The right kind of trend

Next 24 hours: Bank of Canada decision stands out

Today’s report: The right kind of trend

There has been a very clear trend of the market feeling good about softer US economic data, as it will keep the Fed leaning towards a more investor friendly monetary policy path. This trend has been behind a lot of the risk on flow we’ve been seeing in financial markets.

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 2023 high at 1.1276 to strengthen the constructive outlook and extend the recovery run towards 1.2000. Only back below 1.0400 negates.

  • R2 1.0982 – 8 March high – Strong
  • R1 1.0917 - 4 June high – Medium
  • S1 1.0788 - 30 May low– Strong
  • S2 1.0724 – 9 May low – Medium

EURUSD – fundamental overview

On Tuesday, the German unemployment rate was unchanged and most of the market price action was focused on the bigger picture flow and positioning into tomorrow's critical event risk in the form of the ECB policy decision. Looking ahead, key standouts on the calendar come from Eurozone, German, and UK services and composite PMI reads, Eurozone producer prices, US ADP employment, Canada PMIs, the Bank of Canada policy decision, and US ISM services PMIs.

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 latest push to a fresh 2024 high beyond 1.2830 confirms the outlook and opens the door for the next major upside extension towards the 2023 high at 1.3143. Any setbacks should now be well supported ahead of 1.2000.

  • R2 1.2894 – 8 March/2024 high – Strong
  • R1 1.2824 – 12 March high – Medium
  • S1 1.2667 – 24 May low – Medium
  • S2 1.2643 – 16 May low – Strong

GBPUSD – fundamental overview

Absence of first tier data out of the UK has left the Pound trading on bigger picture flow, with the currency pulling back a bit on Tuesday in response to broad based US Dollar demand. Looking ahead, key standouts on the calendar come from Eurozone, German, and UK services and composite PMI reads, Eurozone producer prices, US ADP employment, Canada PMIs, the Bank of Canada policy decision, and US ISM services PMIs.

USDJPY – technical overview

The market remains confined to a strong uptrend, most recently extending to a multi-year high through 160.00. Key support comes in at 151.95, with only a weekly close below to delay the constructive outlook.

  • R2 157.99 – 1 May high – Medium
  • R1 157.71 – 29 May high – Medium
  • S1 153.60 – 16 May low – Medium
  • S2 151.86 – 3 May low – Strong

USDJPY – fundamental overview

The combination of official speak from both BOJ Ueda and FinMin Suzuki, along with some broad based US Dollar selling, has been behind a lot of the rebound in the Yen we've been seeing in recent sessions. Ueda talked about the possibility for a shift in policy on the horizon, while FinMin Suzuki highlighted how intervention efforts had been effective. Looking ahead, key standouts on the calendar come from Eurozone, German, and UK services and composite PMI reads, Eurozone producer prices, US ADP employment, Canada PMIs, the Bank of Canada policy decision, and US ISM services PMIs.

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 0.6715 – 16 May high – Medium
  • S1 0.6591– 30 May low – Medium
  • S2 0.6558 – 8 May low – Strong

AUDUSD – fundamental overview

Aussie GDP data came in a little softer than expected, though the Australian Dollar has done a good job finding bids into dips, helped along by some offsetting data out of China which had services and composite PMIs exceeding expectations. Looking ahead, key standouts on the calendar come from Eurozone, German, and UK services and composite PMI reads, Eurozone producer prices, US ADP employment, Canada PMIs, the Bank of Canada policy decision, and US ISM services PMIs.

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 1.3847 – 16 April/2024 high – Strong
  • R1 1.3785 – 30 April high – Medium
  • S1 1.3586 – 10 May low – Medium
  • S2 1.3547 – 9 April low – Strong

USDCAD – fundamental overview

The Canadian Dollar has been a clear underperformer in recent sessions, taking its hits from overall softer economic data out of Canada and a concerning slide in the price of oil to its lowest level since February. Looking ahead, key standouts on the calendar come from Eurozone, German, and UK services and composite PMI reads, Eurozone producer prices, US ADP employment, Canada PMIs, the Bank of Canada policy decision, and US ISM services PMIs.

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 0.6218 – 22 February high – Strong
  • R1 0.6199 – 4 June high– Medium
  • S1 0.6083 – 22 May low – Medium
  • S2 0.6031 – 15 May low – Strong

NZDUSD – fundamental overview

The New Zealand Dollar is trying to generate upside momentum on Wednesday after New Zealand terms of trade data produced a healthy improvement and after China services and composite PMIs exceeded expectation. Looking ahead, key standouts on the calendar come from Eurozone, German, and UK services and composite PMI reads, Eurozone producer prices, US ADP employment, Canada PMIs, the Bank of Canada policy decision, and US ISM services PMIs.

US SPX 500 – technical overview

Longer-term technical studies continue to look quite extended, begging for a deeper correction ahead. At the same time, the latest bullish breakout to a fresh record high beyond the 2024 high opens the door for the next measured move upside extension targeting the 5650 area. Key support comes in at 5194.

  • R2 5400 – Round Number – Strong
  • R1 5352 – 23 May/Record high – Medium
  • S1 5194 – 31 May low – Strong
  • S2 5165 – 8 May low – Medium

US SPX 500 – fundamental overview

Though we have seen a healthy adjustment of investor expectations towards the amount of rate cuts in 2024, the market still hopes policy will end up erring more towards the investor friendly, accommodative side of things. This bet has kept stocks well bid into dips and consistently pushing record highs. Still, if there is a sense the Fed will need to be more sensitive towards erring on the side of higher rates, it could invite major disruption to the stock market.

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 this next major upside extension into the 2500-3000 area. Setbacks should now be well supported above 2000 on a monthly close basis.

  • R2 2500 – Psychological – Strong
  • R1 2451 – 20 May Record high – Medium
  • S1 2315 – 3 June low – Medium
  • S2 2277– 3 May low – Strong

GOLD (SPOT) – fundamental overview

The yellow metal has pushed record highs in 2024 with solid demand from medium and longer-term accounts. These players are more concerned about inflation, geopolitical risk and a less 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 end.

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

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