Investors run for the hills post Fed decision

Next 24 hours: Look at that US Dollar go

Today’s report: Investors run for the hills post Fed decision

Though the Fed steered clear of making any policy adjustments at Wednesday’s meeting, the fact that the central bank’s dot plot is now projecting two 25 basis point rate hikes in 2023 was enough to rattle the market.

Wake-up call

Chart talk: Technical & fundamental highlights

Choose pair:

EURUSD – technical overview

The market has been looking for a higher low since topping out in 2021 up at 1.2350. Ideally, this next higher low is sought out ahead of 1.1600 in favour of the next major upside extension back through 1.2350 and towards a retest of the 2018 high at 1.2555 further up.

  • R2 1.2148 – 15 June high– Strong
  • R1 1.2093 - 11 June low – Medium
  • S1 1.1984 - 17 June low – Medium
  • S2 1.1943 – 19 April low – Strong

EURUSD – fundamental overview

The Euro was under pressure initially on Wednesday from the German Ifo Institute downgrade of GDP forecasts, before accelerating declines on the back of the more hawkish leaning Fed decision. Key standouts on today’s calendar come in the form of Eurozone construction output, Eurozone inflation, Canada ADP employment, US initial jobless claims, the Philly Fed index, and Treasury Secretary Yellen testimony.

EURUSD - Technical charts in detail

GBPUSD – technical overview

Technical studies are in the process of consolidating from stretched levels after the push to fresh multi-month highs. This leaves room for additional consolidation, before the market considers a meaningful bullish continuation towards a retest of the 2018 high. But look for setbacks to now be very well supported into the 1.3500 area.

  • R2 1.4133 – 16 June high – Strong
  • R1 1.4100 – Figure – Medium
  • S1 1.3971 – 17 June low – Medium
  • S2 1.3900 – Figure – Medium

GBPUSD – fundamental overview

The Pound could not ignore broad US Dollar demand from the more hawkish leaning Fed, but was able to outperform against its peers on the back of hot UK inflation data. Key standouts on today’s calendar come in the form of Eurozone construction output, Eurozone inflation, Canada ADP employment, US initial jobless claims, the Philly Fed index, and Treasury Secretary Yellen testimony.

USDJPY – technical overview

The major pair has run into massive resistance in the form of the monthly Ichimoku cloud, and has since stalled out. This translates to a longer-term trend that is still bearish despite the run up we saw in 2021, with risk for deeper setbacks ahead. It would take a clear break back above 113.00 to negate the outlook.

  • R2 110.97 – 31 March/2021 high – Strong
  • R1 110.83 – 17 June high – Strong
  • S1 109.19– 7 June low – Medium
  • S2 108.34 – 7 May low – Strong

USDJPY – fundamental overview

A souring growth outlook in Japan and broad US Dollar demand in the aftermath of the FOMC decision were behind the latest round of Yen selling. At the same time, the concurrent wave of risk off flow has inspired some Yen demand into the dip. Key standouts on today’s calendar come in the form of Eurozone construction output, Eurozone inflation, Canada ADP employment, US initial jobless claims, the Philly Fed index, and Treasury Secretary Yellen testimony.

AUDUSD – technical overview

Technical studies have turned up in recent months, after the market traded down to its lowest levels since 2003 in 2020. There is evidence of a longer-term bottom following the latest push back through 0.7000, though at this stage, there is risk for a deeper pullback to allow for shorter term studies to unwind. Setbacks should now be well supported ahead of 0.7400.

  • R2 0.7776 – 11 June high – Strong
  • R1 0.7716 – 16 Jun high – Medium
  • S1 0.7598 – 17 June low – Medium
  • S2 0.7500 – Psychological – Strong

AUDUSD – fundamental overview

The Australian Dollar has been in the process of recovering from the hits taken in the aftermath of the more hawkish leaning FOMC decision. A lot of this recovery can be attributed to today's better than expected Aussie jobs report. This has further enhanced expectations the RBA won't roll over the YCC target to the November 2024 bond. Key standouts on today’s calendar come in the form of Eurozone construction output, Eurozone inflation, Canada ADP employment, US initial jobless claims, the Philly Fed index, and Treasury Secretary Yellen testimony.

USDCAD – technical overview

Has been in major decline since topping out in 2021 above 1.4600. At this stage, with the decline now well extended, the market is likely to find solid support into the 1.2000 area ahead of a resumption of gains. Ultimately, only a weekly close below 1.2000 would suggest otherwise. Back above 1.2352 will strengthen the outlook.

  • R2 1.2352 – 4 May high – Strong
  • R1 1.2292 – 17 June high – Medium
  • S1 1.2157– 16 June low – Strong
  • S2 1.2100 – Figure – Medium

USDCAD – fundamental overview

Hot Canada CPI and above forecast wholesale trade data weren't enough to prevent the Canadian Dollar from selling off in the aftermath of a more hawkish leaning FOMC decision. Key standouts on today’s calendar come in the form of Eurozone construction output, Eurozone inflation, Canada ADP employment, US initial jobless claims, the Philly Fed index, and Treasury Secretary Yellen testimony.

NZDUSD – technical overview

The market has been very well supported in recent months and there is evidence of a longer-term base. Look for setbacks to hold up above 0.7000, with sights set on a run back towards the 0.7500 area.

  • R2 0.7243 – 7 June high – Strong
  • R1 0.7161 – 15 June high – Medium
  • S1 0.7042 – 16 June low– Medium
  • S2 0.7100 – Figure – Medium

NZDUSD – fundamental overview

The New Zealand Dollar is trying to recover in the aftermath of the more hawkish leaning Fed decision, with the currency getting a boost on Thursday from above forecast New Zealand GDP data. Expectations for RBNZ rate hikes in early 2022 continue to rise. Key standouts on today’s calendar come in the form of Eurozone construction output, Eurozone inflation, Canada ADP employment, US initial jobless claims, the Philly Fed index, and Treasury Secretary Yellen testimony.

US SPX 500 – technical overview

Longer-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high. Look for rallies to be well capped ahead of 4300, with a break back below 4000 to strengthen the outlook.

  • R2 4300 – Psychological – Strong
  • R1 4271 – 15 June/Record high – Medium
  • S1 4167 – 3 June low – Medium
  • S2 4036 – 13 May low – Strong

US SPX 500 – fundamental overview

We're trading just off fresh record highs, and yet, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, ongoing worry associated with coronavirus fallout and risk of rising inflation should weigh more heavily on investor sentiment into the second half of 2021 as the Fed is forced to consider raising rates sooner than later.

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 an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1600.

  • R2 1960 – 6 January/2021 high – Strong
  • R1 1917 – 1 June high – Strong
  • S1 1803 – 16 June low – Medium
  • S2 1756 – 29 April low – Strong

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 exhausted monetary policy, extended global equities, and coronavirus fallout. 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 unnerving climax.

Peformance chart: 30 Day Performance vs. US dollar (%)

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