Not as simple as it used to be

GBPUSD – technical overview

The market is in a correction phase in the aftermath of the run to fresh multi-month highs in 2021. At this stage, additional setbacks should be limited to the 1.3000 area ahead of the next major upside extension towards a retest and break of critical resistance in the form of the 2018 high. Back above 1.3835 takes pressure off the downside.

• R2 1.3592 – 21 January high – Medium
• R1 1.3588 – 2 February high – Medium
• S1 1.3434– 1 February low – Medium
• S2 1.3339 – 23 December low – Medium

GBPUSD – fundamental overview

There hasn't been much appetite to sell Pounds ahead of today's BOE decision. The combination of rising inflation and some very strong housing numbers early this week are only reinforcing hawkish leaning expectations. Key standouts on today’s calendar include central bank decisions from the BOE and ECB, Eurozone producer prices, US initial jobless claims, US ISM non-manufacturing, and US factory orders.

USDJPY – technical overview

The longer-term trend is bearish despite the recent run higher. Look for additional upside to be limited, with scope for a topside failure and bearish resumption back down towards the 100.00 area. It would take a clear break back above 117.00 to negate the outlook.

• R2 116.36 – 4 January high – Strong
• R1 115.69 – 28 January high – Medium
• S1 114.15 – 2 February low – Medium
• S2 113.47 – 24 January low – Strong

USDJPY – fundamental overview

Yen weakness has slowed down in recent sessions despite the ongoing recovery in US equities. A lot of this could be around the market having already priced all of the Fed hawkishness for 2022, with expectation for 5 rate hikes now well absorbed. This leaves the balance of risk tilting back in the Yen's favour. Key standouts on today’s calendar include central bank decisions from the BOE and ECB, Eurozone producer prices, US initial jobless claims, US ISM non-manufacturing, and US factory orders.

AUDUSD – technical overview

The Australian Dollar has been in the process of a healthy correction following the impressive run towards a retest of the 2018 high in 2021. At this stage, the correction is starting to look stretched and setbacks should be well supported above 0.7000 on a weekly close basis. A weekly close below 0.7000 will force a bearish shift.

• R2 0.7188 – 24 January high – Strong
• R1 0.7160 – 2 February high – Medium
• S1 0.6968 – 28 January/2022 low – Medium
• S2 0.6921 – July 2020 low – Strong

AUDUSD – fundamental overview

Earlier this week, the RBA announced it was ending its QE program. A number of factors were cited, but the most important one was the central bank is getting closer to achieving its employment and inflation goals. The RBA also kept the cash rate at 0.10% and the interest rate on exchange settlement balances at 0%. Aussie gains post decision have mostly come from ongoing support for risk assets. Key standouts on today’s calendar include central bank decisions from the BOE and ECB, Eurozone producer prices, US initial jobless claims, US ISM non-manufacturing, and US factory orders.

USDCAD – technical overview

Finally signs of a major bottom in the works after a severe decline from the 2020 high. A recent weekly close back above 1.2500 encourages the constructive outlook and opens the door for a push back towards next critical resistance in the 1.3000 area. Any setbacks should be well supported into the 1.2200s.

• R2 1.2814 – 6 January high – Strong
• R1 1.2797 – 28 January high – Medium
• S1 1.2560 – 26 January low– Strong
• S2 1.2450 – 19 January low – Medium

USDCAD – fundamental overview

The Canadian Dollar has managed only a mild recovery despite rallying oil prices and an upturn in stocks. Loonie gains have been held up from the soft round of Canada data this week including GDP and construction reads. Key standouts on today’s calendar include central bank decisions from the BOE and ECB, Eurozone producer prices, US initial jobless claims, US ISM non-manufacturing, and US factory orders.

NZDUSD – technical overview

Setbacks have intensified in recent weeks with the market trading down to fresh multi-month lows. A recent breakdown below the 0.6700 area opens the door for a drop towards 0.6500 in the sessions ahead.

• R2 0.6728 – 24 January high – Strong
• R1 0.6702 – 26 January high – Medium
• S1 0.6530 – 28 January/2022 low – Medium
• S2 0.6500 – Psychological – Medium

NZDUSD – fundamental overview

RBNZ rate hike expectations are leaning hawkish and stocks have been bid up. Yet, the New Zealand Dollar hasn't been as well bid into this latest bounce, with market participants still proceeding with caution when it comes to risk correlated FX. Key standouts on today’s calendar include central bank decisions from the BOE and ECB, Eurozone producer prices, US initial jobless claims, US ISM non-manufacturing, and US factory orders.

US SPX 500 – technical overview

Longer-term technical studies are in the process of unwinding from extended readings off record highs. The latest breakdown below 4,272 opens the door for the next major downside extension towards 3,500. Back above 4,612 will be required at a minimum to take the immediate pressure off the downside.

• R2 4612 – 19 January high – Strong
• R1 4600 – Round Number – Medium
• S1 4403 – 31 January low – Medium
• S2 4220 – 24 January/2022 low – Strong

US SPX 500 – fundamental overview

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 in Q1 2022.

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 1917 – 1 June high – Strong
• R1 1878 – 16 November high – Medium
• S1 1753 – 15 December low – Medium
• S2 1722 – 29 September 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.