Next 24 hours: Fed speak takes center stage in data light US session
Today’s report: New week gets off to a good start
Risk appetite is looking quite healthy as the new week gets going. Investors have been encouraged by the latest run of Goldilocks economic data out of the US, which supports the view rates should lean more towards the investor friendly, accommodative side of things.
Wake-up call
Peformance chart: 30-Day Performance vs. US dollar (%)
Suggested reading
- What Stagflation? There's No "Stag" And No "Flation", B. Ritholtz, The Big Picture (May 16, 2024)
- The US Can't Win A Trade War With China, Q. Xu, Project Syndicate (May 13, 2024)
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.EURUSD – fundamental overview
The Euro has been able to hold onto its recovery after Friday's economic data produced a steady France unemployment rate and as expected Eurozone inflation data. Meanwhile, ECB Schnabel perhaps gave the Euro an excuse to see an added little boost after warning against back to back rate cuts in June and July. ECB Holzmann added to the hawkish talk, saying cutting rates too early risked the refueling of inflation. Absence of first-tier economic data releases on Monday’s calendar will leave the focus on central bank speak scattered throughout the day.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.GBPUSD – fundamental overview
The Pound has mostly held up on the back of broad based US Dollar outflows following the latest run of softer US data and concurrent dovish repricing of Fed expectations. As far as the week ahead goes, there won't be any first tier data out of the UK until the release of Wednesday's CPI. Bets have ramped up for a BOE June cut, with those odds rising to just over 50%. There have however been signs of economic data improvement, which if confirmed, could bring those BOE rate cut odds back down and invite more upside in the Pound. Absence of first-tier economic data releases on Monday’s calendar will leave the focus on central bank speak scattered throughout the day.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.USDJPY – fundamental overview
The main focus in Japan this week will come later on by way of Thursday's PMI reads and Friday's CPI print. We suspect there won't be enough within the data to justify the BOJ needing to push to higher rates, which should keep the Yen under pressure against the US Dollar. The market is looking for core CPI to drop to 2.2% in April from 2.6% in March. Absence of first-tier economic data releases on Monday’s calendar will leave the focus on central bank speak scattered throughout the day.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.AUDUSD – fundamental overview
The Australian Dollar has retained a bid tone in the aftermath of last week's softer run of US data and dovish repricing of Fed rate expectations. We have however seen some selling into the rally after a batch of China data at the end of last week came in on the mixed side, suggesting the Chinese economic recovery remains bumpy. Absence of first-tier economic data releases on Monday’s calendar will leave the focus on central bank speak scattered throughout the day.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.USDCAD – fundamental overview
The Canadian Dollar has been a clear underperformer over the past week, tracking lower against the Buck despite a wave of Dollar selling on softer US economic data and a recovery in the price of oil. The relative weakness has been attributed to a sour run of Canada economic data that has been more than offsetting. Absence of first-tier economic data releases on Monday’s calendar will leave the focus on central bank speak scattered throughout the day.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.NZDUSD – fundamental overview
The RBNZ is the only major central bank scheduled to meet this week. The expectation is the RBNZ will leave rates on hold, with inflation still not coming back down as much as desired. This will leave New Zealand holding the position as the country with the highest interest rate amongst the developed nations. It is however possible that we see a dovish tweak and the RBNZ moving its timeline forward with respect to rate cuts on account of broader weakness within the New Zealand economy. Absence of first-tier economic data releases on Monday’s calendar will leave the focus on central bank speak scattered throughout the day.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.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.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.