Next 24 hours: Hawkish talk fuels latest Euro run
Today’s report: Equities extend recent run of declines
We’re coming out of an exceptionally light session of trade on Monday which produced a mild round of volatility. Currencies actually didn’t really move all that much, while US equities extended their recent run south.
Wake-up call
- weak IFO
- Pound longs
- Verbal intervention
- RMB movement
- inflation data
- cross-related demand
- Inflation headache
- Dealers report
Peformance chart: 30 Day Performance vs. US dollar (%)
Suggested reading
- Wall Street Gap on Market Outlook Grows Into a Canyon, J. Levin, Bloomberg (June 26, 2023)
- Why Are Free Thinkers So Comfortable With Fed Intervention?, J. Tamny, Forbes (June 25, 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 has steadied after a two day decline, with price action modestly positive overall, despite the latest weak IFO report. Key standouts on Tuesday’s calendar come from some ECB speak, Canada inflation, US durable goods, Case Shiller, consumer confidence, new home sales, and Richmond Fed manufacturing.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.GBPUSD – fundamental overview
The Pound has shown mild underperformance in recent sessions, taking a hit from the latest discouraging UKCBI numbers. UK June total sales slid to -12 from -10 previous. Long GBP positions are looking stretched, at the largest number since 2018, which could be warning of some profit taking ahead. Key standouts on Tuesday’s calendar come from some ECB speak, Canada inflation, US durable goods, Case Shiller, consumer confidence, new home sales, and Richmond Fed manufacturing.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
It seems the latest verbal intervention efforts from Japanese officials around excessive movement in the Yen being unwelcome, are having some impact with Yen declines stalling out a little in recent sessions. Key standouts on Tuesday’s calendar come from some ECB speak, Canada inflation, US durable goods, Case Shiller, consumer confidence, new home sales, and Richmond Fed manufacturing.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.AUDUSD – fundamental overview
The Australian Dollar has been spooked by fresh lows in the RMB. Aussie stocks have also suffered, trading to their lowest levels since late March. Key standouts on Tuesday’s calendar come from some ECB speak, Canada inflation, US durable goods, Case Shiller, consumer confidence, new home sales, and Richmond Fed manufacturing.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.USDCAD – fundamental overview
The Canadian Dollar has held up better than its peers of late, still holding at yearly high levels against the Buck. A recent run of data and more hawkish expectations for the Bank of Canada have been fueling a lot of this flow. Now the market will get set for Tuesday's big event risk in the form of Canada inflation data. Other key standouts on Tuesday’s calendar come from some ECB speak, US durable goods, Case Shiller, consumer confidence, new home sales, and Richmond Fed manufacturing.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 has outperformed relative to most currencies in the early portion of the week, though it's difficult to reconcile the price action other than cross related demand against the Australian Dollar as Aussie falls victim to China related weakness. Key standouts on Tuesday’s calendar come from some ECB speak, Canada inflation, US durable goods, Case Shiller, consumer confidence, new home sales, and Richmond Fed manufacturing.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.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.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.