Next 24 hours: Euro extends decline
Today’s report: Peak rates now seen through 5%
All of this repricing of Fed bets has resulted in a major wave of risk off flow as reflected through lower stocks and a higher US Dollar. Peak rate expectations have now been pushed out to Q3 from mid-Q2, and peak rates are projected to now go to 5.125% from 4.875% last Thursday.
Wake-up call
- retail sales
- BOE Mann
- Amamiya replacement
- RBA hikes
- Ivey PMIs
- Aussie momentum
- Inflation headache
- Dealers report
Peformance chart: 30 Day Performance vs. US dollar (%)
Suggested reading
- Don’t Use a Retail Trader’s Mentality to Invest in Property, S. Ren, Bloomberg (February 7, 2023)
- Can ecommerce deliver a long-term boost for air freight?, O. Telling, Financial Times (February 6, 2023)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
The Euro recovery has finally run back above meaningful previous support turned resistance at 1.0635. The December 2022 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 1.0500. Next major resistance at 1.1185.EURUSD – fundamental overview
The Euro took another hit Monday, with awful Eurozone retail sales data adding further to downside pressure. Key standouts on Tuesday’s calendar come from German industrial production, some ECB speak, BOE speak, Canada trade, US trade, a Fed Chair Powell speech, and Bank of Canada Governor Macklem speech.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 2022. The recent 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.GBPUSD – fundamental overview
The Pound held up better than most on Monday, this on the back of hawkish comments from BOE Mann who said he still worried about risk of inflation staying too high. Meanwhile, UK health workers walked out on Monday, triggering the largest strike in the 75 year history of the NHS. Key standouts on Tuesday’s calendar come from German industrial production, some ECB speak, BOE speak, Canada trade, US trade, a Fed Chair Powell speech, and Bank of Canada Governor Macklem speech.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.USDJPY – fundamental overview
The Yen took an added hit on Monday on the news that BOJ dove Amamiya was being considered to replace Kuroda. Key standouts on Tuesday’s calendar come from German industrial production, some ECB speak, BOE speak, Canada trade, US trade, a Fed Chair Powell speech, and Bank of Canada Governor Macklem speech.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 0.7284.AUDUSD – fundamental overview
The Australian Dollar has managed to recover into Tuesday, this on the back of the latest as expected 25 basis point RBA rate hike, and on some solid Aussie trade data. The RBA said it expected further increases in interest rates, and on the trade data side, Australia recorded a fifth straight year of trade surpluses. Key standouts on Tuesday’s calendar come from German industrial production, some ECB speak, BOE speak, Canada trade, US trade, a Fed Chair Powell speech, and Bank of Canada Governor Macklem 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 1.4000 area. Setbacks should be very well supported down into the 1.3000 area.USDCAD – fundamental overview
The Canadian Dollar did a good job rallying into dips, getting help from an impressive Canada Ivey PMI showing and a recovery in the price of oil. Key standouts on Tuesday’s calendar come from German industrial production, some ECB speak, BOE speak, Canada trade, US trade, a Fed Chair Powell speech, and Bank of Canada Governor Macklem speech.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.NZDUSD – fundamental overview
The New Zealand Dollar is trying to put in a recovery into Tuesday, mostly on the back of positive momentum in the Australian Dollar. Key standouts on Tuesday’s calendar come from German industrial production, some ECB speak, BOE speak, Canada trade, US trade, a Fed Chair Powell speech, and Bank of Canada Governor Macklem 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. 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.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.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.