US equities have held up rather well despite softer Q4 earnings and ongoing hawkish communications from the Fed. On Wednesday, Boeing missed bad on earnings and Microsoft lowered its guidance.
Audio Updatehttps://www.lmax.com/blog/wp-content/uploads/sites/4/2023/01/26janlmaxaudio.mp3Technical highlights* EURUSD Case for longer term bottom * GBPUSD Setbacks should be supported * USDJPY Closing in on previous resistance * AUDUSD Structure shifts more bullish * USDCAD Well supported on dips * NZDUSD Additional upside limited * US SPX 500 Looking for downtrend resumption * GOLD (spot) Pushing back towards record high
Fundamental highlights EURUSD ECB hawkish speak keeps on * GBPUSD Pound higher as factory prices ease * USDJPY Japan cuts economic assessment * AUDUSD February RBA rate hike odds ramp up * USDCAD Dovish hike from Bank of Canada * NZDUSD Kiwi inflation not as hot overall * US SPX 500 Inflation headache not going away * GOLD (spot) Dealers report* plenty of demand
30 Day Performance vs. US dollar (%)Further reading Why Jeremy Grantham Wishes You Would Cheer Up, J. Authers, Bloomberg (January 25, 2023) * Battling the Avian Flu Epidemic, A. Ahuja, Financial Times* (January 24, 2023)
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GOLD EURUSD – technical overviewThe Euro recovery has finally run back above meaningful previous support turned resistance at 1.0635. The December close above this level further encourages the recovery outlook and makes a stronger case for the formation of a longer-term bottom. Any setbacks should now be well supported ahead of 1.0300. Next major resistance at 1.1000.
R2 1.0937 – 21 April high – Strong
EURUSD – fundamental overviewThe Euro remains well supported at multi-week highs as hawkish ECB comments continue to roll in. ECB’s Makhlouf and Vasle support 50 bps of rate hikes at the next two meetings. On the data side, German IFO reads came in mixed. Key standouts on Thursday’s calendar come from US GDP, durable goods, initial jobless claims, and new home sales.
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GBPUSD – technical overviewSigns have emerged of the market wanting to put in a longer-term base after collapsing to a record low in September. The latest weekly close back above the September high at 1.1739 strengthens this prospect. Any setbacks should now be well supported ahead of 1.1500. Next key resistance comes in at 1.2668.
GBPUSD – fundamental overviewThe Pound was able to shrug off some softer inflation reads and managed to trade higher on relief as UK factory input prices eased. Key standouts on Thursday’s calendar come from US GDP, durable goods, initial jobless claims, and new home sales.
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USDJPY – technical overviewThe major pair has been in the throes of a long overdue correction that was waiting to play out after a parabolic run to the topside to multi-year highs. At this stage, the correction could be getting close to having played out fully, with the market finally approaching critical previous resistance turned support in the 125.00 area.
USDJPY – fundamental overviewThe Yen remains firm into the latter half of the week as JGB yields extend the run for a third straight day. Meanwhile, the Japanese government cut the monthly economic assessment for first time in 11 months, blaming weakening trade. Key standouts on Thursday’s calendar come from US GDP, durable goods, initial jobless claims, and new home sales.
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AUDUSD – technical overviewThere are signs of the potential formation of a longer-term base following the recent surge back above 0.6500. The recent weekly close back above previous support now turned resistance at 0.6682 strengthens the outlook for a bullish structural shift. Next key resistance comes in at 0.7137.
AUDUSD – fundamental overviewThe Australian Dollar has been running strong this week on the big inflation beat, with market participants scrambling to reprice RBA rate hike expectations. Odds for a February hike sit at 80%. Key standouts on Thursday’s calendar come from US GDP, durable goods, initial jobless claims, and new home sales.
USDCAD – technical overviewA recent surge back above 1.3000 signals an end to a period of 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.
USDCAD – fundamental overviewThe Canadian Dollar sold off in the aftermath of a Bank of Canada policy decision in which the central bank raised rates by 25 basis points as expected. The decline came from the communication that the BoC would be moving to a pause, citing a decline in household spending. Key standouts on Thursday’s calendar come from US GDP, durable goods, initial jobless claims, and new home sales.
NZDUSD – technical overviewOverall pressure remains on the downside with risk for the current recovery rally to stall out and form a lower top for the next major downside extension. A break back above 0.6577 would be required to take the immediate pressure off the downside.
NZDUSD – fundamental overviewEarlier this week, New Zealand inflation reads came in above forecast overall which has propped Kiwi somewhat. At the same time, the actual print of 7.2% YoY (near 3 decade high) is lower than the 7.5% YoY projected by the RBNZ in its November Monetary Policy Statement, which suggests a less aggressive rate hike next month. Key standouts on Thursday’s calendar come from US GDP, durable goods, initial jobless claims, and new home sales.
US SPX 500 – technical overviewLonger-term technical studies are in the process of unwinding from extended readings off record highs. Look for rallies to be well capped in favor of lower tops and lower lows. A monthly close back above 4300 will be required at a minimum to take the immediate pressure off the downside. Next major support comes in at 3492.
US SPX 500 – fundamental overviewWe’ve finally reached a point in the cycle where the Fed recognizes unanchored inflation expectations pose a greater downside risk than over-tightening. This is significant, as it means less investor friendly monetary policy that risks potential recession in the months ahead. Overall, we expect inflation to continue to be a problem in H1 2023 that results in downside pressure into rallies.
GOLD (SPOT) – technical overviewThe 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 1600 on a monthly close basis ahead of the next major upside extension. The recent break back above 1808 strengthens the bullish outlook. Next major resistance comes in at 2000.
GOLD (SPOT) – fundamental overviewThe 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 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.