Powell spooks the market with hawkish talk

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 1.3354 – 4 March high – Strong
• R1 1.3239 – 7 March high – Medium
• S1 1.3000 – 14 March/2022 low – Strong
• S2 1.2900 – Figure – Medium

GBPUSD – fundamental overview

Though the BOE hiked rates as expected last week, the Pound has been unable to generate much buy interest, getting sold into rallies. The Pound has been feeling the pains of  the BOE flagging risk to the rate hike trajectory. The market had been pricing a single 50bp hike by June, and this has since come off the table. BOE Bailey has also softened his stance saying further tightening 'might' be appropriate. Solid UK housing data on Monday hasn't really factored into price action. Key standouts on today’s calendar include the Eurozone current account and construction output, UK CBI industrial trends, Canada producer prices, an ECB Lagarde speech, and US Richmond Fed manufacturing.

USDJPY – technical overview

The longer-term trend is neutral despite the recent run higher. Look for additional upside to be limited, with scope for a topside failure above 120.00 and bearish reversal back down towards the 100.00 area. It would take a monthly close above 120.00 to negate the outlook.

• R2 121.00 – Figure – Strong
• R1 120.47 – 22 March/2022 high – Medium
• S1 119.43 – 22 March low – Medium
• S2 118.17 – 16 March low – Strong

USDJPY – fundamental overview

The Yen continues to get hammered to multi-month lows, with the worsening terms of trade and widening yield differentials with the US Dollar playing a major part. Moreover, the fact that stocks haven’t been hit has hard, is taking away from any Yen demand we might normally see in a risk off backdrop, further intensifying the Yen outflows. Last Friday Friday, the BOJ left rates on hold while reaffirming its dovish stance and welcoming weakness in the Yen. Key standouts on today’s calendar include the Eurozone current account and construction output, UK CBI industrial trends, Canada producer prices, an ECB Lagarde speech, and US Richmond Fed manufacturing.

AUDUSD – technical overview

At this stage, the market has found a bottom and is trying to work back to the topside. Ultimately, it will take a break back above 0.7600 to shift the focus back on the topside. A weekly close below 0.7000 will force a bearish shift.

• R2 0.7442 – 7 March/2022 high – Strong
• R1 0.7400 – 4 March high – Medium
• S1 0.7166 – 15 March low – Medium
• S2 0.7100 – Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar is rolling over as the week gets going, with Fed Powell's hawkish cue and weaker iron ore futures factoring into the price action. Key standouts on today’s calendar include the Eurozone current account and construction output, UK CBI industrial trends, Canada producer prices, an ECB Lagarde speech, and US Richmond Fed manufacturing.

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 1.2901 – 8 March/2022 high – Strong
• R1 1.2778 – 16 March high  – Medium
• S1 1.2565 – 21 March low – Medium
• S2 1.2500 – Psychological – Strong

USDCAD – fundamental overview

The Canadian Dollar has been trying hard to recover in recent sessions on a round of strong Canada data in March including the jobs report, housing starts, manufacturing sales, existing home sales and retail sales. We're also seeing some demand creep back in on another hot Canada inflation print and as oil looks to find a bottom after a sharp correction lower. Key standouts on today’s calendar include the Eurozone current account and construction output, UK CBI industrial trends, Canada producer prices, an ECB Lagarde speech, and US Richmond Fed manufacturing.

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 0.6926 – 7 March/2022 high – Strong
• R1 0.6900 – Figure – Medium
• S1 0.6728 – 15 March low – Medium
• S2 0.6700 – Figure – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has come under pressure into this latest rally, facing selling from Fed Powell's hawkish cue and from the much weaker New Zealand Westpac consumer confidence print. Key standouts on today’s calendar include the Eurozone current account and construction output, UK CBI industrial trends, Canada producer prices, an ECB Lagarde speech, and US Richmond Fed manufacturing.

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 4490 – 16 February high – Strong
• R1 4483 – 21 March high – Medium
• S1 4105 – 24 February low – Strong
• S2 4035 – 13 May 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, rising inflation, and geopolitical tension 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. Setbacks should now be well supported above 1900.

• R2 2076 – Record high, August 2020 – Strong
• R1 2071 – 8 March/2022 high – Medium
• S1 1900 – Round number – Medium
• S2 1878 – 16 November high – 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, coronavirus fallout, inflation risk, and geopolitical tension. 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.