Latest wave of Fed speak leans dovish

Special report: Fed Minutes Preview

Today’s report: Latest wave of Fed speak leans dovish

The market has been getting more help from Fed officials of late. Fed Bostic, Logan and Jefferson have all been on the wires this week offering up their views of a Fed that may have reached the limits of rate hikes.

Wake-up call

Chart talk: Technical & fundamental highlights

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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.

  • R2 1.0737 – 20 September high – Strong
  • R1 1.0620 - 10 October high – Strong
  • S1 1.0448 - 3 October/2023 low– Medium
  • S2 1.0400 – Round Number –Strong

EURUSD – fundamental overview

The Euro got some more boost from ECB Holzmann comments, after the central banker said one or two more hikes were possible if inflation shocks emerged. Key standouts on Wednesday’s calendar come from German inflation, Canada building permits, US producer prices, and the Fed Minutes late in the day.

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.

  • R2 1.2425 – 19 September high – Strong
  • R1 1.2347 – 21 September high – Medium
  • S1 1.2211 – 10 October low – Medium
  • S2 1.2163 – 9 October low – Medium

GBPUSD – fundamental overview

The Pound may have gotten some more help on calls from the IMF for another BOE rate hike before moving to a pause. Key standouts on Wednesday’s calendar come from German inflation, Canada building permits, US producer prices, and the Fed Minutes late in the day.

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 150.17 – 3 October/2023 high – Strong
  • R1 150.00–  Psychological – Medium
  • S1 148.53 – 29 September low – Medium
  • S2 147.31 – 3 October low – Strong

USDJPY – fundamental overview

We haven't seen much in the way of movement in the Yen in recent sessions, though there has been some mild Yen selling on the back of broad based risk on flow. There has been some chatter around a story the BOJ is considering raising fiscal year-end inflation forecasts. Meanwhile, the IMF has upgraded Japan 2023 GDP. Key standouts on Wednesday’s calendar come from German inflation, Canada building permits, US producer prices, and the Fed Minutes late in the day.

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.

  • R1 0.6501– 29 September high – Strong
  • R2 0.6445 – 11 October high – Medium
  • S1 0.6300 – Figure – Medium
  • S2 0.6285 – 3 October/2023 low – Strong

AUDUSD – fundamental overview

The Australian Dollar has been getting a boost from rallying commodities prices and some risk on flow, but at the same time, has been sold into rallies after NAB business conditions sunk to their lowest level since January 2022. Key standouts on Wednesday’s calendar come from German inflation, Canada building permits, US producer prices, and the Fed Minutes late in the day.

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 1.3786 – 5 October high – Strong
  • R1 1.3695 – 7 September high – Medium
  • S1 1.3569 – 10 October low – Medium
  • S2 1.3552 – 2 October low – Medium

USDCAD – fundamental overview

The Canadian Dollar is coming back under some pressure as the rally in the price of oil stalls out. Meanwhile, odds for a Bank of Canada rate hike later this month have dropped back to around 25% after trading around 50% last week. Key standouts on Wednesday’s calendar come from German inflation, Canada building permits, US producer prices, and the Fed Minutes late in the day.

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.

  • R2 0.6049 – 29 September high – Strong
  • R1 0.6056 – 11 October high – Medium
  • S1 0.5871 – 4 October low – Medium
  • S2 0.5859 – 5 September/2023 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been better bid this week in response to higher commodities, higher equities, and broad based selling of the US Dollar. Key standouts on Wednesday’s calendar come from German inflation, Canada building permits, US producer prices, 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 4200.

  • R2 4401 – 21 September high – Medium
  • R1 4386 – 10 October high – Medium
  • S1 4216 – 3 October low – Medium
  • S2 4201 – 4 October 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, 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.

  • R2 1880 – 29 September high – Medium
  • R1 1866 – 10 October high – Medium
  • S1 1810 – 6 October low – Medium
  • S2 1805 – 28 February/2023 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 (%)

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