Next 24 hours: Can the recovery hold up?
Today’s report: Soft US ADP inspires market reversal
The market has been getting some relief as the week moves on, with stocks recovering and currencies pushing up against the Buck. We had already seen an improvement in sentiment after a round of PMI data in many of the major economies around the globe came in better than expected.
Wake-up call
- upbeat PMIs
- construction data
- intervention
- sentiment uptick
- Oil dump
- macro flow
- Policy outlook
- Dealers report
Peformance chart: 30 Day Performance vs. US dollar (%)
Suggested reading
- Bond Vigilantes Risk Breaking the Markets, M. Ashworth, Bloomberg (October 5, 2023)
- Nuclear Renaissance in Europe?, T. Wilson, Financial Times (October 2, 2023)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
Any additional setbacks should be well supported on dips below 1.0500 in favor of the start to the next major upside extension. Ultimately, only a monthly close back below 1.0500 would give reason for concern. Back above 1.0618 will take the immediate pressure off the downside.EURUSD – fundamental overview
Friendly revisions to Eurozone PMI reads have helped to inspire some of this latest overdue recovery in the Euro. Key standouts on Thursday’s calendar com from German trade, German, Eurozone, and UK construction PMIs, US trade, US initial jobless claims, and some scattered central bank speak.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 1.3143.GBPUSD – fundamental overview
The Pound has finally managed to put in a bounce, helped along by solid UK PMI reads and broad based selling of the US Dollar. Key standouts on Thursday’s calendar com from German trade, German, Eurozone, and UK construction PMIs, US trade, US initial jobless claims, and some scattered central bank speak.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.USDJPY – fundamental overview
The Yen has entered a tight range trade after some whipsaw volatility earlier in the week on still unsubstantiated chatter around MOF intervention. Key standouts on Thursday’s calendar com from German trade, German, Eurozone, and UK construction PMIs, US trade, US initial jobless claims, and some scattered central bank speak.AUDUSD – technical overview
There 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 0.6300 would give reason for rethink. Back above 0.6523 will take the immediate pressure off the downside and strengthen case for a bottom.AUDUSD – fundamental overview
Aussie PMI data came in better than expected, while risk markets returned to form, all of which helped to inspire a recovery in the Australian Dollar. Key standouts on Thursday’s calendar com from German trade, German, Eurozone, and UK construction PMIs, US trade, US initial jobless claims, and some scattered central bank speak.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 was unable to participate in a wave of currency gains against the US Dollar on Wednesday, with the Loonie taking a big hit on the back of a dump in the price of oil. Key standouts on Thursday’s calendar com from German trade, German, Eurozone, and UK construction PMIs, US trade, US initial jobless claims, and some scattered central bank speak.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 0.6049 would be required to take the immediate pressure off the downside. A monthly close below 0.5900 would intensify bearish price action.NZDUSD – fundamental overview
The New Zealand Dollar has done a good job recovering in recent sessions, despite the recent RBNZ hold and dovish components of the communication. The currency has mostly benefited from upbeat macro flows. Key standouts on Thursday’s calendar com from German trade, German, Eurozone, and UK construction PMIs, US trade, US initial jobless claims, and some scattered central bank speak.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 4200.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, especially with the growth outlook looking up in recent months. 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.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.