No major surprises from Bank of Japan

Next 24 hours: Yen under pressure while other currencies rally

Today’s report: No major surprises from Bank of Japan

The BOJ decision has come and gone, and in the end, nothing to write home about. The central bank opted to keep its monetary policy settings unchanged, with little in the way of any color around a potential pivot.

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 yearly high at 1.1276 to strengthen the constructive outlook and extend the recovery run towards 1.2000. Only back below 1.0400 negates.

  • R2 1.1018 – 29 November high – Strong
  • R1 1.1010 - 14 December high – Medium
  • S1 1.0869 - 14 December low – Medium
  • S2 1.0825 – 17 November low – Strong

EURUSD – fundamental overview

The Euro got a little boost on Monday from hawkish ECB chatter. This included comments from ECB's Vasle, Kazimir, and Stournaras. On the data front, German IFO reads came in a little softer but not enough to make too many waves. Key standouts on Tuesday’s calendar come from Eurozone inflation, UK CBI industrial trends, Canada inflation, US housing starts and building permits, and the New Zealand GDT auction.

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 November 2022 monthly close back above 1.2000 strengthens this prospect. Any setbacks should now be well supported ahead of 1.2000. Next key resistance comes in at 1.2818.

  • R2 1.2818 – 10 August high – Strong
  • R1 1.2794 – 14 December high – Medium
  • S1 1.2635 – 13 December high – Medium
  • S2 1.2612 – 14 December low – Medium

GBPUSD – fundamental overview

A lot of the recent weakness in the Pound has been attributed to BOE Broadbent comments. The central banker thinks the UK may need a longer period of below trend growth and that uncertainty delays the BoE's reaction function. Key standouts on Tuesday’s calendar come from Eurozone inflation, UK CBI industrial trends, Canada inflation, US housing starts and building permits, and the New Zealand GDT auction.

USDJPY – technical overview

The market remains confined to a strong uptrend, with sights set on a retest and break of the multi-year high from 2022 at 151.95. A push through this level will open the next major upside extension towards 155.00. Key support comes in at 140.00, with only a weekly close below to delay the constructive outlook.

  • R2 144.44 – 1 September low – Strong
  • R1 143.79 – 19 December high – Medium
  • S1 142.25– 19 December low – Medium
  • S2 140.95 – 14 December low – Strong

USDJPY – fundamental overview

There continues to be speculation around a BOJ pivot in the months ahead. But right now, this remains pure speculation and not enough to keep the Yen from selling off post today's BOJ decision. The BOJ opted to keep its monetary policy settings unchanged, with the move likely providing little by way of a meaningful surprise to markets given the distance towards the central bank's goals for the economy. Key standouts on Tuesday’s calendar come from Eurozone inflation, UK CBI industrial trends, Canada inflation, US housing starts and building permits, and the New Zealand GDT auction.

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 0.6740– 31 July high – Strong
  • R2 0.6735 – 18 December high – Medium
  • S1 0.6655– 14 December low – Medium
  • S2 0.6620 – 7 December high – Medium

AUDUSD – fundamental overview

The Australian Dollar is getting another prop on Tuesday after the RBA Minutes revealed the central bank was considering a hike at the previous meeting. The case for a hike was driven by expectations of strong domestic demand providing upside risks to the inflation outlook. Key standouts on Tuesday’s calendar come from Eurozone inflation, UK CBI industrial trends, Canada inflation, US housing starts and building permits, and the New Zealand GDT auction.

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 1.3517 – 14 December high – Medium
  • R1 1.3480 – 4 December low – Medium
  • S1 1.3349 – 18 December low – Medium
  • S2 1.3300 – Figure – Medium

USDCAD – fundamental overview

Recent comments from Bank of Canada Governor Macklem have weighed on the Canadian Dollar. Macklem said the likelihood rates were restrictive enough to bring inflation back to target had increased. Key standouts on Tuesday’s calendar come from Eurozone inflation, UK CBI industrial trends, Canada inflation, US housing starts and building permits, and the New Zealand GDT auction.

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 0.6274 – 27 July high– Strong
  • R1 0.6250 – 14 December high – Medium
  • S1 0.6170 – 14 December low – Medium
  • S2 0.6084 – 13 December low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar is holding onto gains despite the Treasury saying the real economy remains very weak. But this has been offset by economic data in the form of a narrowing trade deficit and well received ANZ business outlook survey. Key standouts on Tuesday’s calendar come from Eurozone inflation, UK CBI industrial trends, Canada inflation, US housing starts and building permits, and the New Zealand GDT auction.

US SPX 500 – technical overview

Longer-term technical studies continue to look quite extended, begging for a deeper correction ahead. Look for rallies to be well capped in favor of lower tops and lower lows. A monthly close back above 4800 will be required to delay the outlook. Next key support comes in at 4536.

  • R2 4800 – Round Number – Strong
  • R1 4751 – 18 December/2023 high – Medium
  • S1 4643– 13 December low – Medium
  • S2 4536 – 30 November low – Strong

US SPX 500 – fundamental overview

The Fed has finally bent to the will of the market into year end, with the December policy decision revealing rate projections coming down from previous and more in line with what the market has been looking for. This has translated to more investor friendly policy going forward, which could now open the door for a run to fresh record highs in 2024. At the same time, we worry inflation remains a risk both the market and Fed are not taking as seriously as needed, which could once again force the Fed back into a more restrictive path and weigh heavily on stocks.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs. Setbacks should now be well supported above 1900 on a monthly close basis ahead of the next major upside extension towards 2500.

  • R2 2175 – 4 December/Record high– Strong
  • R1 2100 – Round Number – Medium
  • S1 1973 – 13 December low – Medium
  • S2 1965 – 20 November 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 inflation risk and a less stable and 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 unnerving climax.

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

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