Today’s report: Trying to close out week on positive note
As we come into Friday, things are back to looking up. While there are still concerns about the banking sector, a lot of the worst of these concerns have been brushed aside, leaving room for the market to get back to trying to feel good.
- rate hike
- quiet calendar
- Fed repricing
- Aussie employment
- producer prices
- soft GDP
- Inflation headache
- Dealers report
Chart talk: Technical & fundamental highlights
EURUSD – technical overviewThe 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 1.0300 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 1.0760 - 15 March high – Medium
- S1 1.0516 - 15 March low – Medium
- S2 1.0482 – 6 January low – Strong
EURUSD – fundamental overviewThe ECB went ahead and delivered a 50 basis point rate hike, leaving the market to price another 25 basis points of hikes by July. Clearly, the central bank wasn't overly concerned with the recent turmoil around the banks, though at the same time, the mild gains in the Euro post decision did suggest the market was more skeptical. Key standouts on Friday’s calendar come from Eurozone inflation, Canada producer prices, US industrial production, and Michigan sentiment.
EURUSD - Technical charts in detail
GBPUSD – technical overviewSigns 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 – Strong
- R1 1.2204 – 14 March high– Medium
- S1 1.2010 – 15 March low– Medium
- S2 1.1803 – 8 March low – Strong
GBPUSD – fundamental overviewThere was no important economic data out of the UK on Thursday, leaving the Pound to trade higher on broad based US Dollar outflows and risk on action. Key standouts on Friday’s calendar come from Eurozone inflation, Canada producer prices, US industrial production, and Michigan sentiment.
USDJPY – technical overviewThe 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 137.92 – 8 March high – Strong
- R1 135.37 – 6 March low – Medium
- S1 131.72 – 16 March low – Medium
- S2 129.81 – 10 February low – Strong
USDJPY – fundamental overviewA good chunk of this week's mild flow back into the Yen comes from a repricing of Fed expectations in light of the US bank woes. Key standouts on Friday’s calendar come from Eurozone inflation, Canada producer prices, US industrial production, and Michigan sentiment.
AUDUSD – technical overviewThere 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 0.6717 – 13 March low – Medium
- S1 0.6564– 9 March low – Medium
- S2 0.6500 – Psychological – Strong
AUDUSD – fundamental overviewThe Australian Dollar has recovered on Thursday getting help from Australian employment growth that easily surpassed expectations in February, sending the jobless rate lower and underscoring the economy's resilience. Key standouts on Friday’s calendar come from Eurozone inflation, Canada producer prices, US industrial production, and Michigan sentiment.
USDCAD – technical overviewA 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 1.3900– Figure – Medium
- R1 1.3863 – 10 March high – Medium
- S1 1.3652 – 14 March low – Medium
- S2 1.3555 – 3 March low – Strong
USDCAD – fundamental overviewThe Canadian Dollar has tried to find some momentum into the end of the week on decent Canada housing data and a possible bottom in the price of oil. Key standouts on Friday’s calendar come from Eurozone inflation, Canada producer prices, US industrial production, and Michigan sentiment.
NZDUSD – technical overviewOverall 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 0.6265 – 13 March high – Medium
- S1 0.6084– 8 March low – Medium
- S2 0.6064 – 17 November low – Strong
NZDUSD – fundamental overviewThe New Zealand Dollar underperformed on Thursday after the New Zealand economy contracted by more than expected in the final three months of 2022, putting it on the brink of recession and prompting investors to lower bets on the pace of further interest-rate hikes. Key standouts on Friday’s calendar come from Eurozone inflation, Canada producer prices, US industrial production, and Michigan sentiment.
US SPX 500 – technical overviewLonger-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 3763.
- R2 4198 – 2 February/2023 high – Strong
- R1 4080 – 6 February high – Medium
- S1 3806 – 13 March low – Medium
- S2 3763 – 22 December low – Strong
US SPX 500 – fundamental overviewWe'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 overviewThe 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 1938 – 15 March high – Medium
- S1 1804 – 28 February low – Medium
- S2 1719 – 23 November 2022 low – Strong
GOLD (SPOT) – fundamental overviewThe 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 (%)
- Investors Need to Ignore the Doomsayers Driven by Turmoil, N. Kaissar, Bloomberg (March 15, 2023)
- The Moral Hazards of Banking Keep Increasing, J. Rekenthaler, Morningstar (March 15, 2023)