Volatility expected to pick up on Wednesday

Next 24 hours: US CPI data expected to shake things up

Today’s report: Volatility expected to pick up on Wednesday

The early portion of this week has been relatively tame, with the market not wanting to make any fresh bets on direction until more clarity comes later today in the anticipated US economic data. We have however highlighted an interesting disconnect between the rates market and currency market.

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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

Market participants continue to talk about the fact that a lot of the downside risk to the Euro has been priced in at this point, leaving the greater balance of risk tilting back in the Euro's favor. Key standouts on Wednesday’s calendar come from US inflation data, the Bank of Canada policy decision, and central bank 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 1.2710 – 9 April high – Medium
  • S1 1.2539 – 1 April low – Medium
  • S2 1.2518 – 5 February low – Strong

GBPUSD – fundamental overview

There was quite a bit of demand in Tuesday's Gilt auction, with the 20-year issue oversubscribed by 3.7x. This accounted for the Tuesday's round of relative outperformance in the Pound. Key standouts on Wednesday’s calendar come from US inflation data, the Bank of Canada policy decision, and central bank 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

BOJ Governor Ueda was on the wires, though we haven't heard any major updates. The central banker echoed recent commentary that he expects underlying inflation to rise gradually towards the end of the Bank's projection period, and that monetary policy will be kept accommodative for now amidst the moderate, yet uneven economic recovery. USDJPY has been testing the 152.00 area but bulls are afraid to push too much from here on account of intervention threats. Key standouts on Wednesday’s calendar come from US inflation data, the Bank of Canada policy decision, and central bank 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 0.6645 – 9 April high – Medium
  • S1 0.6481– 1 April low – Medium
  • S2 0.6443 – 13 February low – Medium

AUDUSD – fundamental overview

The Australian Dollar has been well supported in recent sessions, mostly on the back of rallying commodities prices and an ongoing bid in US equities. Key standouts on Wednesday’s calendar come from US inflation data, the Bank of Canada policy decision, and central bank 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 1.3700 – 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 has traded back into a consolidation after sinking to a fresh 2024 low this past Friday on the back of an awful Canada jobs report. The market is now stuck positioning ahead of tomorrow's Bank of Canada policy decision in which the central bank will likely hold, not wanting to get ahead of the Fed, but also now having more pressure to be needing to be thinking about cutting rates. Key standouts on Wednesday’s calendar come from US inflation data, the Bank of Canada policy decision, and central bank 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 0.6217 – 8 March high – Strong
  • R1 0.6107 – 21 March high – Medium
  • S1 0.5939 – 1 April 2024 low – Medium
  • S2 0.5900 – Figure – Medium

NZDUSD – fundamental overview

The New Zealand Dollar is getting a little more boost on Wednesday after the RBNZ left rates on hold as widely expected. However, the fact that the central bank maintained a higher for longer policy outlook, despite recent signs that suggested otherwise, has been the primary driver behind today's bid. Key standouts on Wednesday’s calendar come from US inflation data, the Bank of Canada policy decision, and central bank 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 2366 – 9 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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