US Dollar broadly lower despite risk off

Today’s report: US Dollar broadly lower despite risk off

If we exclude Thursday price action in the Euro, there was a clear trend of US Dollar selling. This trend has been making sense when considering a Fed that hinted at the possibility of being open to a pause on rate hikes and the market pricing in rate cuts, and when considering ongoing banking woes in the US.

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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

The Euro ran into a round of profit taking in the aftermath of the ECB decision. As expected, the ECB went ahead and hiked rates 25 basis points, while ECB President Lagarde stressed there would be no pause in the tightening cycle. It seems because this is what the market was expecting, the selling was all about selling of the fact. The rate market is pricing two more ECB hikes by year end. Key standouts on Friday’s calendar include Eurozone retail sales, Canada employment, and the US employment report.

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 1.2599 – 4 May/2023 high – Medium
  • S1 1.2344 – 10 April  low– Medium
  • S2 1.2275 – 3 April low – Strong

GBPUSD – fundamental overview

The Pound traded to its highest levels against the US Dollar since last May, with the currency getting a boost from upbeat data in the form of mortgage approvals and PMIs. The UK rate market is now pricing 3 more BOE hikes by the end of September. Key standouts on Friday’s calendar include Eurozone retail sales, Canada employment, and the US employment report.

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 136.62 – 3 May high – Strong
  • R1 134.88 – 4 May high – Medium
  • S1 133.50 – 4 May low – Medium
  • S2 133.01 – 26 April low – Strong

USDJPY – fundamental overview

Weakness in energy prices and risk off flow have really factored into this latest run of impressive Yen demand. Key standouts on Friday’s calendar include Eurozone retail sales, Canada employment, and the US employment report.

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 having a harder time extending its run following an RBA rate hike and solid Aussie retail sales earlier this week. It seems all of the risk off flow in global markets has been offsetting. Key standouts on Friday’s calendar include Eurozone retail sales, Canada employment, and the US employment report.

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 1.3519 – 4 May low – Medium
  • S2 1.3448 – 20 April low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been finding some renewed demand after the price of oil rebounded post an unnerving decline this week. Key standouts on Friday’s calendar include Eurozone retail sales, Canada employment, and the US employment report.

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 this week 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 Friday’s calendar include Eurozone retail sales, Canada employment, and the US employment report.

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 2100, above which opens the next extension towards 2,500.

  • R2 2100 – Round Number – Strong
  • R1 2076 – Record high/2020 – 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.

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

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