Market sentiment heads south

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Today’s report: Market sentiment heads south

Things are looking shaky out there as we come into Wednesday. Turmoil in the banking sector and stress around the US debt ceiling deadline have intensified investor concerns and the resulting price action has seen both stocks and the US Dollar trading lower.

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Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

The Euro remains well supported on dips following a run to the topside through 1.1000 earlier this year. Any additional setbacks should be well supported ahead of 1.0500 in favor of the formation of the next major higher low and a bullish continuation. Ultimately, only a monthly close back below 1.0500 would give reason for concern. Next key resistance comes in the form of the March 2022 high at 1.1185.

  • R2 1.1185– Monthly high, March 2022 – Strong
  • R1 1.1096 - 27 April, 2023 high – Medium
  • S1 1.0908- 12 April low – Medium
  • S2 1.0831 – 10 April low – Strong

EURUSD – fundamental overview

German retail sales data missed badly the other day, which factored into some initial downside price action. However, the Euro was able to recover on the back of hot Eurozone inflation data and softer US jobs reads. Key standouts on today’s calendar come from Eurozone unemployment, US ADP employment, US ISM reads, and the Fed decision late in the day.

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 November 2022 monthly close back above 1.2000 strengthens this prospect. Any setbacks should now be well supported ahead of 1.2000. Next key resistance comes in at 1.2667.

  • R2 1.2667 – Monthly high, May 2022 – Strong
  • R1 1.2547 – 14 April/2023 high – Medium
  • S1 1.2344 – 10 April  low– Medium
  • S2 1.2275 – 3 April low – Strong

GBPUSD – fundamental overview

UK Nationwide house prices improved along with UK manufacturing PMIs, though this wasn't enough to help the Pound on Tuesday. Key standouts on today’s calendar come from Eurozone unemployment, US ADP employment, US ISM reads, and the Fed decision 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 137.92– 8 March/2023 high – Strong
  • S1 135.14 – 19 April high – Medium
  • S2 135.00 – Figure – Medium

USDJPY – fundamental overview

While we haven't seen much of the older traditional inverse correlation, this wasn't the case on Tuesday. The Yen was well in demand on the back of a massive liquidation in US equities. Key standouts on today’s calendar come from Eurozone unemployment, US ADP employment, US ISM reads, and the Fed decision 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 0.6772 – 20 April high – Strong
  • R2 0.6718– 2 May high – Medium
  • S1 0.6590 – 15 March low – Medium
  • S2 0.6564 – 10 March low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been a standout outperformer in recent sessions. The currency has been finding demand in the aftermath of a surprise 25 basis point rate hike from the RBA and today's better than expected Aussie retail sales print. All of this comes despite a wave of risk off flow in global markets. Key standouts on today’s calendar come from Eurozone unemployment, US ADP employment, US ISM reads, and the Fed decision 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 1.3805 – 24 March high – Strong
  • R1 1.3700 – Figure– Medium
  • S1 1.3500 – Psychological – Medium
  • S2 1.3448 – 20 April low – Strong

USDCAD – fundamental overview

The Canadian Dollar was hammered in Tuesday trade on the back of a massive pullback in the price of oil and concurrent downturn in US equities. Key standouts on today’s calendar come from Eurozone unemployment, US ADP employment, US ISM reads, and the Fed decision 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 0.6391 – 14 February high – Strong
  • R1 0.6315 – 13 April high – Medium
  • S1 0.6111– 26 April low – Medium
  • S2 0.6084 – 8 March low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been getting an added boost on this Wednesday after employment and wage data came in well above forecast. This shifts RBNZ bets back to the hawkish side and has moved yield differentials back in favor of the New Zealand Dollar. Key standouts on today’s calendar come from Eurozone unemployment, US ADP employment, US ISM reads, and the Fed decision 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 3806.

  • R2 4198 – 2 February/2023 high – Strong
  • R1 4193 – 1 May high – Medium
  • S1 3921 –  2 March low – Medium
  • S2 3806 – 13 March 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 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 the record high from 2020 at 2076, above which opens the next extension towards 2,500.

  • R2 2076 – Record high, 2020 – Very Strong
  • R1 2071 – 2022 high – Strong
  • S1 1969 – 19 April low – Medium
  • S2 1934 – 22 March low – Medium

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. [audio mp3="https://www.lmax.com/blog/wp-content/uploads/sites/4/2023/05/3maylmaxaudio.mp3"][/audio]

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

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