Sour vibes into Wednesday

Special report: What to expect from the Fed

Today’s report: Sour vibes into Wednesday

We come into Wednesday with risk assets on the defensive. US equities took a dump on Tuesday on the back of another hot inflation read, this time by way of producer prices.

Wake-up call

Chart talk: Technical & fundamental highlights

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EURUSD – technical overview

Setbacks have extended to retest the critical 61.8% fib retrace off the 2020 low to 2021 high move. Technical studies are now tracking in extended territory on the weekly chart, warning of the need for a corrective bounce ahead. Look for the market to hold up on a weekly close basis above the 61.8% fib retrace around 1.1275. Back above 1.1465 strengthens outlook. Weekly close below 1.1275 negates.

  • R2 1.1465 – 15 November high– Strong
  • R1 1.1383 - 30 November high – Medium
  • S1 1.1186 - 24 November/2021 low – Medium
  • S2 1.1168 – June 2020 low – Strong

EURUSD – fundamental overview

The Euro is still hanging out near recent lows as the virus dominates headlines in the zone and as Eurozone industrial output disappoints. Key standouts on today’s calendar come in the form of UK inflation reads, Canada inflation reads, US retail sales, empire manufacturing, business inventories, and the Fed policy decision.

EURUSD - Technical charts in detail

GBPUSD – technical overview

The market is in a correction phase in the aftermath of the run to fresh multi-month highs earlier this year. 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.

  • R2 1.3371 – 30 November high – Strong
  • R1 1.3290 – 7 December high – Medium
  • S1 1.3160 – 8 December/2021 low – Medium
  • S2 1.3100 – Figure – Strong

GBPUSD – fundamental overview

A slight rebound for the Pound on Tuesday, with the currency getting a boost from solid UK jobs numbers. Still, the market was well offered into rallies as ongoing worry about the omicron variant weighed. Key standouts on today’s calendar come in the form of UK inflation reads, Canada inflation reads, US retail sales, empire manufacturing, business inventories, and the Fed policy decision.

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 116.00 to negate the outlook.

  • R2 116.00 – Figure – Strong
  • R1 115.53 – 24 November/2021 high – Medium
  • S1 113.00 – 29 November low – Medium
  • S2 112.53 – 30 November low – Strong

USDJPY – fundamental overview

The Yen is back to trading on traditional correlations, with the currency moving along with risk sentiment. We did see some mild Yen weakness as it was learned the BOJ as contemplating extending COVID measures beyond March. Key standouts on today’s calendar come in the form of UK inflation reads, Canada inflation reads, US retail sales, empire manufacturing, business inventories, and the Fed policy decision.

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 earlier this year. 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 0.7237 – 23 November high – Medium
  • R1 0.7200 – 8 December high – Medium
  • S1 0.0.6993 – 3 December/2021 low – Strong
  • S2 0.6950 – Mid-Figure – Medium

AUDUSD – fundamental overview

The Australian Dollar has been sold into rallies as risk assets come under pressure, copper falls below the 200 -day dma, and Aussie business confidence sinks. Key standouts on today’s calendar come in the form of UK inflation reads, Canada inflation reads, US retail sales, empire manufacturing, business inventories, and the Fed policy decision.

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 1.2949 – 20 August/2021 high – Strong
  • R1 1.2896 – 20 September high – Medium
  • S1 1.2667 – 8 December low – Medium
  • S2 1.2585 – 19 November low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been underperforming since last week's more dovish leaning Bank of Canada decision. And the selling has only intensified after the central bank adjusted its mandate, adding maximum employment to go along with price stability. The central bank also widened the inflation target to a range of 1-3%. Key standouts on today’s calendar come in the form of UK inflation reads, Canada inflation reads, US retail sales, empire manufacturing, business inventories, and the Fed policy decision.

NZDUSD – technical overview

The market has entered a period of intense correction after running up to a yearly and multi-month high. Back below 0.6700 would suggest a more significant bearish structural shift.

  • R2 0.6894 – 25 November high – Strong
  • R1 0.6868 – 1 December high – Medium
  • S1 0.6726 – 15 December/2021 low – Medium
  • S2 0.6700 – Figure – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has been a laggard on the combination of a less hawkish RBNZ trajectory and this latest round of discouraging New Zealand manufacturing PMI and home sales data. Key standouts on today’s calendar come in the form of UK inflation reads, Canada inflation reads, US retail sales, empire manufacturing, business inventories, and the Fed policy decision.

US SPX 500 – technical overview

Longer-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high. At the same time, the latest breakout above 4600 introduces the possibility for the next major upside extension through 4800. At this stage, it will take a break back below 4500 to take the immediate pressure off the topside.

  • R2 4800 – Psychological – Strong
  • R1 4745 – 22 November/Record high – Medium
  • S1 4600 –Round number – Medium
  • S2 4496 – 3 December low – Strong

US SPX 500 – fundamental overview

We're trading just off fresh record highs, and yet, 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 Q4 2021.

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 1759 – 3 November 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.

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

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