Special report: Fed decision preview
Today’s report: Market activity picking up as major event risk nears
Activity is expected to pick up on Wednesday as we inch closer towards today’s highly anticipated Fed policy decision. As we come into Wednesday a lot of what we’ve been seeing and hearing away from the US has been leaning more dovish, which has resulted in added US Dollar demand.
Wake-up call
- solid data
- CFTC data
- Tokyo holiday
- drops language
- cut odds
- downbeat comments
- policy outlook
- Macro themes
Peformance chart: 30-Day Performance vs. US dollar (%)
Suggested reading
- Did the UK’s ‘Recession’ End in January?, Fisher Investments (March 13, 2024)
- The Bond Market Is Still Crashing, JC. Parets, All Star Charts (March 18, 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
Tuesday's Euro setbacks on the back of broad based US Dollar demand were mitigated by the fact that Eurozone and German ZEW reads came in on the better side of overall expectation. Key standouts on Wednesday’s calendar come from German producer prices, UK inflation, an ECB Lagarde speech, Eurozone construction output, the Bank of Canada Summary of Deliberations, and the Fed policy decision late in the day.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 latest CFTC data shows the largest speculative long positioning in the Pound since the global financial crisis, which perhaps has taken some of the wind out of the sails of GBP momentum ahead of today's Fed risk and tomorrow's BOE decision. Key standouts on Wednesday’s calendar come from German producer prices, UK inflation, an ECB Lagarde speech, Eurozone construction output, the Bank of Canada Summary of Deliberations, and the Fed policy decision late in the day.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 146.48, with only a weekly close below to delay the constructive outlook.USDJPY – fundamental overview
The Yen is extending declines back towards the multi-year low from 2022 after the BOJ disappointed hawks on Tuesday. Though the central bank ended negative rate policy and YCC, it stressed that it also wasn't exiting accommodative monetary policy. The fact that there is a holiday in Tokyo today has the Yen selling off that much more with traders not worrying about any official intervention. Key standouts on Wednesday’s calendar come from German producer prices, UK inflation, an ECB Lagarde speech, Eurozone construction output, the Bank of Canada Summary of Deliberations, and the Fed policy decision late in the day.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
The Australian Dollar has stumbled in the aftermath of Tuesday's dovish leaning RBA communication in which the central bank dropped the language a further hike can't be ruled out. The notable shift in sentiment should continue to weigh in the lead up to today's Fed decision. Key standouts on Wednesday’s calendar come from German producer prices, UK inflation, an ECB Lagarde speech, Eurozone construction output, the Bank of Canada Summary of Deliberations, and the Fed policy decision late in the day.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 was slammed on Tuesday after Canada inflation data came in softer than expected. Odds for a June rate cut jump to 75% from 50% on Monday. Key standouts on Wednesday’s calendar come from German producer prices, UK inflation, an ECB Lagarde speech, Eurozone construction output, the Bank of Canada Summary of Deliberations, and the Fed policy decision late in the day.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 has been struggling with a combination of drivers including spillover from the RBA decision, soft economic data, and downbeat comments from New Zealand officials. Christopher Luxon said the New Zealand economy has deteriorated rapidly, a FinMin said growth will be weak over the coming years, and the Treasury commented that the economy is in a severe slowdown. Key standouts on Wednesday’s calendar come from German producer prices, UK inflation, an ECB Lagarde speech, Eurozone construction output, the Bank of Canada Summary of Deliberations, and the Fed policy decision late in the day.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.