Today’s report: Currencies taking the Fed more seriously
We got another solid round of economic data out of the US on Thursday, including strong jobs data and upbeat GDP reads, along with a surge in personal consumption to a two-year high.
Wake-up call
- inflation metrics
- UK lending
- policy divergence
- retail sales
- next meeting
- improved survey
- Inflation headache
- Dealers report
Peformance chart: 30 Day Performance vs. US dollar (%)
Suggested reading
- From Russia, With a Really Big Wave Every 30 Years, J. Authers, Bloomberg (June 29, 2023)
- Can society turn down damaging levels of light pollution?, C. Cookson, Financial Times (June 28, 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
Eurozone inflation metrics continued to show signs of easing, something that has factored into some of the latest round of declines in the Euro. We've also seen renewed broad based US Dollar demand on strong US economic data that supports the Fed's higher for longer communication. Key standouts on Friday’s calendar come from German retail sales, UK GDP, German employment, Eurozone employment, Eurozone inflation, Canada GDP, US core PCE, Chicago PMIs, Michigan sentiment, and the Bank of Canada business outlook survey.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
Upbeat UK lending data allowed the Pound to outperform relative to some of its peers on Thursday, though ultimately, the Pound was weaker against the Dollar as fresh USD demand worked back in on solid US economic data supporting the Fed's higher for longer communication on rates. Key standouts on Friday’s calendar come from German retail sales, UK GDP, German employment, Eurozone employment, Eurozone inflation, Canada GDP, US core PCE, Chicago PMIs, Michigan sentiment, and the Bank of Canada business outlook survey.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's been more of the same for the ailing Yen as we run into the latter portion of the week. The currency continues to extend declines to fresh yearly lows against the US Dollar on a very clear monetary policy divergence theme. Key standouts on Friday’s calendar come from German retail sales, UK GDP, German employment, Eurozone employment, Eurozone inflation, Canada GDP, US core PCE, Chicago PMIs, Michigan sentiment, and the Bank of Canada business outlook survey.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 held up well on Thursday, getting a boost from solid Aussie retail sales and continued demand for US equities. Key standouts on Friday’s calendar come from German retail sales, UK GDP, German employment, Eurozone employment, Eurozone inflation, Canada GDP, US core PCE, Chicago PMIs, Michigan sentiment, and the Bank of Canada business outlook survey.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 been forced to rethink its bullish run this week after Canada CPI came in a good deal softer than expected earlier in the week. Odds for a July hike have now pulled back to about 50%. Meanwhile, strong data out of the US has reinforced the Fed's hawkish communication, which has also factored into Canadian Dollar selling. Key standouts on Friday’s calendar come from German retail sales, UK GDP, German employment, Eurozone employment, Eurozone inflation, Canada GDP, US core PCE, Chicago PMIs, Michigan sentiment, and the Bank of Canada business outlook survey.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 steadied into the end of the week on the back of improved New Zealand business activity and business outlook surveys, along with ongoing demand for US equities. Key standouts on Friday’s calendar come from German retail sales, UK GDP, German employment, Eurozone employment, Eurozone inflation, Canada GDP, US core PCE, Chicago PMIs, Michigan sentiment, and the Bank of Canada business outlook survey.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.