US market returns from holiday break

Next 24 hours: Month-end flow shows USD sell interest

Today’s report: US market returns from holiday break

Market conditions will get back to fuller form today as the UK and US markets return from holiday. As things stand right now, the OIS market is pricing 34 basis points of rate cuts from the Fed in 2024, down from 40 basis points last Thursday following the more hawkish leaning Fed Minutes.

Wake-up call

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 1.0900 – Figure – Medium
  • R1 1.0896 - 16 May high – Medium
  • S1 1.0805 - 23 May low– Medium
  • S2 1.0724 – 9 May low – Strong

EURUSD – fundamental overview

A batch of less dovish leaning ECB speak has been getting most of the attention, helping to drive the Euro higher in recent sessions. However, Monday comments from ECB Villeroy did turn some heads after the central banker deviated from the messages we had been getting, instead opting to lean more dovish, saying the ECB shouldn't exclude the possibility for consecutive rate cut in July. On the data front, German Ifo reads were a bit of a disappointment. Key standouts on Tuesday’s calendar come from German wholesale prices, UK CBI trades, Canada producer prices, US Case Shiller, US consumer confidence, Dallas Fed manufacturing, and a batch of 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 1.2000.

  • R2 1.2804 – 21 March high – Medium
  • R1 1.2784 – 28 May high – Medium
  • S1 1.2643 – 16 May low – Medium
  • S2 1.2578 – 15 May low – Medium

GBPUSD – fundamental overview

We've been seeing a wave of Pound outperformance on the back of broad based US Dollar selling and the recently hotter than expected UK inflation data, which has removed any possibility for a BOE rate cut in June. The fact that there is a general election announcement due in July will also keep the central bank from wanting to make any decisions, which ultimately is yet another prop for the Pound right now.  Key standouts on Tuesday’s calendar come from German wholesale prices, UK CBI trades, Canada producer prices, US Case Shiller, US consumer confidence, Dallas Fed manufacturing, and a batch of Fed speak.

USDJPY – technical overview

The market remains confined to a strong uptrend, most recently extending to a multi-year high through 160.00. Key support comes in at 151.95, with only a weekly close below to delay the constructive outlook.

  • R2 157.99 – 1 May high – Medium
  • R1 157.20 – 23 May high – Medium
  • S1 153.60 – 16 May low – Medium
  • S2 151.86 – 3 May low – Strong

USDJPY – fundamental overview

Japan service producer prices ex-tax have come out hotter than expected, rising at the fastest pace since 1991. This supports the idea of a general trend towards higher prices, which should in turn put the BOJ in more of a position to be thinking about tighter monetary policy. While the reaction hasn't been all that significant, we have seen some Yen demand in response, which also takes pressure off the MOF and BOJ from an intervention standpoint. Key standouts on Tuesday’s calendar come from German wholesale prices, UK CBI trades, Canada producer prices, US Case Shiller, US consumer confidence, Dallas Fed manufacturing, and a batch of 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 0.6800– Figure – Medium
  • R2 0.6715 – 16 May high – Medium
  • S1 0.6592– 24 May low – Medium
  • S2 0.6558 – 8 May low – Strong

AUDUSD – fundamental overview

The Australian Dollar has held up well on Tuesday thus far after Aussie retail sales came in a little softer than expected. It seems the market is more focused on concerns around elevated inflation and this keeping the RBA leaning more hawkish despite retail sales. Tomorrow, we will get more clarity with Aussie CPI data due. Key standouts for the remainder of Tuesday come from German wholesale prices, UK CBI trades, Canada producer prices, US Case Shiller, US consumer confidence, Dallas Fed manufacturing, and a batch of 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 1.3847 – 16 April/2024 high – Strong
  • R1 1.3785 – 30 April high – Medium
  • S1 1.3586 – 10 May low – Medium
  • S2 1.3547 – 9 April low – Strong

USDCAD – fundamental overview

The Canadian Dollar has held up relatively well in recent sessions when considering weaker last week's softer Canada retail sales and a solid chance for a Bank of Canada rate cut in June. It seems the recovery in the price of oil and broad based US Dollar selling have been helping to more than offset any Canadian Dollar weakness from softer economic data. Key standouts on Tuesday’s calendar come from German wholesale prices, UK CBI trades, Canada producer prices, US Case Shiller, US consumer confidence, Dallas Fed manufacturing, and a batch of 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 0.6200 – Figure – Medium
  • R1 0.6166 – 28 May high– Medium
  • S1 0.6083 – 22 May low – Medium
  • S2 0.6031 – 15 May low – Strong

NZDUSD – fundamental overview

Absence of first tier data out of New Zealand has the New Zealand Dollar tracking higher on bigger picture developments to the tune of broad based US Dollar outflows and a healthy risk backdrop. Key standouts on Tuesday’s calendar come from German wholesale prices, UK CBI trades, Canada producer prices, US Case Shiller, US consumer confidence, Dallas Fed manufacturing, and a batch of Fed speak.

US SPX 500 – technical overview

Longer-term technical studies continue to look quite extended, begging for a deeper correction ahead. At the same time, the latest bullish breakout to a fresh record high beyond the 2024 high opens the door for the next measured move upside extension targeting the 5650 area. Key support comes in at 4928.

  • R2 5400 – Round Number – Strong
  • R1 5352 – 23 May/Record high – Medium
  • S1 5257 – 23 May low – Medium
  • S2 5196 – 14 May low – Medium

US SPX 500 – fundamental overview

Though we have seen a healthy adjustment of investor expectations towards the amount of rate cuts in 2024, the market still hopes policy will end up erring more towards the investor friendly, accommodative side of things. This bet has kept stocks well bid into dips and consistently pushing record highs.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and this next major upside extension into the 2500-3000 area. Setbacks should now be well supported above 2000 on a monthly close basis.

  • R2 2500 – Psychological – Strong
  • R1 2451 – 20 May Record high – Medium
  • S1 2300 – Round Number – Medium
  • S2 2277– 3 May low – Strong

GOLD (SPOT) – fundamental overview

The yellow metal has pushed record highs in 2024 with solid demand from medium and longer-term accounts. These players are more concerned about inflation, geopolitical 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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