Powell rattles investor confidence

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 1.2066– 7 March high – Strong
• R1 1.1915 – 17 February low – Medium
• S1 1.1800 – Round number – Medium
• S2 1.1739 – 13 September 2022 high – Strong

GBPUSD – fundamental overview

The Pound took a hard hit on Tuesday after BOE Mann said the Pound could weaken further, while noting the hawkishness at the Fed and ECB, implying the BOE wouldn't be able to keep pace. Of course, the hawkish testimony from the Fed Chair only reaffirmed this assertion and added further to downside pressure. Key standouts on Wednesday’s calendar include German industrial production and retail sales, Eurozone employment and GDP, an ECB Lagarde speech, US ADP employment, Canada trade, the Bank of Canada policy decision, US JOLTs job openings, more Fed Chair Powell testimony, and the Fed Beige Book late in the day.

USDJPY – technical overview

The major pair has seen a nice recovery following the massive correction out from multi-year highs. Setbacks have finally been well supported ahead of 125.00 in the 127s thus far. At this stage, it looks like the market could be wanting to resume the bigger picture uptrend and head back towards a retest of that multi-year high from October 2022 up at 151.95. Look for any weakness to continue to be well supported in favor of higher lows along the way.

• R2 138.18 – 15 December high – Strong
• R1 138.00 – Figure – Medium
• S1 136.99 – 8 March low – Medium
• S2 135.26 – 1 March low – Strong

USDJPY – fundamental overview

Yield differentials widened further in the US Dollar's favor, this after Japanese local wage data slumped and the Fed Chair came out with his latest hawkish testimony. The BOJ will meet on Friday, though no change is expected to policy in what will be Kuroda's final meeting. Key standouts on Wednesday’s calendar include German industrial production and retail sales, Eurozone employment and GDP, an ECB Lagarde speech, US ADP employment, Canada trade, the Bank of Canada policy decision, US JOLTs job openings, more Fed Chair Powell testimony, and the Fed Beige Book late in the day.

AUDUSD – technical overview

There are signs of the potential formation of a longer-term base following the late 2022 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 0.6784 – 1 March high – Strong
• R2 0.6695 – 1 March low – Medium
• S1 0.6568– 8 March low – Medium
• S2 0.6500 – Psychological – Strong

AUDUSD – fundamental overview

Tuesday was a day of contrasting developments which ended up crushing the Australian Dollar. On the one side, the RBA was out with a dovish tweak to its communication after hiking rates by 25 basis points as expected. The RBA dropped the reference to the need for 'further rate increases,' replacing it with a less aggressive need for 'further tightening.' And on the other side, Fed Chair Powell did not let down with respect to Fed hawkishness in his testimony before Congress. Key standouts on Wednesday’s calendar include German industrial production and retail sales, Eurozone employment and GDP, an ECB Lagarde speech, US ADP employment, Canada trade, the Bank of Canada policy decision, US JOLTs job openings, more Fed Chair Powell testimony, and the Fed Beige Book late in the day.

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 1.3836– 30 September 2022 high – Strong
• R1 1.3800 – Figure – Medium
• S1 1.3666 – 24 February high – Medium
• S2 1.3555 – 3 March low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been struggling of late. This week already we've seen softer Canada Ivey PMI data and a dip in the price of oil. Meanwhile, Fed policy continues to lean to the hawkish side, as evidenced by the Fed Chair's Tuesday testimony. Attention will now shift to today's Bank of Canada decision where the central bank is expected to pause. Key standouts on Wednesday’s calendar include German industrial production and retail sales, Eurozone employment and GDP, an ECB Lagarde speech, US ADP employment, Canada trade, the already mentioned Bank of Canada policy decision, US JOLTs job openings, more Fed Chair Powell testimony, and the Fed Beige Book late in the day.

NZDUSD – technical overview

Overall pressure remains on the downside with the market once again stalling out on a run up into the 0.6500 area. Ultimately, a break back above 0.6577 would be required to take the immediate pressure off the downside.

• R2 0.6276 – 1 March high – Strong
• R1 0.6222 – 7 March high – Medium
• S1 0.6084– 8 March low – Medium
• S2 0.6064 – 17 November low – Strong

NZDUSD – fundamental overview

No surprise to see the New Zealand Dollar struggling on Tuesday in the aftermath of hawkish Fed Chair testimony and a dump in equities and commodities. Key standouts on Wednesday’s calendar include German industrial production and retail sales, Eurozone employment and GDP, an ECB Lagarde speech, US ADP employment, Canada trade, the Bank of Canada policy decision, US JOLTs job openings, more Fed Chair Powell testimony, and the Fed Beige Book late in the day.

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 4198 – 2 February/2023 high – Strong
• R1 4080 – 6 February 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 1960 – 2 February/2023 high – Strong
• R1 1859 – 6 March high – Medium
• S1 1774 – 15 December 2022 low – Medium
• S2 1719 – 23 November 2022 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.