Special report: Fed decision preview
Today’s report: Calendar stacked with data and key event risk
We suspect activity in financial markets will pick up today, with a good deal of economic data on the calendar ahead of the feature event in the form of the Fed policy decision late in the day. At the moment, things have been rather tame.
Wake-up call
- EURUSD Eurozone avoids technical recession in Q4
- UK housing
- rate hike
- Aussie inflation
- higher oil
- macro flows
- inflation risk
- Macro themes
Peformance chart: 30-Day Performance vs. US dollar (%)
Suggested reading
- When Does This Bull Market End?, J.C. Parets, All Star Charts (January 29, 2024)
- While GDP Is a Backward Look, It's a Positive, J. Calhoun, Alhambra (January 28, 2024)
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 2023 high at 1.1276 to strengthen the constructive outlook and extend the recovery run towards 1.2000. Only back below 1.0400 negates.EURUSD – fundamental overview
The Euro has been trying to steady after the Eurozone avoided a technical recession in Q4. However, with the German yield curve steepening, worry over recession is still very much alive and could keep the Euro well capped into any rallies. Key standouts on Wednesday’s calendar come from German area inflation reads, German retail sales, German unemployment, the ECB bank lending survey, US ADP employment, Canada GDP, Chicago PMIs, and the Fed decision 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 1.2849.GBPUSD – fundamental overview
The Pound came under mild pressure on Tuesday after UK housing and lending data underwhelmed. The BRC shop price index also slowed sharply, to its lowest level since April 2022. Key standouts on Wednesday’s calendar come from German area inflation reads, German retail sales, German unemployment, the ECB bank lending survey, US ADP employment, Canada GDP, Chicago PMIs, and the Fed decision 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 140.00, with only a weekly close below to delay the constructive outlook.USDJPY – fundamental overview
The BOJ Summary of Opinions has hinted that conditions for a rate hike are getting closer. One central banker even went as far as to say economic conditions provided a golden opportunity to end Japan's negative interest rate policy. On the data front, industrial production and retail sales were below forecast. Key standouts on Wednesday’s calendar come from German area inflation reads, German retail sales, German unemployment, the ECB bank lending survey, US ADP employment, Canada GDP, Chicago PMIs, and the Fed decision 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.AUDUSD – fundamental overview
The Australian Dollar is contending with a heavy round of Wednesday setbacks after Aussie inflation data came in below forecast. Key standouts on Wednesday’s calendar come from German area inflation reads, German retail sales, German unemployment, the ECB bank lending survey, US ADP employment, Canada GDP, Chicago PMIs, and the Fed decision 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.USDCAD – fundamental overview
Stronger Canada data and a recent recovery in the price of oil have helped to keep the Canadian Dollar propped up this week. Key standouts on Wednesday’s calendar come from German area inflation reads, German retail sales, German unemployment, the ECB bank lending survey, US ADP employment, Canada GDP, Chicago PMIs, and the Fed decision 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.NZDUSD – fundamental overview
The New Zealand Dollar business outlook for January showed the component for business confidence at its highest level since 2014, while the activity outlook component came in at the third highest level since mid-2022. The New Zealand Dollar is however under pressure as global sentiment points south on Wednesday. Key standouts on Wednesday’s calendar come from German area inflation reads, German retail sales, German unemployment, the ECB bank lending survey, US ADP employment, Canada GDP, Chicago PMIs, and the Fed decision late in the day.US SPX 500 – technical overview
Longer-term technical studies continue to look quite extended after pushing to fresh record highs, begging for a deeper correction ahead. Look for rallies to be well capped in favor of lower tops and lower lows. A monthly close back above 4900 will be required to delay the outlook. Next key support comes in at 4714.US SPX 500 – fundamental overview
The Fed has finally bent to the will of the market, with the December 2023 policy decision revealing rate projections coming down from previous and more in line with what the market has been looking for. This has translated to more investor friendly policy going forward, opening the door for a run to fresh record highs in 2024. At the same time, we worry inflation remains a risk both the market and Fed are not taking as seriously as needed, which could once again force the Fed back into a more restrictive path and weigh heavily on stocks.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 1900 on a monthly close basis ahead of the next major upside extension towards 2500.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.