Should we expect more of the same from financial markets

Next 24 hours: Fed goes into blackout period

Today’s report: Should we expect more of the same from financial markets

The new week gets going with financial markets still trying as hard as they can to push the narrative of peak rates in the US. We’ve seen an aggressive repricing of Fed expectations in recent weeks on the back of softer economic data out of the US, including softer inflation data.

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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 1.1018 – 29 November high – Strong
  • R1 1.0966 - 21 November high – Medium
  • S1 1.0829 - 1 December low – Medium
  • S2 1.0825 – 17 November high – Strong

EURUSD – fundamental overview

The market has been coming to terms with the possibility of a sharp ECB policy pivot, following a round of economic data and ECB speak that have been pointing to less hawkish policy. This has resulted in Euro underperformance over the past week. Key standouts on Monday’s calendar come from Aussie business inventories and retail sales, German trade, an ECB Lagarde speech, and US factory orders.

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 1.2603 – 30 November low – Medium
  • S2 1.2449 – 22 November low – Strong

GBPUSD – fundamental overview

UK Nationwide house prices rose by more than expected, while UK manufacturing PMI data also exceeded market forecasts. All of this helped to drive strength in the Pound into last week's close. Key standouts on Monday’s calendar come from Aussie business inventories and retail sales, German trade, an ECB Lagarde speech, and US factory orders.

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 146.66 – 1 December low – Medium
  • S2 145.90 – 11 September low – Strong

USDJPY – fundamental overview

Most of the latest recovery in the Yen has come from a market repricing of Fed expectations, with peak rates getting priced in the US and yield differentials moving decidedly out of the Buck's favor. Key standouts on Monday’s calendar come from Aussie business inventories and retail sales, German trade, an ECB Lagarde speech, and US factory orders.

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 got a nice boost into the end of last week on strong demand for US equities, an impressive uptick in metals and miners, and broad based selling of the US Dollar. Key standouts on Monday’s calendar come from Aussie business inventories and retail sales, German trade, an ECB Lagarde speech, and US factory orders.

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 1.3712 – 24 November high – Medium
  • R1 1.3627 – 230 November high– Medium
  • S1 1.3487 – 1 December low – Medium
  • S2 1.3400 – Figure – Medium

USDCAD – fundamental overview

Last Thursday's impressive Canada GDP showing was followed up on Friday with a strong Canada employment report. This resulted in another wave of demand for the Canadian Dollar into the weekly close. Key standouts on Monday’s calendar come from Aussie business inventories and retail sales, German trade, an ECB Lagarde speech, and US factory orders.

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

Last week, we got a hawkish dose from the RBNZ, while New Zealand consumer confidence improved to a two year high. This along with broad based US Dollar selling and demand for stocks contributed to a run of relative outperformance in the New Zealand Dollar. Key standouts on Monday’s calendar come from Aussie business inventories and retail sales, German trade, an ECB Lagarde speech, and US factory orders.

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 4600 – 1 December 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 2100 – Round Number– Strong
  • R1 2076 – 1 December/Record 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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