Next 24 hours: Risk assets continue to hold up well into the mid-week
Today’s report: Investors keep turning a blind eye
We were surprised by the subdued reaction in the aftermath of the US CPI print. Rates markets haven't really budged all that much and investors continue to turn a blind eye to any signs the Fed might need to be less accommodative than what is being priced.
Wake-up call
- dovish comments
- discouraging jobs
- wage news
- Iron ore
- Energy prices
- food prices
- policy outlook
- Macro themes
Peformance chart: 30-Day Performance vs. US dollar (%)
Suggested reading
- You Can't Invest Like Everyone Else and Expect to Outperform, J. Calhoun, Alhambra (March 10, 2024)
- Federal Reserve Should Just Leave Interest Rates Alone, P. Morici, MarketWatch (March 12, 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 hasn't seen much movement despite comments from ECB Villeroy that there's a broad agreement at the central bank to begin lowering rates in the Spring, on account of the battle being won against inflation. ECB Wunsch also added that borrowing costs will need to come down even without being completely certain inflation will return to target. Key standouts on Wednesday’s calendar come from UK GDP, industrial production, and construction output, and Eurozone industrial production.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 latest push to a fresh 2024 high beyond 1.2830 confirms the outlook and opens the door for the next major upside extension towards the 2023 high at 1.3143. Any setbacks should now be well supported ahead of 1.2500.GBPUSD – fundamental overview
The Pound took a hit on Tuesday after UK employment data discouraged as reflected in rising unemployment and cooling wages. Key standouts on Wednesday’s calendar come from UK GDP, industrial production, and construction output, and Eurozone industrial production.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
The reports that Toyota has agreed to all the wage demands by the workers has opened a minor bout of demand for the Yen, seemingly on the expectation this could get things back on track towards pushing the BOJ to exit negative interest rate policy. More news on the wage negotiation process is expected to come out over the coming days. Key standouts on Wednesday’s calendar come from UK GDP, industrial production, and construction output, and Eurozone industrial production.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
There hasn't been much activity around the Australian Dollar on Wednesday, though a dip in the price of iron ore could be weighing on the currency into any rallies. Key standouts on Wednesday’s calendar come from UK GDP, industrial production, and construction output, and Eurozone industrial production.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 hasn't been doing much in recent sessions but has been a little weighed down on weaker energy prices. Key standouts on Wednesday’s calendar come from UK GDP, industrial production, and construction output, and Eurozone industrial production.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
Earlier today, we saw a dip in New Zealand food price inflation, though the data hasn't had much impact on the New Zealand Dollar. Key standouts on Wednesday’s calendar come from UK GDP, industrial production, and construction output, and Eurozone industrial production.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.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.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.