Next 24 hours: US GDP reads, initial jobless claims stand out
Today’s report: No surprises from Fed Minutes
The Fed Minutes have come and gone and in the end, no real fireworks from the event risk.
Wake-up call
- EURUS ECB Villeroy says policy restrictive
- GBPUSD Citi calls for 2% CPI in 2023
- JGB yields
- wage data
- Canada CPI
- post RBNZ
- Inflation headache
- Dealers report
Peformance chart: 30 Day Performance vs. US dollar (%)
Suggested reading
- Fed Minutes Show Three Weeks Is a Long Time, J. Authers, Bloomberg (February 23, 2023)
- The story behind Jake Freeman’s meme-stock bonanza, A. Gara, Financial Times (February 20, 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 dipped down on dovish ECB comments. ECB Villeroy said the market overreacted in pricing peak rates, while calling current policy restrictive. Key standouts on Thursday’s calendar come from Eurozone inflation, UK CBI trades, US initial jobless claims, GDP, and the Chicago Fed National Activity index.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
Absence of Wednesday economic data out of the UK left the market focused on comments out of Citi calling a return to 2% CPI in 2023. Key standouts on Thursday’s calendar come from Eurozone inflation, UK CBI trades, US initial jobless claims, GDP, and the Chicago Fed National Activity index.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 put in a mild rebound on Wednesday as JGB yields pressed above cap. But overall, yield differentials continue to favor the US Dollar. Meanwhile, Japanese auto manufacturers were out offering the biggest pay raises in decades. Key standouts on Thursday’s calendar come from Eurozone inflation, UK CBI trades, US initial jobless claims, GDP, and the Chicago Fed National Activity index.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 had already been under pressure from broader macro forces of risk off, before finding additional downside on Wednesday from the softer than expected Aussie wages data. The data contrasts with much higher CPI inflation, highlighting real income pressure on Australian households. Key standouts on Thursday’s calendar come from Eurozone inflation, UK CBI trades, US initial jobless claims, GDP, and the Chicago Fed National Activity index.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 was already under pressure from risk off flow and sliding oil prices, before taking an added hit on Tuesday from the softer than expected Canada inflation data. This has shifted expectations more towards a no hike from the central bank in March. Key standouts on Thursday’s calendar come from Eurozone inflation, UK CBI trades, US initial jobless claims, GDP, and the Chicago Fed National Activity index.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
On Wednesday, the RBNZ went ahead and hiked rates 50 basis points to 4.75% as widely expected. Although the RBNZ's expectations for the official cash rate are marked slightly lower for Q2 2023, they are left unchanged thereafter at 5.50% for Q4 2023 and 5.32% for Q4 2024. Key standouts on Thursday’s calendar come from Eurozone inflation, UK CBI trades, US initial jobless claims, GDP, and the Chicago Fed National Activity index.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.