Western markets repricing rate cut bets

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.

• R2 1.2700 – Figure – Medium
• R1 1.2643 – 3 February high – Medium
• S1 1.2518 – 5 February/2024 low – Medium
• S2 1.2500 – 13 December low – Strong

GBPUSD – fundamental overview

The Pound has been better bid of late as the UK rate market makes a significant repricing of BOE rate cut expectations since the beginning of the year. When the year started out, the market was pricing 175 basis points of cuts in 2024. Now, the market is only looking for 75 basis points of cuts in 2024. Key standouts on Monday’s calendar come from ECB speak, Fed speak, BOE speak, US consumer inflation expectations, and the US monthly budget statement.

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.

• R2 150.00 – Psychological – Strong
• R1 149.58 – 9 February/2024 high – Medium
• S1 148.00 – Figure – Medium
• S2 147.62– 7 February low – Strong

USDJPY – fundamental overview

The big news around the Yen is last week's comments from BOJ Ueda who said would remain easy even after NIRP. The Yen has unsurprisingly been under pressure as a consequence. Key standouts on Monday’s calendar come from ECB speak, Fed speak, BOE speak, US consumer inflation expectations, and the US monthly budget statement.

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 0.6661– 16 January high – Strong
• R2 0.6625 – 30 January high – Medium
• S1 0.6469– 5 February/2024 low – Strong
• S2 0.6452 – 17 November low – Medium

AUDUSD – fundamental overview

Most of the recent gains in the Australian Dollar come from record high US equities and overall upbeat sentiment. Still, last week's softer China CPI data has prevented the currency from making any meaningful runs to the topside. Key standouts on Monday’s calendar come from ECB speak, Fed speak, BOE speak, US consumer inflation expectations, and the US monthly budget statement.

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 1.3600 – Figure – Medium
• R1 1.3544 – 5 February/2024 high – Medium
• S1 1.3413 – 9 February  low – Medium
• S2 1.3358 – 31 January low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been underperforming relative to its peers after Canada jobs growth was concerning after showing most of the growth coming from part-time work. Key standouts on Monday’s calendar come from ECB speak, Fed speak, BOE speak, US consumer inflation expectations, and the US monthly budget statement.

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 0.6223 – 4 December high– Strong
• R1 0.6174 – 31 January high – Medium
• S1 0.6038 – 5 February/2024 low– Medium
• S2 0.6000 – Psychological – Strong

NZDUSD – fundamental overview

Comments from ANZ that more RBNZ rate hikes are coming were responsible for Friday's wave of Kiwi outperformance. ANZ now sees the RBNZ raising rates two more times in 2024. Key standouts on Monday’s calendar come from ECB speak, Fed speak, BOE speak, US consumer inflation expectations, and the US monthly budget statement.

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 above 5000 will be required to delay the outlook. Next key support comes in at 4842.

• R2 5050 – Mid-Figure – Strong
• R1 5031 – 9 February/Record – Strong
• S1 4842– 31 January low – Strong
• S2 4800 – Figure – Medium

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 early 2024. At the same time, the central bank is still not willing to fully play into market expectations for aggressive rate cuts to the tune of 6 in 2024, which could prove to be a disappointment for investors and start to weigh 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.

• R2 2175 – 4 December/Record high– Strong
• R1 2100 – Round Number – Medium
• S1 2000 – Psychological – Medium
• S2 1973 – 13 December 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.