Waiting on Powell testimony

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

The Pound underperformed on Monday with many pricing in a BOE that would be lagging the ECB on rates. All of this played out despite a very solid UK construction PMI print. Key standouts on Tuesday’s calendar come from German factory orders, and US Fed Chair Powell testimony.

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

Later this week, on Friday, we get the BOJ policy decision, which will be Kuroda's last. There has been chatter into the leadup, though no changes are expected to policy. Key standouts on Tuesday’s calendar come from German factory orders, and US Fed Chair Powell testimony.

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 0.6693 – 6 March low – Medium
• S2 0.6688 – 3 January low – Strong

AUDUSD – fundamental overview

Earlier today, the RBA hiked the cash rate by 25bps to 3.60%, in line consensus expectations. While the Reserve Bank of Australia pointed to further monetary policy tightening to bring CPI inflation back to target, the statement pivoted from February's indication that of “further increases in interest rates… over the months ahead" to “further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary" without giving a timeframe, a subtle shift towards less frequent rates hikes. The Australian Dollar is lagging on the day as a result of the dovish tweak to the policy communication. Aussie trade data which produced a smaller trade surplus than expected. Key standouts on Tuesday’s calendar come from German factory orders, and US Fed Chair Powell testimony.

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

The Canadian Dollar was a clear laggard on Monday, taking an extra hit on below forecast Canada Ivey PMI reads. Key standouts on Tuesday’s calendar come from German factory orders, and US Fed Chair Powell testimony.

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

New Zealand commodity prices were up the other day, while a rebound in sentiment towards China also played into overall price action that was mostly supportive of the correlated Kiwi rate. Key standouts on Tuesday’s calendar come from German factory orders, and US Fed Chair Powell testimony.

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.