Financial markets hold up well all things considered

Next 24 hours: US Dollar not as strong as expected

Today’s report: Financial markets hold up well all things considered

We have to say; it’s been rather surprising to see markets behaving as they are in the aftermath of Friday’s US jobs report. The monthly employment report came in much stronger than expected, accompanied by an hourly earnings print that was just a little higher than forecast.

Wake-up call

Chart talk: Technical & fundamental highlights

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 hold up well on dips despite another round of soft Friday data and strong US economic data. Key standouts on Monday’s calendar come from German trade and US consumer inflation expectations.

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 has been struggling a little more to gain momentum into rallies partially on account of evidence of more pressure in the UK housing market, and partially on the back of strong economic data out of the US. Key standouts on Monday’s calendar come from German trade and US consumer inflation expectations.

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 remains under pressure but hasn't been able to materially extend declines against the US Dollar since the latest wave of official jawboning began several days back. Yield differentials continue to point to more weakness, and Friday's US jobs report only adds to this case. Perhaps also helping the Yen a bit is the escalation in geopolitical tension in the Middle East. On the data front, Japan's current account surplus came in lower than expected, while the trade balance narrowed sharply. Key standouts on Monday’s calendar come from German trade and US consumer inflation expectations.

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 trading in choppy fashion but mostly sideways in recent sessions. On the one side, there has been Aussie selling from the stronger US jobs report. On the other side, Aussie demand has come in as commodities remains bid and as US equities find a way to rebound. Key standouts on Monday’s calendar come from German trade and US consumer inflation expectations.

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 1.3700 – Figure – Medium
  • R1 1.3648 – 5 April/2024 high – Medium
  • S1 1.3478 – 4 April low – Medium
  • S2 1.3420 – 8 March low – Strong

USDCAD – fundamental overview

The Canadian Dollar took a hard hit on Friday after the Canada jobs report came in weak at -2.2k versus the +25k expected. This also came in contrast to a strong US employment report, which ultimately resulted in fresh 2024 lows for the Canadian Dollar against the Buck. Odds for a Bank of Canada rate cut this week have risen into the 25% range. Key standouts on Monday’s calendar come from German trade and US consumer inflation expectations.

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 0.6100 – Figure– Medium
  • R1 0.6047 – 4 April high – Medium
  • S1 0.5939 – 1 April 2024 low – Medium
  • S2 0.5900 – Figure – Medium

NZDUSD – fundamental overview

The fact that conditions for a rate cut in New Zealand have become more apparent, has been something that has unquestionably weighed on the New Zealand Dollar in recent weeks. Economic data has also been less upbeat, all while US data has leaned on the stronger side, ultimately keeping the Kiwi rate under pressure. Key standouts on Monday’s calendar come from German trade and US consumer inflation expectations.

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 2355 – 8 April/Record high – Medium
  • S1 2223 – 21 March high – Strong
  • S2 2146 – 18 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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