Back to pricing two full Fed rate cuts in 2024

Next 24 hours: ECB cuts rates as expected

Today’s report: Back to pricing two full Fed rate cuts in 2024

Softness in the latest US ADP employment report has further emboldened investors to price in more rate cuts than less from the Fed in 2024. At the moment, we’re back to an expectation of just about two full rate cuts this year.

Wake-up call

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.

  • R2 1.0982 – 8 March high – Strong
  • R1 1.0917 - 4 June high – Medium
  • S1 1.0788 - 30 May low– Strong
  • S2 1.0724 – 9 May low – Medium

EURUSD – fundamental overview

We have been seeing some support for the Euro ahead of today's ECB decision. Initially, the market had been selling on the expectation of a 25 basis point rate cut. But with inflation metrics back on the rise, some of the market is thinking it will keep the central bank from getting overly dovish with future decisions. Key standouts on Thursday’s calendar come from German factory orders, Eurozone construction PMIs, UK construction PMIs, Eurozone retail sales, the ECB policy decision, Canada trade, US trade, US initial jobless claims, and Canada Ivey PMIs.

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 1.2894 – 8 March/2024 high – Strong
  • R1 1.2824 – 12 March high – Medium
  • S1 1.2667 – 24 May low – Medium
  • S2 1.2643 – 16 May low – Strong

GBPUSD – fundamental overview

UK composite PMIs rose from the previous month, while the services PMIs component remained unchanged. Key standouts on Thursday’s calendar come from German factory orders, Eurozone construction PMIs, UK construction PMIs, Eurozone retail sales, the ECB policy decision, Canada trade, US trade, US initial jobless claims, and Canada Ivey PMIs.

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 157.71 – 29 May high – Medium
  • S1 153.60 – 16 May low – Medium
  • S2 151.86 – 3 May low – Strong

USDJPY – fundamental overview

On Wednesday, it was right back to the market playing the longer-term trend of selling the Yen. We had seen some demand for the Yen earlier in the week on a round of broad based US Dollar selling and some Yen supportive comments from BOJ Ueda and FinMin Suzuki. But all of that has faded as the market knows full well that talk is cheap. Meanwhile, BOJ Kamakura added to the Yen selling theme after offering up comments suggesting the case to support easy policy was still there. On the data front, bank services PMIs came in a little higher than previous, while labor cash earnings beat the consensus. Key standouts on Thursday’s calendar come from German factory orders, Eurozone construction PMIs, UK construction PMIs, Eurozone retail sales, the ECB policy decision, Canada trade, US trade, US initial jobless claims, and Canada Ivey PMIs.

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 0.6591– 30 May low – Medium
  • S2 0.6558 – 8 May low – Strong

AUDUSD – fundamental overview

The Australian Dollar is looking up on Thursday thus far, getting a boost from the Aussie trade balance which came in at a surplus, and also getting a boost from another record run in US equities. Key standouts on Thursday’s calendar come from German factory orders, Eurozone construction PMIs, UK construction PMIs, Eurozone retail sales, the ECB policy decision, Canada trade, US trade, US initial jobless claims, and Canada Ivey PMIs.

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 Bank of Canada went ahead and cut rates by 25 basis points as was widely expected, and Governor Macklem signaled more rate cuts ahead. This kept the Canadian Dollar under pressure, though we did see some minor relief from the recovery in gold and rally to fresh record highs in US equities. Key standouts on Thursday’s calendar come from German factory orders, Eurozone construction PMIs, UK construction PMIs, Eurozone retail sales, the ECB policy decision, Canada trade, US trade, US initial jobless claims, and Canada Ivey PMIs.

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 0.6218 – 22 February high – Strong
  • R1 0.6200 – Figure– Medium
  • S1 0.6083 – 22 May low – Medium
  • S2 0.6031 – 15 May low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar has been getting help from this latest rally in risk assets, though at the same time, local data has been weighing somewhat into the rally. New Zealand volume from construction work done fell sharply on a quarter over quarter basis, which adds to a growing pile of evidence of softness in the local economy. Key standouts on Thursday’s calendar come from German factory orders, Eurozone construction PMIs, UK construction PMIs, Eurozone retail sales, the ECB policy decision, Canada trade, US trade, US initial jobless claims, and Canada Ivey PMIs.

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 5194.

  • R2 5400 – Round Number – Strong
  • R1 5365 – 6 June/Record high – Medium
  • S1 5194 – 31 May low – Strong
  • S2 5165 – 8 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. Still, if there is a sense the Fed will need to be more sensitive towards erring on the side of higher rates, it could invite major disruption to the stock market.

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 2315 – 3 June low – 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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