It’s been a little odd to see currencies holding up in recent sessions against the US Dollar, considering all of the risk off flow we’ve been seeing this week. It’s possible the FX market is trying to respond to toned down hawkish talk from Fed Powell on Wednesday and some weaker US initial jobless claims reads.
Audio Updatehttps://www.lmax.com/blog/wp-content/uploads/sites/4/2023/03/10marchlmaxaudio.mp3Technical highlights* EURUSD Looking for next higher low * GBPUSD Room for more weakness * USDJPY Signs of uptrend resumption * AUDUSD Gravitating to critical support * USDCAD Sights set on 1.4000 * NZDUSD Well capped into rallies * US SPX 500 Looking for downtrend resumption * GOLD (spot) Setbacks seen forming higher low
Fundamental highlights EURUSD Euro extends recovery on position adjusting * GBPUSD Pound to digest heavy batch of Friday data * USDJPY No surprises from BOJ decision * AUDUSD Aussie looking ahead to US jobs report * USDCAD Canada employment report stands out * NZDUSD Kiwi gets a little help from PMI uptick * US SPX 500 Inflation headache not going away * GOLD (spot) Dealers report* plenty of demand
30 Day Performance vs. US dollar (%)Further reading Banks Throw Markets a Curveball, J. Authers, Bloomberg (March 10, 2023) * A One-Stop Investment Shop for the Global Elite, S. Indap, Morningstar* (March 9, 2023)
Choose pair:
GOLD EURUSD – technical overviewThe Euro is in the throes of a correction following a run to the topside through 1.1000 earlier this year. Any additional setbacks should be well supported ahead of 1.0200 in favor of the formation of the next major higher low and a bullish continuation. Ultimately, only a monthly close back below parity would give reason for concern.
R2 1.0805 – 14 February high – Strong
EURUSD – fundamental overviewNot a lot of news out of the Eurozone on Thursday, though the Euro did manage to recover for the second day as it found some relief in positioning adjusting between Powell testimony and today’s US jobs report. ECB’s Villeroy was on the wires saying French GDP would be upgraded slightly, and that inflation would be at target in late 2024. Key standouts on Friday’s calendar come from German inflation, UK GDP, industrial production, trade, and construction output, Canada employment, and the monthly employment report out of the US.
EURUSD – Technical charts in detailWatch now
GBPUSD – technical overviewSigns have emerged of the market wanting to put in a longer-term base after collapsing to a record low in September 2022. The recent 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 has put in a healthy recovery after getting slammed earlier in the week on hawkish Fed Powell testimony. There haven’t been any major updates and the price action is more likely positioning ahead of today’s US jobs report than anything else. Key standouts on Friday’s calendar come from German inflation, UK GDP, industrial production, trade, and construction output, Canada employment, and the monthly employment report out of the US.
Watch now
USDJPY – technical overviewThe major pair has seen a nice recovery following the massive correction out from multi-year highs. Setbacks have finally been well supported ahead of 125.00 in the 127s thus far. At this stage, it looks like the market could be wanting to resume the bigger picture uptrend and head back towards a retest of that multi-year high from October 2022 up at 151.95. Look for any weakness to continue to be well supported in favor of higher lows along the way.
USDJPY – fundamental overviewAs was widely expected, there were no surprises from the BOJ earlier today, with the central bank leaving policy on hold and keeping with its commitment to ease further if necessary. This was Kuroda’s final meeting. Key standouts on Friday’s calendar come from German inflation, UK GDP, industrial production, trade, and construction output, Canada employment, and the monthly employment report out of the US.
Watch now
AUDUSD – technical overviewThere are signs of the potential formation of a longer-term base following the late 2022 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 0.7284. Setbacks should be well supported ahead of 0.6500.
AUDUSD – fundamental overviewThe Australian Dollar is trying to put in a recovery into the end of the week, seemingly on the back of the softer inflation data out of China and selling in the US Dollar on positioning into today’s US jobs report. Key standouts on Friday’s calendar come from German inflation, UK GDP, industrial production, trade, and construction output, Canada employment, and the monthly employment report out of the US.
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 has extended its run of declines after the Bank of Canada paused on rate hikes earlier this week after nine consecutive hikes. The central bank also forecast CPI to decline to 3% by the middle of 2023, while seeing near-zero GDP growth through Q3. Adding insult to injury for the Loonie is risk off flow and downside pressure in the price of oil. Key standouts on Friday’s calendar come from German inflation, UK GDP, industrial production, trade, and construction output, Canada employment, and the monthly employment report out of the US.
NZDUSD – technical overviewOverall pressure remains on the downside with the market once again stalling out on a run up into the 0.6500 area. Ultimately, a break back above 0.6577 would be required to take the immediate pressure off the downside.
NZDUSD – fundamental overviewNew Zealand PMI reads ticked up from previous earlier today, which could be helping to give the New Zealand Dollar a little extra boost. But overall, the currency remains well offered into rallies as risk assets come under pressure on hawkish Fed policy expectations. Key standouts on Friday’s calendar come from German inflation, UK GDP, industrial production, trade, and construction output, Canada employment, and the monthly employment report out of the US.
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 3763.
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.