US Dollar holding up well despite rate pricing

Today’s report: US Dollar holding up well despite rate pricing

It’s been an interesting week for financial markets. The most striking development in our opinion is the fact that the market is back to pricing two full rate cuts from the Fed in 2024, and yet, the Dollar has held up relatively well considering.

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 1.0917 – 4 June high – Strong
  • R1 1.0853 - 12 June high – Medium
  • S1 1.0720 - 11 June low– Strong
  • S2 1.0695 – 14 February low – Medium

EURUSD – fundamental overview

The Euro has been struggling this week on political fallout from the European election and on shifting policy expectations after the Fed communication leaned more hawkish. Economic data out of the zone hasn't helped wither after Eurozone industrial production went negative, highlighting a weak start to Q2. Key standouts on Friday’s calendar come from Eurozone trade, ECB speak, Canada manufacturing sales, Canada wholesale sales, and Michigan sentiment.

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 door is now open for the next major upside extension towards the 2023 high at 1.3143. Any setbacks should be well supported ahead of 1.2000.

  • R2 1.2894 – 8 March/2024 high – Strong
  • R1 1.2861 – 12 June high – Medium
  • S1 1.2688 – 10 June low – Medium
  • S2 1.2643 – 16 May low – Strong

GBPUSD – fundamental overview

The big takeaway for the Pound this week is the added demand on the back up the political fallout in Europe and accompanying financial turmoil. Key standouts on Friday’s calendar come from Eurozone trade, ECB speak, Canada manufacturing sales, Canada wholesale sales, and Michigan sentiment.

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 160.21 – 29 April/2024 high – Strong
  • R1 157.99 – 14 June high – Medium
  • S1 155.72 – 12 June low – Medium
  • S2 154.55 – 4 June low – Strong

USDJPY – fundamental overview

The BOJ kept its key short-term target unchanged and ultimately didn't do anything to satisfy expectations for any meaningful hawkish shift in policy. The biggest eye opener in the announcement was that there would be no change in the amount of its monthly bond buys. Key standouts on Friday’s calendar come from Eurozone trade, ECB speak, Canada manufacturing sales, Canada wholesale sales, and Michigan sentiment.

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 0.6715– 16 May high – Strong
  • R2 0.6705 – 12 June high – Medium
  • S1 0.6576– 10 June low – Medium
  • S2 0.6558 – 8 May low – Strong

AUDUSD – fundamental overview

The Australian Dollar hasn't been able to do anything with the recent stronger than expected jobs data, with the currency more focused on souring risk sentiment and a more unstable European political climate. Key standouts on Friday’s calendar come from Eurozone trade, ECB speak, Canada manufacturing sales, Canada wholesale sales, and Michigan sentiment.

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 1.3792 – 11 June high – Medium
  • S1 1.3662 – 7 June low – Medium
  • S2 1.3586 – 10 May low – Strong

USDCAD – fundamental overview

There is a growing sense that bad news in Canada is now equal to bad news, which only adds to the strain on the Canadian Dollar as yield differentials suffer with the market continuing to push odds for a Bank of Canada rate cut in July. The Bank of Canada has added to the dovishness after seeing more signs underlying price pressures were easing. Key standouts on Friday’s calendar come from Eurozone trade, ECB speak, Canada manufacturing sales, Canada wholesale sales, and Michigan sentiment.

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 0.6222 – 12 June high – Strong
  • R1 0.6200 – Figure – Medium
  • S1 0.6083 – 22 May low – Medium
  • S2 0.6031 – 15 May low – Strong

NZDUSD – fundamental overview

It's been a tougher go for the New Zealand Dollar in recent sessions. The currency has been hit on the combination of softer local data, as per food prices and performance of manufacturing, and on souring sentiment amidst a slowdown in the US economy and unstable political climate in Europe. Key standouts on Friday’s calendar come from Eurozone trade, ECB speak, Canada manufacturing sales, Canada wholesale sales, and Michigan sentiment.

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 5500 – Round Number – Strong
  • R1 5450 – 7 June/Record high – Medium
  • S1 5321 – 7 June low – Medium
  • S2 5194 – 31 May low – Strong

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 2451 – 20 May Record high – Strong
  • R1 2365 – 28 May high – Medium
  • S1 2277 – 3 May low – Strong
  • S2 2223– 21 March high – 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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