Investors let down by good news

Today’s report: Investors let down by good news

The market simply can’t get away from its efforts to try and force a more accommodative Fed narrative at every turn. But what’s different in 2023 versus years earlier, is that this is a Fed that now refuses to bend to the will of the market.

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Wake-up call

Chart talk: Technical & fundamental highlights

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 1.0770 will take the immediate pressure off the downside.

  • R2 1.0770 – 12 September high – Strong
  • R1 1.0757 - 6 November high – Medium
  • S1 1.0609 - 3 November low– Medium
  • S2 1.0517 – 1 November low – Medium

EURUSD – fundamental overview

The ECB economic bulletin said the economy remains weak and the services sector was still falling. ECB Villeroy said the central bank wouldn't raise rates again provided there were no shocks. ECB Guindos said rate cut talk was premature. Key standouts on Friday’s calendar come from UK GDP, trade, industrial production, and construction output, an ECB Lagarde speech, Fed speak, and Michigan sentiment.

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 1.2429.

  • R2 1.2429 – 6 November high – Strong
  • R1 1.2309 – 9 November high – Medium
  • S1 1.2200 – Figure – Medium
  • S2 1.2184 – 3 November low – Medium

GBPUSD – fundamental overview

The Pound underperformed on the back of another round of discouraging housing data. Though the data did come in better than expected, the overall results were still quite awful. BOE Pill was also on the wires describing inflation as persistent. Key standouts on Friday’s calendar come from UK GDP, trade, industrial production, and construction output, an ECB Lagarde speech, Fed speak, and Michigan sentiment.

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 151.72 – 31 October/2023 high – Strong
  • R1 151.50 – Mid-Figure – Medium
  • S1 149.93 – 7 November low – Medium
  • S2 148.80 – 30 October low – Stronger

USDJPY – fundamental overview

The Yen remains under pressure in the aftermath of latest BOJ Ueda comments and BOJ Minutes which continue to show the central bank worrying about adjusting policy away from ultra accommodation. Key standouts on Friday’s calendar come from UK GDP, trade, industrial production, and construction output, an ECB Lagarde speech, Fed speak, and Michigan sentiment.

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 0.6200 would give reason for rethink. Back above 0.6523 will take the immediate pressure off the downside and strengthen case for a bottom.

  • R1 0.6523– 30 August high – Strong
  • R2 0.6450 – 8 November high – Medium
  • S1 0.6352 – 10 November low – Medium
  • S2 0.6314 – 31 October low – Medium

AUDUSD – fundamental overview

The hasn't been much activity out of Australia on Friday, though the Australian Dollar is struggling with a falling RMB and struggling Yen. Key standouts on Friday’s calendar come from UK GDP, trade, industrial production, and construction output, an ECB Lagarde speech, Fed speak, and Michigan sentiment.

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 1.3899 – 1 November/2023 high – Strong
  • R1 1.3815 – 8 November high– Medium
  • S1 1.3683 – 7 November low – Medium
  • S2 1.3629 – 6 November low – Strong

USDCAD – fundamental overview

Bank of Canada Rogers was on the wires urging households and businesses to prepare for rates staying high. This is particularly worrying considering a run of soft economic data out of Canada and the latest dump in commodities prices. Key standouts on Friday’s calendar come from UK GDP, trade, industrial production, and construction output, an ECB Lagarde speech, Fed speak, and Michigan sentiment.

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 0.6056 would be required to take the immediate pressure off the downside. A monthly close below 0.5800 will intensify bearish price action.

  • R2 0.6056 – 11 October high– Strong
  • R1 0.6002 – 6 November high – Medium
  • S1 0.5886 – 10 November low – Medium
  • S2 0.5839 – 2 November low – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has shrugged off a weak round of manufacturing PMIs. The latest reading saw a renewed reduction in production and new orders, with the former at its lowest level for a non-Covid month since May 2009. Higher US equity futures early Friday have been helping to offset Kiwi downside. Key standouts on Friday’s calendar come from UK GDP, trade, industrial production, and construction output, an ECB Lagarde speech, Fed speak, and Michigan sentiment.

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 4103.

  • R2 4398 – 12 October high – Strong
  • R1 4391 – 8 November high – Medium
  • S1 4308 – 3 November low – Medium
  • S2 4239 – 2 November low – Medium

US SPX 500 – fundamental overview

Investors continue to struggle with the reality of a higher for longer Fed policy track in the face of ongoing worry around inflation, while also contending with an escalation in geopolitical risk. 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 2071 – 8 March 2022/Record high– Strong
  • R1 2010 – 27 October high – Medium
  • S1 1945 – 19 October low – Medium
  • S2 1908 – 16 October low – Medium

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 stable and 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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