Investors pleased with Fed Chair testimony

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 1.2800 – Figure – Medium
• R1 1.2762 – 6 March high – Medium
• S1 1.2621 – 28 February low – Medium
• S2 1.2518 – 5 February/2024 low – Strong

GBPUSD – fundamental overview

There were few surprises from the UK Budget, though the OBR did go ahead and upgrade its 2025 growth forecast to 1.9% from 1.4% previous. UK construction PMIs came out better than expected and also helped to prop the Pound. Key standouts on Thursday’s calendar come from German factory orders, the ECB policy decision, Canada trade, US trade, US initial jobless claims, and more Fed Chair Powell testimony.

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.

• R2 151.00 – Figure – Medium
• R1 150.89 – 13 February/2024 high – Medium
• S1 148.40 – 7 March low – Medium
• S2 147.62– 7 February low – Strong

USDJPY – fundamental overview

The Yen has been a strong performer on Thursday on the back of a bunch of headlines and market chatter. Japan's largest industrial union said that the current round of Shunto negotiations would see workers win bigger wage hikes than last year. Meanwhile, there has been plenty of chatter that government officials are being more supportive of a near-term tightening from the BOJ. Key standouts on Thursday’s calendar come from German factory orders, the ECB policy decision, Canada trade, US trade, US initial jobless claims, and more Fed Chair Powell testimony.

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 0.6625– 30 January high – Strong
• R2 0.6595 – 22 February high – Medium
• S1 0.6442– 13 February/2024 low – Strong
• S2 0.6400 – Figure – Medium

AUDUSD – fundamental overview

Aussie trade day came in below forecast, with imports slumping, to suggest all might not be well with the Australian consumer. Aussie home loans data came in a little better than previous, while investment lending for homes was a little softer than previous. China trade data was solid, which helped to support the Australian Dollar. Key standouts on Thursday’s calendar come from German factory orders, the ECB policy decision, Canada trade, US trade, US initial jobless claims, and more Fed Chair Powell testimony.

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 1.3627 – 30 November high – Strong
• R1 1.3607 – 28 February/2024 high – Medium
• S1 1.3441 – 22 February  low – Medium
• S2 1.3358 – 31 January low – Strong

USDCAD – fundamental overview

The Canadian Dollar rallied sharply on Wednesday after the Bank of Canada held on rates but came out saying it was too early to discuss rate cuts. Odds for an April rate cut have now slid to 25% after tracking around 40% ahead of the decision. On the data front, Canada labor productivity was a pleasant surprise, which also may have helped to support the Canadian Dollar. Key standouts on Thursday’s calendar come from German factory orders, the ECB policy decision, Canada trade, US trade, US initial jobless claims, and more Fed Chair Powell testimony.

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 0.6218 – 22 February high – Medium
• S1 0.6050 – 13 February low– Medium
• S2 0.6000 – 5 February/2024 low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar is trying to recover from the other week's dovish RBNZ decision, with the currency getting propped back up on a sentiment uptick, broad selling of the US Dollar, and solid trade data out of China. Key standouts on Thursday’s calendar come from German factory orders, the ECB policy decision, Canada trade, US trade, US initial jobless claims, and more Fed Chair Powell testimony.

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 5100 will be required to delay the outlook. Next key support comes in at 4842.

• R2 5200 – Figure – Strong
• R1 5150 – 4 March/Record – Medium
• S1 4920– 13 February low – Strong
• S2 4842 – 31 January low – Medium

US SPX 500 – fundamental overview

Though we have seen an adjustment of investor expectations towards the amount of rate cuts in 2024, the market still believes policy will end up erring more towards the investor friendly, accommodative side of things. This bet has kept stocks well bid and pushing record highs. Still, it's important to highlight the fact that the Fed has yet to declare a victory over inflation and could disappoint investors with less accommodative policy than desired going forward. If this happens, stocks could be in for a nasty bearish reversal.

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 2200 – Round Number – Medium
• R1 2162 – 7 March/Record high – Medium
• S1 2110 – 5 March low – Medium
• S2 2079 – 4 March low – Medium

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 end.