An unsettling inconsistency

Next 24 hours: US GDP data in focus

Today’s report: An unsettling inconsistency

Financial markets continue to mostly be driven off Fed expectations. And in recent weeks, we’ve seen a big push on behalf of the market to price in peak rates. Fed officials were out in full force on Tuesday offering up their views. The trouble is, these views are on the whole inconsistent with market expectations.

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Wake-up call

Chart talk: Technical & fundamental highlights

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 1.1066 – 10 August high – Strong
  • R1 1.1018 - 29 November high – Medium
  • S1 1.0852 - 22 November low – Medium
  • S2 1.0825 – 17 November high – Strong

EURUSD – fundamental overview

The Euro has extended its run of gains, getting help from Tuesday's better than expected consumer confidence reads out of Germany and France, and hawkish comments from ECB Nagel. Nagel warned the ECB could still hike and that it was premature to talk about lowering rates. Key standouts on Wednesday’s calendar come from German inflation, BOE consumer credit and mortgage approvals, Eurozone sentiment reads, US GDP, and the Fed Beige Book 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 1.2818.

  • R2 1.2747 – 30 August high – Medium
  • R1 1.2733 – 29November high – Medium
  • S1 1.2591 – 27 November low – Medium
  • S2 1.2449 – 22 November low – Strong

GBPUSD – fundamental overview

The Pound has extended its run on a double punch of hawkish speak from BOE's Ramsden and Haskel. Ramsden said policy needs to be restrictive for sufficiently long, and Haskel said there was no scope for a moderation of rates anytime soon. Key standouts on Wednesday’s calendar come from German inflation, BOE consumer credit and mortgage approvals, Eurozone sentiment reads, US GDP, and the Fed Beige Book late in the day.

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 145.00, with only a weekly close below to delay the constructive outlook.

  • R2 149.99 – 2o November high – Medium
  • R1 149.75 – 22 November high – Medium
  • S1 146.67 – 29 November low – Medium
  • S2 145.90 – 11 September low – Strong

USDJPY – fundamental overview

BOJ Board member Adachi's remarks were in focus today after saying Japan's economy was not yet at a stage suitable for a discussion of an exit of easy monetary policy, and that the BOJ would have to continue with its ultra-loose monetary policy patiently, while not hesitating to add to easing where necessary. Adachi added that overshoots in inflation may not necessitate a change in policy, unless the BOJ has confidence in hitting its 2% inflation target sustainably, while also seeing signs of a "positive wage-inflation cycle." Key standouts on Wednesday’s calendar come from German inflation, BOE consumer credit and mortgage approvals, Eurozone sentiment reads, US GDP, and the Fed Beige Book 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 0.6200 would give reason for rethink. Back above 0.6900 will take the big picture pressure off the downside and strengthen case for a bottom.

  • R1 0.6700– Figure – Medium
  • R2 0.6677 – 29 November high – Medium
  • S1 0.6521 – 22 November low – Medium
  • S2 0.6452 – 17 November low – Strong

AUDUSD – fundamental overview

The Australian Dollar rally has run into resistance on Wednesday after Aussie CPI came in softer than expected. This has forced some downward repricing of RBA expectations. Key standouts on Wednesday’s calendar come from German inflation, BOE consumer credit and mortgage approvals, Eurozone sentiment reads, US GDP, and the Fed Beige Book 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 1.3777 – 16 November high – Strong
  • R1 1.3712 – 24 November high– Medium
  • S1 1.3541 – 29 November low – Medium
  • S2 1.3489 – 1 September low – Strong

USDCAD – fundamental overview

No surprise to see the Canadian Dollar higher in recent sessions, getting a boost from the recovery in oil, broad based US Dollar selling, higher overall commodities, and ongoing bid in equities. Key standouts on Wednesday’s calendar come from German inflation, BOE consumer credit and mortgage approvals, Eurozone sentiment reads, US GDP, and the Fed Beige Book late in the day.

NZDUSD – technical overview

Overall pressure remains on the downside with the market continuing to stall out on runs 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 0.6500 would be required to take the medium-term pressure off the downside and encourage this prospect. A monthly close below 0.5800 will intensify bearish price action.

  • R2 0.6274 – 27 July high– Strong
  • R1 0.6209 – 29 November high – Medium
  • S1 0.6061 – 27 November low – Medium
  • S2 0.5996 – 22 November low – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has been a clear outperformer in Wednesday trade on the back of the RBNZ decision. Indeed, the central bank left rates on hold as expected. But it was the more hawkish leaning communication which caught the market off guard. Key standouts on Wednesday’s calendar come from German inflation, BOE consumer credit and mortgage approvals, Eurozone sentiment reads, US GDP, and the Fed Beige Book 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 4308.

  • R2 4608 – 27 July/2023 high – Strong
  • R1 4569 – 28 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 2053 – 29 November high – Medium
  • S1 1965 – 20 November low – Medium
  • S2 1920 – 13 November 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 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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