Why we’re concerned about the bull

Today’s report: Why we're concerned about the bull

As the week comes to a close, we’re left worried about the state of financial markets. We’ve just come through a run of central bank meetings, and on net, the takeaway has been that central banks remain committed to or seriously thinking about higher rates going forward.

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Wake-up call

Chart talk: Technical & fundamental highlights

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 1.1000 – Psychological – Strong
  • R1 1.0953 - 15 June high – Medium
  • S1 1.0804 - 15 June low – Medium
  • S2 1.0635 – 31 May low – Strong

EURUSD – fundamental overview

The Euro got another jolt on Thursday after the ECB went ahead and hiked rates while also signaling more rate increases were very likely. Meanwhile, any hawkishness post Fed has all but been drained as the market shifts back to betting the Fed is done with the tightening cycle. Key standouts on Friday’s calendar come from Eurozone inflation, and US Michigan sentiment.

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 1.3000.

  • R2 1.2800 – Figure – Medium
  • R1 1.2793 – 16 June/2023 high – Medium
  • S1 1.2629 – 15 June low – Medium
  • S2 1.2487 – 12 June low – Medium

GBPUSD – fundamental overview

The Pound has continued to benefit from stronger UK jobs earlier this week, highlighted by an ongoing surge in wages. All of this points to higher peak rates in the UK, which pushes yield differentials in the Pound's favor. At the same time, the US Dollar is getting hit hard into the end of the week on bets the Fed tightening cycle has come to an end. Key standouts on Friday’s calendar come from Eurozone inflation, and US Michigan sentiment.

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 142.00 – Figure – Strong
  • R1 141.51 – 15 June/2023 high – Medium
  • S1 138.43 – 1 June low – Medium
  • S2 137.29 – 18 May low – Medium

USDJPY – fundamental overview

Yield differentials continue to be the main driver of Yen weakness on the back of the monetary policy divergence between the Fed and BOJ. Wednesday's Fed decision has opened another wave of Yen selling after the Fed dot plot leaned more hawkish than expected. Meanwhile, the ongoing surge in US equities has also been helping to prop the major pair on traditional correlations. Key standouts on Friday’s calendar come from Eurozone inflation, and US Michigan sentiment.

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 continue to be well supported in the 0.6500 area. Only a monthly close below 0.6500 would give reason for rethink.

  • R1 0.6900 – Figure – Medium
  • R2 0.6893 – 15 June high – Medium
  • S1 0.6693 – 9 June low – Medium
  • S2 0.6642 – 7 June low – Strong

AUDUSD – fundamental overview

The Australian Dollar has extended an impressive run into the end of the week, getting help from Thursday's impressive Aussie jobs report, China easing, and broad based US Dollar selling as the market bets on the end of the Fed tightening cycle. Key standouts on Friday’s calendar come from Eurozone inflation, and US Michigan sentiment.

USDCAD – technical overview

Above 1.3000 signals an end to a period of longer-term 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 1.3384 – 12 June high – Strong
  • R1 1.3355 – 15 June high – Medium
  • S1 1.3210 – 15 June/2023 low – Medium
  • S2 1.3200 – Figure– Strong

USDCAD – fundamental overview

The Canadian Dollar has run to a fresh yearly highs against the US Dollar, getting a big boost from rallying oil prices, and surging US equities. We've also seen additional demand as the market bets on the end of the Fed tightening cycle. Key standouts on Friday’s calendar come from Eurozone inflation, and US Michigan sentiment.

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.

  • R2 0.6306 – 19 May high – Strong
  • R1 0.6247 – 16 June high – Medium
  • S1 0.6031 – 7 June low – Medium
  • S2 0.5985 – 31 May/2023 low – Strong

NZDUSD – fundamental overview

While the New Zealand Dollar has managed some gains this week as bets are made on the end of the Fed tightening cycle, the currency continues to lag against its peers. Overall, concerns over slowing growth in New Zealand have resulted in an underperforming New Zealand Dollar weighed down by expectations the RBNZ will be leaning more towards accommodation, all while other central banks continue to lean more hawkish. Key standouts on Friday’s calendar come from Eurozone inflation, and US Michigan sentiment.

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 4400 will be required to take the immediate pressure off the downside. Next key support comes in at 4260.

  • R2 4500 – Psychological – Strong
  • R1 4444 – 15 June/2023 high – Medium
  • S1 4341 – 13 June low – Medium
  • S2 4260 – 8 June 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 despite market expectations that would argue otherwise.

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 1925 – 15 June low – Medium
  • S2 1900 – Round Number – Strong

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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