Renewed risk appetite in question

Next 24 hours: US Dollar recovering on Monday

Today’s report: Renewed risk appetite in question

We come into the new week with market sentiment trying to look up. US equities had a big day on Friday, with the market perhaps encouraged by a resilient services sector and comments from Fed officials which while hawkish, were perhaps just a little toned down.

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Wake-up call

Chart talk: Technical & fundamental highlights

EURUSD – technical overview

The Euro is in the throes of a correction following a run to the topside through 1.1000 earlier this year. Any additional setbacks should be well supported ahead of 1.0200 in favor of the formation of the next major higher low and a bullish continuation. Ultimately, only a monthly close back below parity would give reason for concern.

  • R2 1.0805 – 14 February high – Strong
  • R1 1.0705 - 20 February high – Medium
  • S1 1.0533 - 27 February low – Medium
  • S2 1.0482 – 6 January low – Strong

EURUSD – fundamental overview

There was plenty of hawkish speak out from ECB and Fed officials in the previous week, which resulted in a choppy directionless bout of trade for the Euro. Key standouts on Monday’s calendar come from Eurozone, German, and UK construction PMIs, Eurozone retail sales, Canada Ivey PMIs, and US factory orders.

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.

  • 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 services PMI reads were revised higher, which may have helped to give the Pound an additional boost after already finding momentum on broad based US Dollar selling. Key standouts on Monday’s calendar come from Eurozone, German, and UK construction PMIs, Eurozone retail sales, Canada Ivey PMIs, and US factory orders.

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 137.10 – 2 March high – Medium
  • S1 135.26 – 1 March low – Medium
  • S2 134.05 – 24 February low – Strong

USDJPY – fundamental overview

Tokyo February CPI slowed considerably at 3.4% y/y vs 4.4% last, the first deceleration in over a year. Meanwhile, Japan's services and composite PMI reads showed improvement in February. Key standouts on Monday’s calendar come from Eurozone, German, and UK construction PMIs, Eurozone retail sales, Canada Ivey PMIs, and US factory orders.

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 0.6695 – 1 March low – Medium
  • S2 0.6688 – 3 January low – Strong

AUDUSD – fundamental overview

The Australian Dollar got some nice support from a solid round of economic data out of China in the previous week. We also saw demand from risk on flow into the end of the week. Key standouts on Monday’s calendar come from Eurozone, German, and UK construction PMIs, Eurozone retail sales, Canada Ivey PMIs, and US factory orders.

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

Canada productivity dropped off, while Canada building permits declined as well. The Canadian Dollar got some help from rallying stocks and oil, but ultimately couldn't totally shake off the softer economic data. Key standouts on Monday’s calendar come from Eurozone, German, and UK construction PMIs, Eurozone retail sales, Canada Ivey PMIs, and US factory orders.

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 0.6276 – 1 March high – Medium
  • S1 0.6100– Figure – Medium
  • S2 0.6064 – 17 November low – Strong

NZDUSD – fundamental overview

At the end of the previous week, RBNZ Governor Orr noted the central bank would still target achieving maximum sustainable employment even without an express mandate to do so. The New Zealand Dollar was able to mostly get a boost from broad based risk on flow. Key standouts on Monday’s calendar come from Eurozone, German, and UK construction PMIs, Eurozone retail sales, Canada Ivey PMIs, and US factory orders.

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 3921 – 2 March 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.

Peformance chart: 30 Day Performance vs. US dollar (%)

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