Plenty of first tier data on US docket

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 1.2624 – 20 December low – Medium
• S2 1.2612 – 14 December low – Medium

GBPUSD – fundamental overview

A sharp drop in UK CPI data was all that was needed to account for the relative weakness in the Pound on Wednesday. The implied probability of a BOE rate cut in March has semi-spiked to 44% versus around 19% around the time of the UK CPI release. Key standouts on Thursday’s calendar come from UK public borrowing, Canada retail sales and earnings, and US reads in the form of GDP, initial jobless claims, and the Philly Fed.

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 144.96 – 19 December low – Strong
• R1 144.00 – Figure – Medium
• S1 142.25– 19 December low – Medium
• S2 140.95 – 14 December low – Strong

USDJPY – fundamental overview

A quarterly report from the Bank of Japan highlighted Japan’s household assets hitting a record high of JPY 2121tln with assets in stocks up 30%. Meanwhile, Japan’s trade balance showed the deficit increased to JPY -776.9bln in November versus JPY -661.0bln prior and JPY -1000.1bln forecast. Key standouts on Thursday’s calendar come from UK public borrowing, Canada retail sales and earnings, and US reads in the form of GDP, initial jobless claims, and the Philly Fed.

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 0.6800– Figure – Medium
• R2 0.6775 – 19 December high – Medium
• S1 0.6655– 14 December low – Medium
• S2 0.6620 – 7 December high – Medium

AUDUSD – fundamental overview

Australia’s November Westpac leading index growth rate climbed to 0.30% from -0.39% prior, the first positive, above-trend reading in 15 months. At the same time, the Australian Dollar wasn't able to avoid downside pressure on Wednesday from the reversal in US equities. Key standouts on Thursday’s calendar come from UK public borrowing, Canada retail sales and earnings, and US reads in the form of GDP, initial jobless claims, and the Philly Fed.

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 1.3311 – 20 December low – Medium
• S2 1.3300 – Figure – Medium

USDCAD – fundamental overview

Bank of Canada research suggested approximately 45% of Canadian mortgages taken out before rates began to rise in March 2022 have seen an increase in payments, and by the end of 2026, nearly all remaining holders will go through the renewal cycle. Meanwhile, the Bank of Canada Minutes showed that in the deliberations leading up to the decision to hold rates steady at 5%, policymakers were more comfortable that rates were high enough to combat inflation, but were looking for further sustained declines in underlying price pressure. They noted it may still be necessary to increase the policy rate to secure further disinflation. Key standouts on Thursday’s calendar come from UK public borrowing, Canada retail sales and earnings, and US reads in the form of GDP, initial jobless claims, and the Philly Fed.

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 0.6412 – 14 July high– Strong
• R1 0.6300 – Figure – Medium
• S1 0.6170 – 14 December low – Medium
• S2 0.6084 – 13 December low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar succumbed to pressure from a bearish reversal in US equities. The RBNZ raised FX intervention capacity further in November to NZ$18.6bln by month-end, up from NZ$18.5bln in October, and sharply up from NZ$12.2bln a year ago. Key standouts on Thursday’s calendar come from UK public borrowing, Canada retail sales and earnings, and US reads in the form of GDP, initial jobless claims, and the Philly Fed.

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 4779 – 20 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.