Today’s report: Currencies and equities less bothered by recent updates
Over the past several days we’ve seen a serious adjustment in Fed rate expectations, with the market now only expecting 3.5 cuts in 2024, down from near 7 a month ago. All of this price adjustment comes from a less dovish Fed decision, stronger US jobs report and hotter US inflation data.
Wake-up call
- wholesale prices
- retail sales
- Yield differentials
- Jonathan Kearns
- wholesale sales
- manufacturing PMI
- reconsider bets
- Macro themes
Peformance chart: 30-Day Performance vs. US dollar (%)
Suggested reading
- 4 Warren Buffett Stocks to Buy From Berkshire's 13F, S. Dziubinski, Morningstar (February 15, 2024)
- Where Are The New Lows?, J. Parets, All Star Charts (February 15, 2024)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
German wholesale prices came in well above the previous print, which helped to give the Euro a prop into the end of last week. 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 mostly been boosted on a retreating US Dollar. Meanwhile, ECB officials continued to express some concern about inflation. On the data front, the Eurozone trade balance showed a smaller than expected surplus. Monday’s economic calendar is exceptionally thin, with no first-tier data to speak of and the US out for the Presidents Day long weekend holiday. The only notable standout comes from Canada producer prices.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 got a nice boost into the end of the week on the back of the much better than expected round of UK retail sales data. Retail sales were up 3.4% versus -3.3% previous. Monday’s economic calendar is exceptionally thin, with no first-tier data to speak of and the US out for the Presidents Day long weekend holiday. The only notable standout comes from Canada producer prices.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 145.90, with only a weekly close below to delay the constructive outlook.USDJPY – fundamental overview
Warnings from Japanese officials about excessive and rapid weakness in the Yen don't usually have any meaningful impact on the market. At the same time, the latest wave of concerns has perhaps slowed the pace of Yen declines for a moment. On the data front, evidence supports more Yen weakness after Japan slid into technical recession and US inflation data came in above forecast. Monday’s economic calendar is exceptionally thin, with no first-tier data to speak of and the US out for the Presidents Day long weekend holiday. The only notable standout comes from Canada producer prices.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
A weekend piece from the former RBA head of domestic markets could be helping to prop the Australian Dollar on Monday. Jonathan Kearns suggested the cash rate was not high enough and that with inflation still a problem, it would take longer before the RBA could cut rates. Monday’s economic calendar is exceptionally thin, with no first-tier data to speak of and the US out for the Presidents Day long weekend holiday. The only notable standout comes from Canada producer prices.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
The Canadian Dollar ended the week under some pressure after Canada wholesale sales came in below forecast. Monday’s economic calendar is exceptionally thin, with no first-tier data to speak of and the US out for the Presidents Day long weekend holiday. The only notable standout comes from Canada producer prices.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 was bid as the week closed out, getting help from a decent New Zealand manufacturing PMI read which jumped to 47.3 from 43.4 previous. Monday’s economic calendar is exceptionally thin, with no first-tier data to speak of and the US out for the Presidents Day long weekend holiday. The only notable standout comes from Canada producer prices.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.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, with the inflation outlook still uncertain, the central bank not willing to fully play into market expectations for aggressive rate cuts, which could prove to be a disappointment for investors and start to weigh more 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.