Slumping Empire Fed and discouraging Goldman earnings

Next 24 hours: Dollar right back under pressure

Today’s report: Slumping Empire Fed and discouraging Goldman earnings

Tuesday’s round of economic data around the globe was mostly better than expected, though we did see some tension out of the US from a discouraging empire Fed survey and not so great earnings results from Goldman Sachs.

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Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

The Euro recovery has finally run back above meaningful previous support turned resistance at 1.0635. The December close above this level further encourages the recovery outlook and makes a stronger case for the formation of a longer-term bottom. Any setbacks should now be well supported ahead of 1.0300. Next major resistance at 1.1000.

  • R2 1.0937 – 21 April high – Strong
  • R1 1.0875 - 16 January high – Medium
  • S1 1.0725 - 12 January low – Medium
  • S2 1.0634 – 9 January low – Medium

EURUSD – fundamental overview

Most of the latest round of Euro weakness has come from some profit taking on longs in the aftermath of a nice run to the topside on hawkish ECB speak and an improved outlook for the Eurozone economy. Risk off flow and a report the ECB may not end up being as aggressive on rates going forward have also worked into the equation and has been weighing on the Euro as well. Key standouts on Wednesday’s calendar come from the BOJ decision, UK inflation reads, Eurozone inflation reads, Eurozone construction output, Canada producer prices, and US data in the form of producer prices, retail sales, industrial production, NAHB housing, and the Fed Beige Book. We also get Fed speak from Bostic, Bullard, and Harker.

EURUSD - Technical charts in detail

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 1.1500. Next key resistance comes in at 1.2668.

  • R2 1.2345– 5 December high – Strong
  • R1 1.2301 – 17 January high – Medium
  • S1 1.2077 – 9 January low – Medium
  • S2 1.1841 – 6 January low – Strong

GBPUSD – fundamental overview

Odds have risen for a 50 basis point rate hike from the BOE next month after the latest round of UK wages data, which came in above forecast. Key standouts on Wednesday’s calendar come from the BOJ decision, UK inflation reads, Eurozone inflation reads, Eurozone construction output, Canada producer prices, and US data in the form of producer prices, retail sales, industrial production, NAHB housing, and the Fed Beige Book. We also get Fed speak from Bostic, Bullard, and Harker.

USDJPY – technical overview

The major pair has been in the throes of a long overdue correction that was waiting to play out after a parabolic run to the topside to multi-year highs. At this stage, the correction could be getting close to having played out fully, with the market finally approaching critical previous resistance turned support in the 125.00 area.

  • R2 134.78 – 6 January high – Strong
  • R1 132.88 – 11 January high – Medium
  • S1 127.22 – 16 January low – Medium
  • S2 126.36 – 24 May low – Strong

USDJPY – fundamental overview

There has been a lot of attention around what could come out of the BOJ policy decision, with many speculating the central bank could be getting ready to make a move that leans less accommodative than what we've been seeing for so many years. Last month's surprise move to widen the 10 year yield curve control band has fueled a lot of this speculation around a policy shift. Key standouts on Wednesday’s calendar come from the BOJ decision, UK inflation reads, Eurozone inflation reads, Eurozone construction output, Canada producer prices, and US data in the form of producer prices, retail sales, industrial production, NAHB housing, and the Fed Beige Book. We also get Fed speak from Bostic, Bullard, and Harker.

AUDUSD – technical overview

There are signs of the potential formation of a longer-term base following the recent surge back above 0.6500. The recent weekly close back above previous support now turned resistance at 0.6682 strengthens the outlook for a bullish structural shift. Next key resistance comes in at 0.7137.

  • R1 0.7020 – 16 January high– Medium
  • R2 0.7000 – Psychological – Medium
  • S1 0.6860 – 10 January low – Medium
  • S2 0.6800 – Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar has received another boost, this time from solid Aussie consumer confidence reads and a better than expected round of China data. Key standouts on Wednesday’s calendar come from the BOJ decision, UK inflation reads, Eurozone inflation reads, Eurozone construction output, Canada producer prices, and US data in the form of producer prices, retail sales, industrial production, NAHB housing, and the Fed Beige Book. We also get Fed speak from Bostic, Bullard, and Harker.

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 1.3706 – 16 December high – Strong
  • R1 1.3459 – 12 January high – Medium
  • S1 1.3322 – 13 January low – Medium
  • S2 1.3316 – 24 November low – Strong

USDCAD – fundamental overview

The latest round of economic data out of Canada produced a mixed inflation report and decline in housing starts. Still, a sticky core CPI read has tipped odds in favor of a 25 basis point rate hike from the Bank of Canada next week. Key standouts on Wednesday’s calendar come from the BOJ decision, UK inflation reads, Eurozone inflation reads, Eurozone construction output, Canada producer prices, and US data in the form of producer prices, retail sales, industrial production, NAHB housing, and the Fed Beige Book. We also get Fed speak from Bostic, Bullard, and Harker.

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 0.6577 would be required to take the immediate pressure off the downside.

  • R2 0.6514 – 13 December high – Strong
  • R1 0.6450 – Mid-Figure – Medium
  • S1 0.6305– 12 January low – Medium
  • S2 0.6191 – 6 January low – Strong

NZDUSD – fundamental overview

A recent round of Kiwi strength seems to be a lot more about cross related selling in AUDNZD than anything else at the moment. Key standouts on Wednesday’s calendar come from the BOJ decision, UK inflation reads, Eurozone inflation reads, Eurozone construction output, Canada producer prices, and US data in the form of producer prices, retail sales, industrial production, NAHB housing, and the Fed Beige Book. We also get Fed speak from Bostic, Bullard, and Harker.

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 4137 – 13 December high – Strong
  • R1 4019 – 17 January high – Medium
  • S1 3763 – 22 December low – 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 H1 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. The recent break back above 1808 strengthens the bullish outlook. Next major resistance comes in at 2000.

  • R2 1950 – Mid-Figure – Strong
  • R1 1929 – 16 January high – Medium
  • S1 1774 – 15 December low – Medium
  • S2 1719 – 23 November 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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