Next 24 hours: Yen to lowest level against Buck in 5 months
Today’s report: State of confusion
Financial markets appear to be in a state of confusion into the latter portion of the week. We’re coming off a trading session where currency traders were looking for yield and safety in the US Dollar, all while equity traders were happy to push stocks higher.
- German data
- BOE Bailey
- strong readings
- higher stocks
- stronger oil
- producer prices
- Inflation headache
- Dealers report
Chart talk: Technical & fundamental highlights
EURUSD – technical overviewThe 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 1.0810- 17 May low – Medium
- S2 1.0788 – 3 April low – Strong
EURUSD – fundamental overviewThere is added fear the European economy is weaker than many had thought it to be in the aftermath of the latest German production data, which has continued to force downside pressure on the single currency. Key standouts on Thursday’s calendar come from an ECB Lagarde speech, Canada housing data, US reads in the form of the Philly Fed, existing home sales, and some Fed speak.
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 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 1.2421 – 17 May low– Medium
- S2 1.2344 – 10 April low – Strong
GBPUSD – fundamental overviewThe Pound held up well in the face of some broad US Dollar strength, with the currency finding some relative strength on BOE Bailey comments. The central bank governor was out Wednesday talking persistent inflation, which suggests the need for tighter policy. Key standouts on Thursday’s calendar come from an ECB Lagarde speech, Canada housing data, US reads in the form of the Philly Fed, existing home sales, and some Fed speak.
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, 2023 high – Strong
- R1 137.75 – 18 May high – Medium
- S1 136.30 – 17 May low – Medium
- S2 135.64 – 15 May low – Strong
USDJPY – fundamental overviewThe Yen has extended declines back towards yearly lows against the US Dollar despite a run of solid Japan economic data. The focus here is clearly on yield differentials and the US Dollar advantage. Key standouts on Thursday’s calendar come from an ECB Lagarde speech, Canada housing data, US reads in the form of the Philly Fed, existing home sales, and some Fed speak.
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 0.6806 – 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 overviewMost of the latest demand for the Australian Dollar has come from this latest uptick in global sentiment and rally in the US stock market. Key standouts on Thursday’s calendar come from an ECB Lagarde speech, Canada housing data, US reads in the form of the Philly Fed, existing home sales, and some Fed speak.
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 1.3600 – Figure – Medium
- R1 1.3568 – 15 May high – Medium
- S1 1.3404 – 16 May low – Medium
- S2 1.3301 – 14 April low – Strong
USDCAD – fundamental overviewRallying US equities, higher oil, and hotter than expected Canada inflation data, have all helped to drive some strength into the Canadian Dollar this week. Key standouts on Thursday’s calendar come from an ECB Lagarde speech, Canada housing data, US reads in the form of the Philly Fed, existing home sales, and some Fed speak.
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 0.6391 – 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 overviewThe New Zealand Dollar has been getting help from higher US equities, though the rally is running into some selling on Thursday after New Zealand producer prices came in softer than expected. Key standouts on Thursday’s calendar come from an ECB Lagarde speech, Canada housing data, US reads in the form of the Philly Fed, existing home sales, and some Fed speak.
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 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 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 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 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 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 (%)
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