Sentiment improves on solid US economic data

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Today’s report: Sentiment improves on solid US economic data

Tuesday’s run of US economic data was impressive across the board and this was enough to fuel the resulting price action of higher stocks and a lower US Dollar. The key standouts were US durable goods and consumer confidence reports, while sentiment was also boosted on news out of China of more practical and effective support for the economy.

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Chart talk: Technical & fundamental highlights

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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 1.1013 – 22 June high – Strong
  • R1 1.0977 - 27 June high – Medium
  • S1 1.0844 - 23 June low – Medium
  • S2 1.0779 – 2 June high – Strong

EURUSD – fundamental overview

The Euro has enjoyed another nice run back to the topside on the back of a wave of hawkish ECB comments from the likes of Lagarde, Kazaks, and  Wunsch. Meanwhile, the bund curve collapse is still going, reflecting the deepest inversion since 1992. Germany is now likely to see a third consecutive quarter of negative growth. Key standouts on Wednesday’s calendar come from German consumer confidence reads, speeches from ECB Lane, Guindos, and Enria, a BOE Pill speech, US trade data, and speeches from Fed Chair Powell and ECB President Lagarde.

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 1.2849 – 16 June/2023 high – Strong
  • R1 1.2800 – Figure – Medium
  • S1 1.2685 – 23 June low – Medium
  • S2 1.2629 – 15 June low – Medium

GBPUSD – fundamental overview

BOE rate hikes to greater than 6% have now been fully priced in, leaving the Pound potentially at risk for some profit taking in the sessions ahead. But overall, yield differentials continue to point towards more GBP strength into dips. Key standouts on Wednesday’s calendar come from German consumer confidence reads, speeches from ECB Lane, Guindos, and Enria, a BOE Pill speech, US trade data, and speeches from Fed Chair Powell and ECB President Lagarde.

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 145.00 – Psychological – Strong
  • R1 144.18 – 27 June/2023 high – Medium
  • S1 141.21 – 20 June low – Medium
  • S2 139.85 – 16 June low – Strong

USDJPY – fundamental overview

The BOJ continues to commit to easy policy, all while the other major central banks push in the other direction, and the net result is a Yen extending its run of 2023 lows against the Buck. BOJ Ueda was on the wires saying the central bank will 'patiently' continue monetary easing. Long JGB yields have fallen to their lowest since March. Key standouts on Wednesday’s calendar come from German consumer confidence reads, speeches from ECB Lane, Guindos, and Enria, a BOE Pill speech, US trade data, and speeches from Fed Chair Powell and ECB President Lagarde.

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 – 16 June high – Strong
  • R2 0.6806 – 22 June high – Medium
  • S1 0.6641 – 7 June low – Medium
  • S2 0.6564 – 10 March low – Strong

AUDUSD – fundamental overview

The Australian Dollar continues to suffer from China fallout and weakness in the commodities markets. Key standouts on Wednesday’s calendar come from German consumer confidence reads, speeches from ECB Lane, Guindos, and Enria, a BOE Pill speech, US trade data, and speeches from Fed Chair Powell and ECB President Lagarde.

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 1.3270 – 20 June high – Medium
  • S1 1.3117 – 27 June/2023 low – Strong
  • S2 1.3100 – Figure – Medium

USDCAD – fundamental overview

The Canadian Dollar was forced to rethink its bullish run after Canada CPI came in a good deal softer than expected on Tuesday. Odds for a July hike have now pulled back to just under 60%. Key standouts on Wednesday’s calendar come from German consumer confidence reads, speeches from ECB Lane, Guindos, and Enria, a BOE Pill speech, US trade data, and speeches from Fed Chair Powell and ECB President Lagarde.

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 0.6248 – 16 June high – Medium
  • S1 0.6117 – 23 June low – Medium
  • S2 0.6082 – 9 June low – Medium

NZDUSD – fundamental overview

The New Zealand Dollar was able to rally on Tuesday, getting help from a recovery in US equities. At the same time, the run higher was capped on sliding commodities prices. Key standouts on Wednesday’s calendar come from German consumer confidence reads, speeches from ECB Lane, Guindos, and Enria, a BOE Pill speech, US trade data, and speeches from Fed Chair Powell and ECB President Lagarde.

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 4452 – 16 June/2023 high – Medium
  • S1 4300 – Round Number – 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 2076 – Record high/2020 – Strong
  • R1 1986 – 24 May high – Medium
  • S1 1910 – 23 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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