Geopolitical risk and the US jobs report

Today’s report: Geopolitical risk and the US jobs report

A round of softer economic data out of the US on Thursday had invited an initial wave of welcome Dollar selling and risk on flow, before all of it fell apart as geopolitical tension escalated on fear of conflict between Israel and Iran in the Middle East.

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Chart talk: Technical & fundamental highlights

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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.

  • R2 1.1000 – Psychological – Medium
  • R1 1.0982 - 8 March high – Medium
  • S1 1.0725 - 2 April low – Medium
  • S2 1.0695 – 14 February/2024 low – Strong

EURUSD – fundamental overview

The short Euro trade is looking overcrowded with a June ECB rate cut now fully priced in. This has slanted the balance of risk back to the topside, and the Euro has managed to put in a decent recovery, getting added momentum from Thursday's round of well received PMI data in the Eurozone, Germany, and France. Key standouts on Friday’s calendar come from German factory orders, German, Eurozone, and UK construction PMIs, Eurozone retail sales, the Canada jobs report, monthly employment report out of the US, and some Fed speak.

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.

  • R2 1.2804 – 21 March high – Strong
  • R1 1.2700 – Figure – Medium
  • S1 1.2539 – 1 April low – Medium
  • S2 1.2518 – 5 February low – Strong

GBPUSD – fundamental overview

The Pound is coming out of a Thursday session in which it underperformed slightly after UK services PMIs ticked down, and shopkeepers saw the smallest price rise in 2.5 years. Key standouts on Friday’s calendar come from German factory orders, German, Eurozone, and UK construction PMIs, Eurozone retail sales, the Canada jobs report, monthly employment report out of the US, and some Fed speak.

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.

  • R2 153.00 – Figure – Medium
  • R1 151.98 – 27 March/Multi-Year high – Strong
  • S1 148.91 – 18 March low – Medium
  • S2 146.48 – 8 March low – Strong

USDJPY – fundamental overview

The Yen has entered a period of tight consolidation with bears a little more cautious about testing the BOJ's resolve, and bulls not able to produce a convincing enough case to be wanting to buy. Key standouts on Friday’s calendar come from German factory orders, German, Eurozone, and UK construction PMIs, Eurozone retail sales, the Canada jobs report, monthly employment report out of the US, and some Fed speak.

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 0.6668– 8 March high – Strong
  • R2 0.6624 – 21 March high – Medium
  • S1 0.6481– 1 April low – Medium
  • S2 0.6443 – 13 February low – Medium

AUDUSD – fundamental overview

The Australian Dollar has been finding some relief into the end of the week, this after speculative shorts had hit a new record high, something that often warns of reversal. Of course, broad based US Dollar selling and rallying commodities have also helped the Australian Dollar. Key standouts on Friday’s calendar come from German factory orders, German, Eurozone, and UK construction PMIs, Eurozone retail sales, the Canada jobs report, monthly employment report out of the US, and some Fed speak.

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 1.3614 – 19 March/2024 high – Strong
  • R1 1.3600 – Figure – Medium
  • S1 1.3482 – 20 March low – Medium
  • S2 1.3459 – 13 March low – Strong

USDCAD – fundamental overview

The latest round of relative weakness in the Canadian Dollar has been somewhat difficult to reconcile, especially as oil continues to run higher and after Canada produced a healthy trade surplus the other day. We suspect a lot of this could have more to do with positioning into today's highly anticipated monthly job reports out of Canada and the US. Key standouts on Friday’s calendar come from German factory orders, German, Eurozone, and UK construction PMIs, Eurozone retail sales, the Canada jobs report, monthly employment report out of the US, and some Fed speak.

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 0.6132 – 15 March high– Strong
  • R1 0.6100 – Figure – Medium
  • S1 0.5939 – 1 April 2024 low – Medium
  • S2 0.5900 – Figure – Medium

NZDUSD – fundamental overview

We're seeing some selling of the New Zealand Dollar in recent sessions as risk appetite comes off on account of rising geopolitical tension, particularly in the Middle East. Positioning ahead of today's monthly employment report out of the US could also be factoring into the price action. Key standouts on Friday’s calendar come from German factory orders, German, Eurozone, and UK construction PMIs, Eurozone retail sales, the Canada jobs report, monthly employment report out of the US, and some Fed speak.

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. Next key support comes in at 5110.

  • R2 5300 – Figure – Strong
  • R1 5287 – 1 April high/Record – Medium
  • S1 5110– 15 March low – Strong
  • S2 5058 – 5 March 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 2400 – Round Number – Medium
  • R1 2305 – 4 April/Record high – Medium
  • S1 2146 – 18 March low – Strong
  • 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 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.

Peformance chart: 30-Day Performance vs. US dollar (%)

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