Market to thin out for remainder of week

Next 24 hours: Fed Minutes Dollar rally stalls out...for now

Today’s report: Market to thin out for remainder of week

We’ve been warning that the market has once again gotten ahead of itself after pricing in a Fed policy reversal after last week’s round of softer inflation data out of the US. Yesterday’s Fed Minutes backed this up, with the central bank showing no such willingness to reverse policy.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

The Euro has been in a multi-month consolidation since bottoming out in 2022. Setbacks have since been exceptionally well supported on dips below 1.0500, with a higher platform sought out ahead of the next major upside extension. Look for a push through the yearly high at 1.1276 to strengthen the constructive outlook and extend the recovery run towards 1.2000. Only back below 1.0400 negates.

  • R2 1.1000 – Psychological – Strong
  • R1 1.0966 - 21 November high – Medium
  • S1 1.0825 - 17 November low – Medium
  • S2 1.0757 – 6 November high – Strong

EURUSD – fundamental overview

The Euro finally ran into some selling pressure, which was helped along by comments from ECB Centeno who said inflation was falling faster than it rose and there was a high probability we had already seen peak rates. Key standouts on Wednesday’s calendar come from Eurozone consumer confidence, Canada manufacturing sales, and a batch of US reads including durable goods, initial jobless claims, 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 1.2681.

  • R2 1.2591 – 29 June low – Strong
  • R1 1.2560 – 21 November high – Medium
  • S1 1.2446 – 20 November low – Medium
  • S2 1.2374 – 17 November low – Medium

GBPUSD – fundamental overview

The Pound got a nice boost on Tuesday as the UK government raised the minimum wage. Sources also say Chancellor of the Exchequer Hunt will announce a reduction in business taxes, despite public spending showing very little room to maneuver. Key standouts on Wednesday’s calendar come from Eurozone consumer confidence, Canada manufacturing sales, and a batch of US reads including durable goods, initial jobless claims, and Michigan sentiment.

USDJPY – technical overview

The market remains confined to a strong uptrend, with sights set on a retest and break of the multi-year high from 2022 at 151.95. A push through this level will open the next major upside extension towards 155.00. Key support comes in at 147.00, with only a daily close below to delay the constructive outlook.

  • R2 149.99 – 2o November high – Medium
  • R1 149.00 – Figure – Medium
  • S1 147.55 – 21 November low – Medium
  • S2 147.00 – Figure – Strong

USDJPY – fundamental overview

A healthy round of Yen demand seems to finally be running out of steam, with the market getting back to the bigger picture themes. Ultimately, monetary policy divergence remains a driving force which continues to favor additional weakness in the Yen. Key standouts on Wednesday’s calendar come from Eurozone consumer confidence, Canada manufacturing sales, and a batch of US reads including durable goods, initial jobless claims, 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 0.6630 will take the immediate pressure off the downside and strengthen case for a bottom.

  • R1 0.6630– 2 August high – Strong
  • R2 0.6590 – 21 November high – Medium
  • S1 0.6452 – 17 November low – Medium
  • S2 0.6338 – 10 November low – Strong

AUDUSD – fundamental overview

RBA Bullock was on the wires saying that containing inflation was still a crucial challenge. Still, Aussie upside has been limited, with the currency coming back under pressure on Wednesday as broad Dollar buying comes back into play, along with risk off flow. Key standouts on Wednesday’s calendar come from Eurozone consumer confidence, Canada manufacturing sales, and a batch of US reads including durable goods, initial jobless claims, 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 1.3855 – 10 November high – Strong
  • R1 1.3786 – 5 October high– Medium
  • S1 1.3654 – 15 November low – Medium
  • S2 1.3629 – 6 November low – Strong

USDCAD – fundamental overview

Economic data out of Canada has been discouraging of late, which has been driving relative underperformance in the Canadian Dollar. The latest batch of inflation data out of Canada has come in softer than expected, fueling more downside pressure on the Loonie. Key standouts on Wednesday’s calendar come from Eurozone consumer confidence, Canada manufacturing sales, and a batch of US reads including durable goods, initial jobless claims, 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. At the same time, there are some signs of the market wanting to put in a longer-term base. Ultimately, a break back above 0.6133 would be required to take the immediate pressure off the downside and encourage this prospect. A monthly close below 0.5800 will intensify bearish price action.

  • R2 0.6133 – 4 August high– Strong
  • R1 0.6087 – 21 November high – Medium
  • S1 0.5940 – 17 November low – Medium
  • S2 0.5863 – 14 November low – Medium

NZDUSD – fundamental overview

A renewed demand for the US Dollar and downside pressure on stocks has opened downside pressure on the risk correlated New Zealand Dollar. Key standouts on Wednesday’s calendar come from Eurozone consumer confidence, Canada manufacturing sales, and a batch of US reads including durable goods, initial jobless claims, 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 4600 will be required to take the immediate pressure off the downside. Next key support comes in at 4308.

  • R2 4608 – 27 July/2023 high – Strong
  • R1 4558 – 20 November high – Medium
  • S1 4487– 16 November low – Medium
  • S2 4408 – 14 November low – Strong

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 geopolitical risk in 2023. Overall, we expect inflation to continue to be a problem in 2023 that results in downside pressure into rallies despite recent data and 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 1920 – 13 November 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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