Fed Minutes rattle investor confidence

Next 24 hours: Old habits die hard

Today’s report: Fed Minutes rattle investor confidence

In our special report preview of the FOMC Minutes, we warned the Fed could let the market down and come out with a more hawkish leaning communication. And indeed, this is how it played out, with inflation risk still enough of a concern to keep the possibility for additional hikes on the table.

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Wake-up call

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. Any additional setbacks should be well supported ahead of 1.0500 in favor of 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 2023 high at 1.1276.

  • R2 1.1150 – 27 July high – Strong
  • R1 1.1066 - 10 August high – Medium
  • S1 1.0871 - 16 August low – Medium
  • S2 1.0834 – 6 July low – Strong

EURUSD – fundamental overview

The Euro was once again hit on broad based US Dollar demand and risk off flow, but did try its best to hold up into weakness. Perhaps a decent round of economic data out of the Eurozone on Wednesday helped to offset setbacks from Dollar demand. Eurozone GDP came in as expected, while industrial production exceeded consensus estimates. Key standouts on Thursday’s calendar come from Eurozone trade, Canada foreign securities purchases, the US Philly Fed, and initial jobless claims.

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 1.2500. Next key resistance comes in at 1.3143.

  • R2 1.2996 – 27 July high – Strong
  • R1 1.2818 – 10 August high – Medium
  • S1 1.2616 – 14 August low – Medium
  • S2 1.2591 – 29 June low – Strong

GBPUSD – fundamental overview

Tuesday's strong UK earnings were followed up on Wednesday with above forecast UK inflation data. This helped to drive GBP outperformance with UK peak rates jumping as a consequence. Key standouts on Thursday’s calendar come from Eurozone trade, Canada foreign securities purchases, the US Philly Fed, and initial jobless claims.

USDJPY – technical overview

At this stage, it looks like the market is 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 on dips.

  • R2 147.00 – Figure – Medium
  • R1 146.41– 16 August/2023 high – Medium
  • S1 145.10 – 15 August low – Medium
  • S2 144.65 – 14 August low – Medium

USDJPY – fundamental overview

Overall, the market doesn't believe the BOJ will be shifting to tighter policy anytime soon. As such, yield differentials continue to dominate flow, with the US Dollar running at fresh yearly highs against the Yen. Key standouts on Thursday’s calendar come from Eurozone trade, Canada foreign securities purchases, the US Philly Fed, and initial jobless claims.

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 0.6400-6500 area. Only a monthly close below 0.6400 would give reason for rethink.

  • R1 0.6740– 31 July high – Strong
  • R2 0.6617 – 10 August high – Medium
  • S1 0.6415 – 16 August/2023 low – Strong
  • S2 0.6400 – Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar has extended its run of fresh 2023 lows on the back of ongoing fears over the outlook for China, a more dovish leaning RBA Minutes earlier this week, a downtick in the Aussie wage price index, and more hawkish leaning FOMC Minutes. Key standouts on Thursday’s calendar come from Eurozone trade, Canada foreign securities purchases, the US Philly Fed, and initial jobless claims.

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 1.3600 – Figure – Medium
  • R1 1.3545 – 16 August high – Medium
  • S1 1.3373 – 10 August low – Medium
  • S2 1.3319 – 4 August low – Medium

USDCAD – fundamental overview

A worsening global macro condition, slumping oil prices, and softer Canada economic data have all factored into the latest run of Canadian Dollar weakness. On Wednesday, Canada housing starts and wholesale sales came in soft. Key standouts on Thursday’s calendar come from Eurozone trade, Canada foreign securities purchases, the US Philly Fed, and initial jobless claims.

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 0.6133 – 4 August high – Strong
  • R1 0.6025 – 11 August high – Medium
  • S1 0.5927 – 16 August/2023 low – Medium
  • S2 0.5900 – Figure – Medium

NZDUSD – fundamental overview

New Zealand Dollar declines could have been much worse on Wednesday if not for a more hawkish leaning central bank decision in which the RBNZ left rates on hold but would not rule out the possibility for additional rate hikes. Key standouts on Wednesday’s calendar come from the RBNZ policy decision, UK inflation, Eurozone industrial production, employment, and GDP, Canada housing starts and wholesale sales, US building permits, housing starts, industrial production, manufacturing production, and the Fed Minutes late in the day.

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 4600 will be required to take the immediate pressure off the downside. Next key support comes in at 4376.

  • R2 4608 – 27 July/2023 high – Strong
  • R1 4541 – 4 August high – Medium
  • S1 4400 – Round Number – Medium
  • S2 4376 – 10 July 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. 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. Next major resistance comes in at 2100, above which opens the next extension towards 2500.

  • R2 1988 – 20 July high – Strong
  • R1 1947 – 4 August high – Medium
  • S1 1886 – 15 March low – Medium
  • S2 1871 – 10 March high – 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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