Today’s report: Are we headed for a hard landing?
Investors have been a lot more worried this week about the prospect for a hard landing. We’ve seen a combination of stronger US economic data and softer economic data outside the US, which has made for a situation where the US Dollar has been well bid, while US equities have been under pressure.
- hike odds
- peak rates
- China exports
- surplus narrows
- Canada employment
- manufacturing data
- Messy combo
- Dealers report
Chart talk: Technical & fundamental highlights
EURUSD – technical overviewThe 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 1.0946 – 30 August high – Strong
- R1 1.0809 - 4 September high – Medium
- S1 1.0686 - 7 September low – Medium
- S2 1.0635 – 31 May low – Strong
EURUSD – fundamental overviewEconomic data out of the Zone this week was not encouraging, with the Euro taking a hit on the back of the disappointing results. On Thursday, Eurozone GDP and German industrial production were the latest round of let downs. Market odds for an ECB hike next week stand between 35% and 40%. Key standouts on Friday’s calendar come from German inflation, Canada employment, US wholesale inventories, and US consumer credit.
EURUSD - Technical charts in detail
GBPUSD – technical overviewSigns 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 1.2747 – 30 August high – Strong
- R1 1.2643 – 4 September high – Medium
- S1 1.2446 – 7 September low – Medium
- S2 1.2400 – Figure – Medium
GBPUSD – fundamental overviewThis week's dovish BOE comments and soft UK housing data have been behind a lot of the Pound selling. Implied peak rates in the UK have dropped almost 90 basis points from a high of 6.5% in early July. Key standouts on Friday’s calendar come from German inflation, Canada employment, US wholesale inventories, and US consumer credit.
USDJPY – technical overviewAt 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 148.00 – Figure – Medium
- R1 147.88– 7 September/2023 high – Medium
- S1 146.02 – 4 September low – Medium
- S2 144.44 – 1 September low – Strong
USDJPY – fundamental overviewAn unwinding of FX carry trades has helped to prop up a beaten down Yen into the end of the week. China exports to Japan at -20% are however not a good sign for either country. Key standouts on Friday’s calendar come from German inflation, Canada employment, US wholesale inventories, and US consumer credit.
AUDUSD – technical overviewThere are signs of the potential formation of a longer-term base with the market trading down into a meaningful longer-term support zone. Only a monthly close below 0.6400 would give reason for rethink. Back above 0.6523 will take the immediate pressure off the downside and strengthen case for a bottom.
- R1 0.6617– 10 August high – Strong
- R2 0.6523 – 30 August high – Medium
- S1 0.6357 – 6 September/2023 low – Strong
- S2 0.6300 – Figure – Medium
AUDUSD – fundamental overviewThe Australian trade surplus narrowed, while Chinese markets continued to struggle. All of this continued to keep the downside pressure on Aussie into the end of the week. Key standouts on Friday’s calendar come from German inflation, Canada employment, US wholesale inventories, and US consumer credit.
USDCAD – technical overviewAbove 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 1.3700 – Figure – Strong
- R1 1.3695 – 7 September high – Medium
- S1 1.3575 – 4 September low – Medium
- S2 1.3489 – 1 September low – Strong
USDCAD – fundamental overviewThe Canadian Dollar has been hit hard this week after the Bank of Canada held on rates and economic data came out on the softer side. Most recently, Canada building permits slumped. Oil selling off in recent sessions also hasn't helped the Canadian Dollar's cause. On the data front, the Canada trade gap narrowed, while Canada labor productivity declined. Key standouts on Friday’s calendar come from German inflation, Canada employment, US wholesale inventories, and US consumer credit.
NZDUSD – technical overviewOverall 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 0.6015 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 0.6015 – 1 September high – Medium
- S1 0.5859 – 5 September/2023 low – Medium
- S2 0.5841 – 10 November 2022 low – Medium
NZDUSD – fundamental overviewThe New Zealand Dollar has held up a little better than its peers into the end of the week after New Zealand manufacturing data surprised to the topside. Key standouts on Friday’s calendar come from German inflation, Canada employment, US wholesale inventories, and US consumer credit.
US SPX 500 – technical overviewLonger-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 4328.
- R2 4541 – 4 August high – Medium
- R1 4533 – 31 August high – Medium
- S1 4328 – 26 June low – Medium
- S2 4300 – Round Number – Strong
US SPX 500 – fundamental overviewWe'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, even in the face of a less certain growth outlook. 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 overviewThe 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 1950 – 30 August high – Medium
- S1 1885 – 21 August low – Medium
- S2 1871 – 10 March high – Strong
GOLD (SPOT) – fundamental overviewThe 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 (%)
- Carpe Clichés! This Time Really Was Different, J. Authers, Bloomberg (September 7, 2023)
- Following the Money Behind Premier League Betting Sponsors, J. Sandy, FT (September 8, 2023)