Currencies taking the Fed more seriously

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.

Download complete report as PDF

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 1.1013 – 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

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.

  • R2 1.2849 – 16 June/2023 high – Strong
  • R1 1.2760 – 27 June high – Medium
  • S1 1.2591 – 29 June low – Medium
  • S2 1.2487 – 12 June low – Strong

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.

  • R2 145.00 – Psychological – Strong
  • R1 144.90 – 29 June/2023 high – Medium
  • S1 142.69 – 23 June low – Medium
  • S2 141.21 – 20 June low – Strong

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.

  • R1 0.6806 – 22 June high – Strong
  • R2 0.6721 – 27 June high – Medium
  • S1 0.6595 – 29 June low – Medium
  • S2 0.6564 – 10 March low – Strong

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.

  • R2 1.3384 – 12 June high – Strong
  • R1 1.3286 – 29 June high – Medium
  • S1 1.3117 – 27 June/2023 low – Strong
  • S2 1.3100 – Figure – Medium

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.

  • R2 0.6201 – 27 June high – Strong
  • R1 0.6166 – 28 June high – Medium
  • S1 0.6050 – 29 June low – Medium
  • S2 0.6031 – 7 June low – Medium

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.

  • R2 4500 – Psychological – Strong
  • R1 4452 – 16 June/2023 high – Medium
  • S1 4328 – 26 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 2076 Record high/2020 – Strong
  • R1 1986 – 24 May high – Medium
  • S1 1900 – Round Number – Medium
  • S2 1893 – 29 June low – 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 (%)

Suggested reading

Any opinions, news, research, analyses, prices or other information ("information") contained on this Blog, constitutes marketing communication and it has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further, the information contained within this Blog does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of, or solicitation for, a transaction in any financial instrument. LMAX Group has not verified the accuracy or basis-in-fact of any claim or statement made by any third parties as comments for every Blog entry.

LMAX Group will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. No representation or warranty is given as to the accuracy or completeness of the above information. While the produced information was obtained from sources deemed to be reliable, LMAX Group does not provide any guarantees about the reliability of such sources. Consequently any person acting on it does so entirely at his or her own risk. It is not a place to slander, use unacceptable language or to promote LMAX Group or any other FX and CFD provider and any such postings, excessive or unjust comments and attacks will not be allowed and will be removed from the site immediately.