Today’s report: Is it just too much to ignore?
Earlier this week, US CPI data came out hotter than expected, which should have had the market a little more worried about less investor friendly tweaks to Fed policy next week. And yet, the market shrugged off the data with stocks continue to track in record high territory.
Wake-up call
- ECB Stournaras
- housing data
- BOJ
- CB risk
- manufacturing data
- FinMin Willis
- policy outlook
- Macro themes
Peformance chart: 30-Day Performance vs. US dollar (%)
Suggested reading
- Long-Term Recency Bias?, B. Carlson, A Wealth of Common Sense (March 12, 2024)
- AI Will Save Millions of Lives Before Taking Even One, S. McBride, RiskHedge (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 took a hit on Thursday after a round of contrasting developments out of the Eurozone and US. In the Eurozone, we heard from ECB Stournaras who said he wanted to see two ECB rate cuts before the summer break. Meanwhile in the US, economic data was strong, including a hotter US producer prices read, which suggests the Fed may adjust its outlook to just two rate cuts for 2024 at next week's meeting. Key standouts on Friday’s calendar come from Canada housing starts and wholesale sales, and US industrial production, import and export prices, NY empire manufacturing, and Michigan sentiment.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 managed to hold up better than most currencies on Thursday, mostly on the back of some solid UK housing data. Still, this couldn't stop the UK currency from selling off against the Buck after a round of strong US data and hotter producer prices. Key standouts on Friday’s calendar come from Canada housing starts and wholesale sales, and US industrial production, import and export prices, NY empire manufacturing, and Michigan sentiment.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
There's been a lot of talk about the BOJ getting ready to end negative interest rate policy, and yet, the market has been proceeding with extreme caution. The latest news report to highlight this possibility has been shrugged off, with the market instead focusing on selling Yen in the aftermath of some strong US data. Key standouts on Friday’s calendar come from Canada housing starts and wholesale sales, and US industrial production, import and export prices, NY empire manufacturing, and Michigan sentiment.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 has been a growing risk of the RBA leaning more dovish next week and the Fed leaning more hawkish. Thursday's strong round of US data accompanied by hotter producer prices has only further encouraged this prospect, while weighing on the Australian Dollar. Key standouts on Friday’s calendar come from Canada housing starts and wholesale sales, and US industrial production, import and export prices, NY empire manufacturing, and Michigan sentiment.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
Canada manufacturing data came in soft, while US data was strong and US producer prices were hot. This was behind a lot of the latest slide in the Canadian Dollar, with risk off flow also adding to the mix. The only saving grace for the Loonie has been higher oil, though this has only slowed the pace of Canadian Dollar declines. Key standouts on Friday’s calendar come from Canada housing starts and wholesale sales, and US industrial production, import and export prices, NY empire manufacturing, and Michigan sentiment.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
New Zealand FinMin Nicola Willis was on the wires saying the subpar Q4 2023 GDP growth forecast does nothing to help the Kiwi's cause. This in conjunction with strong US data and a slide in equities has been behind the latest wave of Kiwi selling. Key standouts on Friday’s calendar come from Canada housing starts and wholesale sales, and US industrial production, import and export prices, NY empire manufacturing, and Michigan sentiment.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.