made by any third parties as comments for every Blog entry.

LMAX Group will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. No representation or warranty is given as to the accuracy or completeness of the above information. While the produced information was obtained from sources deemed to be reliable, LMAX Group does not provide any guarantees about the reliability of such sources. Consequently any person acting on it does so entirely at his or her own risk. It is not a place to slander, use unacceptable language or to promote LMAX Group or any other FX and CFD provider and any such postings, excessive or unjust comments and attacks will not be allowed and will be removed from the site immediately.