The upside from Friday’s soft US data

Next 24 hours: Currencies give back gains after solid start

Today’s report: The upside from Friday's soft US data

A sluggish round of economic data out of the US on Friday had opened a wave of risk off flow, though already on Monday, we’re seeing a reversal of flow and uptick in risk appetite. Ultimately, the good news for investors is that softer US economic data increases odds for a more accommodative, investor friendly Fed policy track, which should inspire renewed Dollar selling and higher stocks.

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 towards parity, with a higher platform sought out ahead of the next major upside extension. Look for a major bounce in the days ahead and the start to a push back towards the 2023 high at 1.1276. Only a monthly close below 1.0000 negates.

  • R2 1.0534 – 27 January/2025 high – Strong
  • R1 1.0529 - 24 February high  – Medium
  • S1 1.0373 - 13 February low – Medium
  • S2 1.0283 – 10 February low – Medium

EURUSD – fundamental overview

There's been a fresh wave of Euro optimism on the back of expectations for a potential policy shift under the anticipated leadership of Friedrich Merz, head of the CDU/CSU. Merz has signaled an intent to reduce Germany’s dependence on the United States while pursuing fiscal reforms designed to foster economic growth. The path forward will not be without challenge however, as the failure to secure an outright majority means coalition negotiations. Another positive for the Euro as the new week gets going is the news President Zelensky would be willing to resign if a peaceful resolution of the Russia-Ukraine war was offered soon. Key standouts on Monday’s calendar come from German Ifo reads, Eurozone inflation, the Chicago Fed national activity index, Dallas Fed manufacturing, Bank of Canada speak, and BOE speak.

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 door is now open for the next major upside extension towards the 2018 high at 1.4377. Setbacks should be well supported above 1.2000 on a monthly close basis.

  • R2 1.2729 – 17 December high – Strong
  • R1 1.2691 – 24 February/2025 high – Medium
  • S1 1.2563 –  19 February low – Medium
  • S2 1.2545 – 14 February low – Strong

GBPUSD – fundamental overview

The Pound is coming off another solid day of economic data. This past Friday, although manufacturing PMIs were softer, they were more than offset by improvements in services PMIs, retail sales, and consumer confidence. Key standouts on Monday’s calendar come from German Ifo reads, Eurozone inflation, the Chicago Fed national activity index, Dallas Fed manufacturing, Bank of Canada speak, and BOE speak.

USDJPY – technical overview

The market is looking to resume the longer-term uptrend after an intense correction in 2024. A higher low is ideally sought out above 140.00 in favor of a bullish continuation. The October monthly close back above 150.00 strengthens the case for longer-term uptrend resumption.

  • R2 154.80 – 12 February high – Strong
  • R1 152.32 – 19 February high – Medium
  • S1 148.84 – 24 February/2025 low – Medium
  • S2 148.64 – 3 December low – Strong

USDJPY – fundamental overview

Japanese markets are closed on this Monday in observance of holiday. Key standouts on Monday’s calendar come from German Ifo reads, Eurozone inflation, the Chicago Fed national activity index, Dallas Fed manufacturing, Bank of Canada speak, and BOE speak.

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 0.6000 would give reason for rethink. A monthly close back above 0.7000 will take the big picture pressure off the downside and strengthen case for a bottom.

  • R1 0.6430 – 12 December high – Medium
  • R2 0.6409 – 21 February/2025 high – Medium
  • S1 0.6310 – 14 February low – Medium
  • S2 0.6233 – 12 February low – Strong

AUDUSD – fundamental overview

Absence of any first tier calendar risk out of Australia has left the Australian Dollar to trade on bigger picture flows. The currency will also be looking ahead to this week's Aussie inflation data. Key standouts on Monday’s calendar come from German Ifo reads, Eurozone inflation, the Chicago Fed national activity index, Dallas Fed manufacturing, Bank of Canada speak, and BOE speak.

USDCAD – technical overview

A sustained hold above 1.3000 over the past several months 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 at the 1.5000 psychological barrier. Setbacks should be very well supported ahead of 1.4000.

  • R2 1.4595 – 30 January high – Medium
  • R1 1.4380 – 10 February high – Strong
  • S1 1.4151 – 14 February/2025 low – Medium
  • S2 1.4100 – Figure – Medium

USDCAD – fundamental overview

The alleviation of stress around trade tariffs has given the Canadian Dollar good reason to be feeling better than it did at the height of the panic in early February. Risk sentiment did however take a turn for the worse on Friday, and this along with a big drop in the price of oil were seen driving Canadian Dollar selling. Key standouts on Monday’s calendar come from German Ifo reads, Eurozone inflation, the Chicago Fed national activity index, Dallas Fed manufacturing, Bank of Canada speak, and BOE speak.

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 0.5469 will intensify bearish price action.

  • R2 0.5818 – 12 December high – Medium
  • R1 0.5773 – 21 February/2025 high – Medium
  • S1 0.5600 – 12 February low – Strong
  • S2 0.5541 – 13 January low – Medium

NZDUSD – fundamental overview

The New Zealand Dollar has gotten a nice boost of support on Monday after New Zealand retail sales came in much beter than expected, putting in the strongest gain in three years. Key standouts on Monday’s calendar come from German Ifo reads, Eurozone inflation, the Chicago Fed national activity index, Dallas Fed manufacturing, Bank of Canada speak, and BOE speak.

US SPX 500 – technical overview

The longer term uptrend remains intact and dips continue to be exceptionally well supported. Critical support comes in at 5679, with only a break back below this level to compromise the structure and open the door for a more significant corrective decline. Until then, the focus remains on a continued push to fresh record highs.

  • R2 6200 – Round Number – Strong
  • R1 6152 – 19 February/Record high – Medium
  • S1 5771 – 13 January/2025 low – Medium
  • S2 5697 – 4 November low – Strong

US SPX 500 – fundamental overview

Investors are feeling better about a soft landing in the US economy. Moreover, there has been a fresh wave of market optimism in anticipation of a market bullish Trump presidency. It will however be important to keep an eye on Trump trade policies, inflation, bigger picture economic data and the latest shift in the Fed dot plot. Any of these variables are capable of easily ruffling some feathers and we've already seen a little of this as 2025 gets going.

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 3000 area. Setbacks should now be well supported above 2500 on a monthly close basis.

  • R2 3000 – Psychological – Strong
  • R1 2948 – 20 February/Record high – Medium
  • S1 2730 – 27 January low – Medium
  • S2 2689 – 20 January low – Medium

GOLD (SPOT) – fundamental overview

The yellow metal has pushed record highs in recent months 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 over the coming months.

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

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