The market is getting increasingly anxious about tomorrow’s big ticket event risk in the form of the FOMC decision. There has been a growing expectation the Fed will be doing a lot less on account of the recent turmoil in the bank sector.
Audio Updatehttps://www.lmax.com/blog/wp-content/uploads/sites/4/2023/03/21marchlmaxaufio.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 ECB reassurances help Euro * GBPUSD Rate pricing favoring Pound * USDJPY Yen emerges as primary safe haven * AUDUSD Aussie boosted on rallying metals * USDCAD Canada inflation data in spotlight * NZDUSD Kiwi trading as regional safe haven * US SPX 500 Inflation headache not going away * GOLD (spot) Dealers report* plenty of demand
30 Day Performance vs. US dollar (%)Further reading Markets Go Calm: A Lehman Pause or the Real Thing?, J. Authers, Bloomberg (March 21, 2023) * Is This a Banking Crisis? If So, Should I Be Fearful?, N. Sherman, BBC* (March 20, 2023)
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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 1.0300 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 overviewThe ECB continues to talk up European bank stability and this has helped the Euro to extend its run higher. Meanwhile, also helping the Euro is the latest German producer prices beat. Key standouts on Tuesday’s calendar come from UK public borrowing, German and Eurozone ZEW reads, Eurozone construction output, Canada inflation, an ECB Lagarde speech, and US existing 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 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 extended to its highest level against the US Dollar since early January as yield differentials moved back in the UK’s favor. The futures markets is pricing just one rate cut from the BOE in the second half of the year, as compared with three cuts seen from the Fed over that time. Key standouts on Tuesday’s calendar come from UK public borrowing, German and Eurozone ZEW reads, Eurozone construction output, Canada inflation, an ECB Lagarde speech, and US existing home sales.
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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 overviewInterestingly enough, with the US Dollar selling off on a repricing of Fed expectations, and with the Swiss Franc seen less safe these days in the aftermath of the Credit Suisse blowup, it’s the Yen that’s been the prime beneficiary of risk off flow. At the same time, the recent run higher in the Yen has been somewhat limited by the latest dovish BOJ Minutes. The board saw a bigger risk in a quick policy shift than a delayed one. Key standouts on Tuesday’s calendar come from UK public borrowing, German and Eurozone ZEW reads, Eurozone construction output, Canada inflation, an ECB Lagarde speech, and US existing home sales.
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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 has been in recovery mode on the combination of broad US Dollar selling, rallying metals prices, and Australia distance from the current banking woes. No major updates out from the latest RBA Minutes. Key standouts on Tuesday’s calendar come from UK public borrowing, German and Eurozone ZEW reads, Eurozone construction output, Canada inflation, an ECB Lagarde speech, and US existing 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 overviewOngoing weakness in energy prices has been a major drag on the Canadian Dollar. However, broad US Dollar selling and a Monday recovery in the price of oil have helped to inspire some demand for the Loonie. Key standouts on Tuesday’s calendar come from UK public borrowing, German and Eurozone ZEW reads, Eurozone construction output, Canada inflation, an ECB Lagarde speech, and US existing home sales.
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 overviewThe New Zealand Dollar has done well in recent sessions, mostly on the consideration of the currency being viewed as a regional safe haven, with good distance from all of the banking woes in the US and Europe. Broad US Dollar selling and rallying metals prices have also helped the commodity currency. Key standouts on Tuesday’s calendar come from UK public borrowing, German and Eurozone ZEW reads, Eurozone construction output, Canada inflation, an ECB Lagarde speech, and US existing 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 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 the record high from 2020 at 2076.
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.