The return of dovish Fed speak

Next 24 hours: US retail sales featured in active calendar

Today’s report: The return of dovish Fed speak

Fed Goolsbee, the only Fed speaker from Monday with a vote on the direction of monetary policy, was out sounding more dovish, saying the May hike was a close call, suggesting he’ll be supporting the case for a pause in June.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

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 1.0845- 15 May low – Medium
  • S2 1.0831 – 10 April low – Strong

EURUSD – fundamental overview

The Euro saw a nice rebound on Monday, getting help from upgraded growth and inflation outlooks out of the Eurozone. Key standouts on Tuesday’s calendar include UK employment data, Eurozone trade, employment, GDP, and ZEW reads, German ZEW, Canada inflation, US retail sales, industrial production, business inventories, and NAHB housing, Fed speak, the New Zealand GDT auction, and an ECB Lagarde appearance.

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 1.2700 – Figure – Medium
  • R1 1.2680 – 10 May/2023 high – Strong
  • S1 1.2435 – 2 May  low– Medium
  • S2 1.2344 – 10 April low – Strong

GBPUSD – fundamental overview

A recent survey has shown UK public sector wages to rise 3.3%, the most since 2012 and up from 2% in the previous quarter. This keeps pressure on the BOE to continue to tighten, which in turn has been supporting the Pound. Key standouts on Tuesday’s calendar include UK employment data, Eurozone trade, employment, GDP, and ZEW reads, German ZEW, Canada inflation, US retail sales, industrial production, business inventories, and NAHB housing, Fed speak, the New Zealand GDT auction, and an ECB Lagarde appearance.

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 136.33 – 15 May high – Medium
  • S1 133.50 – 4 May low – Medium
  • S2 133.01 – 26 April low – Strong

USDJPY – fundamental overview

The focus here has shifted back to yield differentials and a balance that has clearly swung back in favor of the US Dollar in recent sessions. The decline in Japan April producer prices to 5.8% year on year only adds to this dynamic. Key standouts on Tuesday’s calendar include UK employment data, Eurozone trade, employment, GDP, and ZEW reads, German ZEW, Canada inflation, US retail sales, industrial production, business inventories, and NAHB housing, Fed speak, the New Zealand GDT auction, and an ECB Lagarde appearance.

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 0.6806 – 14 April high – Strong
  • R2 0.6804– 8 May high – Medium
  • S1 0.6590 – 15 March low – Medium
  • S2 0.6564 – 10 March low – Strong

AUDUSD – fundamental overview

The latest news around the announcement of more stimulus out of China has definitely served the Australian Dollar well in recent sessions. The PBOC has upped liquidity while expanding policy loans from May maturities. Key standouts on Tuesday’s calendar include UK employment data, Eurozone trade, employment, GDP, and ZEW reads, German ZEW, Canada inflation, US retail sales, industrial production, business inventories, and NAHB housing, Fed speak, the New Zealand GDT auction, and an ECB Lagarde appearance.

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 1.3600 – Figure – Medium
  • R1 1.3568 – 15 May high – Medium
  • S1 1.3315 – 8 May low – Medium
  • S2 1.3301 – 14 April low – Strong

USDCAD – fundamental overview

Canada housing data has picked up and the price of oil has recovered, both developments helping to support the Canadian Dollar on Monday. Key standouts on Tuesday’s calendar include UK employment data, Eurozone trade, employment, GDP, and ZEW reads, German ZEW, Canada inflation, US retail sales, industrial production, business inventories, and NAHB housing, Fed speak, the New Zealand GDT auction, and an ECB Lagarde appearance.

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 0.6385 – 11 May high – Medium
  • S1 0.6111– 26 April low – Medium
  • S2 0.6084 – 8 March low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar recovered with the broader currency market on Monday, but did find some resistance after New Zealand performance of services contracted for the first time in 14 months. Key standouts on Tuesday’s calendar include UK employment data, Eurozone trade, employment, GDP, and ZEW reads, German ZEW, Canada inflation, US retail sales, industrial production, business inventories, and NAHB housing, Fed speak, the New Zealand GDT auction, and an ECB Lagarde appearance.

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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