Higher for longer can’t be stopped

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.

• R2 1.2270– 14 February high – Medium
• R1 1.2148 – 21 February high – Medium
• S1 1.1915 – 17 February low – Medium
• S2 1.1841 – 6 January low – Strong

GBPUSD – fundamental overview

UK consumer confidence reads improved and dovish BOE Tenreyro wasn't sounding as dovish when he warned the impact of the energy shock, as well as time lags in how monetary policy works, brought a risk of raising borrowing costs too high when attempting to bring down inflation. And yet, despite all of this GBP supportive news, the Pound has been under pressure as US Dollar demand from a repricing of Fed expectations dominates flow. Looking ahead, key standouts on Monday’s calendar come from Eurozone money supply, economic sentiment, and consumer confidence reads, the Canada current account, and US durable goods, pending home sales, and Dallas Fed manufacturing. We also get central bank speak from Fed Jefferson and ECB Lane.

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 138.18 – 15 December high – Strong
• R1 136.56 – 24 February high – Medium
• S1 135.00 – Round Number – Medium
• S2 134.05 – 24 February low – Strong

USDJPY – fundamental overview

BOJ Governor nominee Ueda said the Bank would stop its massive buying of bonds if it reached its target of stable 2% inflation, but added it would still take time to reach that goal. Meanwhile, Japan national CPI accelerated 4.3% y/y to set a fresh four-decade high, underscoring the challenges that lie ahead for Ueda. All of this in conjunction with broad based US Dollar demand on a repricing of Fed expectations has resulted in a slide in the Yen to its lowest level against the Buck in 2 months. Looking ahead, key standouts on Monday’s calendar come from Eurozone money supply, economic sentiment, and consumer confidence reads, the Canada current account, and US durable goods, pending home sales, and Dallas Fed manufacturing. We also get central bank speak from Fed Jefferson and ECB Lane.

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. Setbacks should be well supported ahead of 0.6500.

• R1 0.7031 – 14 February high – Strong
• R2 0.6920 – 21 February high – Medium
• S1 0.6700 – Figure – Medium
• S2 0.6688 – 3 January low – Strong

AUDUSD – fundamental overview

The Australian Dollar has suffered from the repricing of Fed expectations and risk off flow in global markets. Earlier, RBA Lowe was on the wires saying the expectation of further interest-rate rises ahead has prompted economists and money markets to narrow the odds of a recession in the $1.5 trillion economy. Looking ahead, key standouts on Monday’s calendar come from Eurozone money supply, economic sentiment, and consumer confidence reads, the Canada current account, and US durable goods, pending home sales, and Dallas Fed manufacturing. We also get central bank speak from Fed Jefferson and ECB Lane.

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 1.3705 – 16 December high – Strong
• R1 1.3666 – 24 February high – Medium
• S1 1.3514 – 22 February low – Medium
• S2 1.3441 – 21 February low – Strong

USDCAD – fundamental overview

Most of the recent slide in the Canadian Dollar has come from broad US Dollar demand and equity market weakness on a repricing of Fed expectations. Commodity prices have also been under pressure, adding to the downside pressure on the Loonie. Looking ahead, key standouts on Monday’s calendar come from Eurozone money supply, economic sentiment, and consumer confidence reads, the Canada current account, and US durable goods, pending home sales, and Dallas Fed manufacturing. We also get central bank speak from Fed Jefferson and ECB Lane.

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 0.6391 – 14 February high – Strong
• R1 0.6263 – 20 February high – Medium
• S1 0.6100– Figure – Medium
• S2 0.6064 – 17 November low – Strong

NZDUSD – fundamental overview

Comments from RBNZ Conway that we could soon see a turning point on inflation, along with a discouraging New Zealand retail sales print earlier day have contributed to added downside pressure on a New Zealand Dollar already under pressure from a repricing of Fed expectations and broad based risk off flow. Looking ahead, key standouts on Monday’s calendar come from Eurozone money supply, economic sentiment, and consumer confidence reads, the Canada current account, and US durable goods, pending home sales, and Dallas Fed manufacturing. We also get central bank speak from Fed Jefferson and ECB Lane.

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 3885.

• R2 4217 – 26 August high – Strong
• R1 4198 – 2 February/2023 high – Medium
• S1 3942 – 24 February low – Medium
• S2 3885 – 19 January 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 2000 – Mid-Figure – Strong
• R1 1960 – 2 February/2023 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.