Fundamentals that simply can’t be ignored

GBPUSD – technical overview

Signs have emerged of the market wanting to put in a longer-term base after collapsing to a record low in September. The latest weekly close back above the September high at 1.1739 strengthens this prospect. Any setbacks should now be well supported ahead of 1.1100. Next key resistance comes in at 1.2407.

• R2 1.2407– 16 June high – Strong
• R1 1.2345 – 5 December high – Medium
• S1 1.2134 – 2 December low – Medium
• S2 1.1900 – 30 November low – Medium

GBPUSD – fundamental overview

The Pound pulled back sharply on Monday, taking a hit on broad based US Dollar demand and dovish comments from BOE Dhingra who said rates should peak below 4.5%. Key standouts on Tuesday’s calendar come from German factory orders, Eurozone, German and UK construction PMIs, Canada trade, US trade, and Canada Ivey PMIs.

USDJPY – technical overview

Longer-term technical studies are in the process of unwinding from severe overbought readings. Look for additional corrective price action back down towards the 130.00 area before the market considers the possibility of uptrend resumption. Rallies should now be well capped ahead of 140.00.

• R2 139.90 – 30 November high – Strong
• R1 138.11 – 1 December high – Medium
• S1 133.62 – 2 December low – Medium
• S2 133.00 – Figure – Medium

USDJPY – fundamental overview

We saw some Yen weakness on Monday, mostly on broad based US Dollar gains. Overall however, the Yen has been better bid in recent sessions, getting a boost from the combination of hotter Japan inflation data and broad based US Dollar weakness. And last week, we saw reason for additional Yen upside after BOJ Tamura said it was getting close to conducting a policy assessment. Key standouts on Tuesday’s calendar come from German factory orders, Eurozone, German and UK construction PMIs, Canada trade, US trade, and Canada Ivey PMIs.

AUDUSD – technical overview

There are signs of the potential formation of a longer-term base following the recent surge back above 0.6500. The latest weekly close back above previous support now turned resistance at 0.6682 strengthens the outlook for a bullish structural shift.

• R1 0.6917 – 13 September high – Strong
• R2 0.6852 – 5 December high – Medium
• S1 0.6585 – 21 November low – Medium
• S2 0.6387 – 10 November low – Strong

AUDUSD – fundamental overview

The Australian Dollar fell victim to risk off flow and broad US Dollar gains, but did manage to find support as Aussie inflation reads surged to a record high. Melbourne Institute November inflation was up 1% m/m, while the y/y rate rose to 5.9%. Key standouts on Tuesday’s calendar come from German factory orders, Eurozone, German and UK construction PMIs, Canada trade, US trade, and Canada Ivey PMIs.

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 1.4000 area. Setbacks should be very well supported down into the 1.3000 area.

• R2 1.3700 – Figure – Medium
• R1 1.3646 – 29 November high – Medium
• S1 1.3381 – 28 November low – Medium
• S2 1.3316 – 24 November low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been a standout underperformer in recent weeks. Economic data has been soft overall and oil prices remain weighed down. Friday's discouraging Canada jobs report has been followed up by unimpressive building permits. Key standouts on Tuesday’s calendar come from German factory orders, Eurozone, German and UK construction PMIs, Canada trade, US trade, and Canada Ivey PMIs.

NZDUSD – technical overview

Overall pressure remains on the downside with risk for the current recovery rally to stall out and form a lower top for the next major downside extension. A break back above 0.6469 would be required to take the immediate pressure off the downside.

• R2 0.6469 – 12 August high – Strong
• R1 0.6443 – 5 December high – Medium
• S1 0.6285– 1 December low – Medium
• S2 0.6156 – 28 November low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has held up well of late on more hawkish leaning RBNZ expectations, though could not avoid falling victim to Monday's commodities slump and risk off flow. New Zealand commodity export prices fell 3.9% m/m in November, down 11.5% y/y to their lowest since February 2021. Key standouts on Tuesday’s calendar come from German factory orders, Eurozone, German and UK construction PMIs, Canada trade, US trade, and Canada Ivey PMIs.

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. A monthly close back above 4300 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in at 3492.

• R2 4150 – 13 September high – Strong
• R1 4105 – 1 December high – Strong
• S1 3863 – 8 November high – Medium
• S2 3699 – 3 November low – 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. Overall, we expect inflation to continue to be a problem in Q4 2022 and Q1 2023 that results in 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 1600 on a monthly close basis ahead of the next major upside extension. This latest break back above 1808 strengthens the bullish outlook.

• R2 1880 – 13 June high – Strong
• R1 1811 – 5 December high – Medium
• S1 1719 – 23 November low – Medium
• S2 1665 – 8 November 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 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.