Next 24 hours: US Dollar sold on dovish leaning Fed comments
Today’s report: Back to more pressing themes in June
The US can officially stop worrying about risk of a default after the House passed debt limit legislation that will impose restraints on government spending through the 2024 election.
Wake-up call
- CPI misses
- policy divergence
- lower stocks
- local data
- GDP beat
- US yields
- Inflation headache
- Dealers report
Peformance chart: 30 Day Performance vs. US dollar (%)
Suggested reading
- A Higher Tech High? Yes, But Keep Your AIs Open, J. Authers, Bloomberg (June 1, 2023)
- It's Possible Actual Fundamentals Are Moving the Market, J. Calhoun, Alhambra (May 29, 2023)
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.EURUSD – fundamental overview
The Euro broke to fresh multi-session lows on Wednesday after taking in CPI misses and sell-off in the European banks. The peak implied Euro policy rate has now faded to 3.63% from a May high of 3.74% last week. Key standouts on Thursday’s calendar come from PMI reads out of Germany, the Eurozone and UK, BOE consumer credit, Eurozone inflation and unemployment, US initial jobless claims, ADP employment, ISM manufacturing, and construction spending.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 1.2680.GBPUSD – fundamental overview
The Pound has enjoyed a round of relative outperformance in recent sessions, getting a boost from last week's solid UK retail sales data and an additional boost from yield differentials that show a clear divergence in monetary policy expectations between the BOE and ECB. Key standouts on Thursday’s calendar come from PMI reads out of Germany, the Eurozone and UK, BOE consumer credit, Eurozone inflation and unemployment, US initial jobless claims, ADP employment, ISM manufacturing, and construction spending.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.USDJPY – fundamental overview
Though the Yen does remain under pressure overall, sitting just off yearly lows against the Buck, we have seen some demand in recent sessions. We believe this comes from the combination of a downturn in recent Japan unemployment data and a sell-off in US equities. Key standouts on Thursday’s calendar come from PMI reads out of Germany, the Eurozone and UK, BOE consumer credit, Eurozone inflation and unemployment, US initial jobless claims, ADP employment, ISM manufacturing, and construction spending.AUDUSD – technical overview
There are signs of the potential formation of a longer-term base following the late 2022 surge back above 0.6500. Next key resistance comes in at 0.7284. Setbacks should be well supported into the 0.6500 area. Only a monthly close below 0.6500 would give reason for rethink.AUDUSD – fundamental overview
The Australian Dollar has held up better than most in recent sessions on account of solid Aussie credit, housing and construction data. Key standouts on Thursday’s calendar come from PMI reads out of Germany, the Eurozone and UK, BOE consumer credit, Eurozone inflation and unemployment, US initial jobless claims, ADP employment, ISM manufacturing, and construction spending.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.USDCAD – fundamental overview
A quick recovery in the price of oil and better than expected Canada GDP data have helped to inspire renewed demand into the Canadian Dollar. Key standouts on Thursday’s calendar come from PMI reads out of Germany, the Eurozone and UK, BOE consumer credit, Eurozone inflation and unemployment, US initial jobless claims, ADP employment, ISM manufacturing, and construction spending.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. A monthly close below 0.6000 would intensify bearish price action.NZDUSD – fundamental overview
The New Zealand Dollar can't get away from the recent shift in RBNZ policy that slanted back to the dovish side, all while US yields continue to rise. Throw in a downturn in sentiment and softer China PMI reads and the result is a Kiwi rate sliding to fresh yearly lows. Key standouts on Thursday’s calendar come from PMI reads out of Germany, the Eurozone and UK, BOE consumer credit, Eurozone inflation and unemployment, US initial jobless claims, ADP employment, ISM manufacturing, and construction spending.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 4049.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.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.