Fed officials push back against market pricing

Next 24 hours: Mixed bag of price action as Monday gets going

Today’s report: Fed officials push back against market pricing

We got our first round of pushback from last week’s major shift in Fed sentiment, with both Fed Williams and Bostic pushing back against the aggressive repricing of expectations.

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

  • R2 1.1018 – 29 November high – Strong
  • R1 1.1010 - 14 December high – Medium
  • S1 1.0869 - 14 December low – Medium
  • S2 1.0825 – 17 November low – Strong

EURUSD – fundamental overview

The Euro came under pressure on Friday, with the market perhaps worrying it had priced in a little too much dovishness out of the Fed and too much hawkishness out of the ECB. A round of discouraging PMI data out of the Eurozone further contributed to the thinking that if odds stood at 80% for an upcoming Fed rate cut, then the 55% odds for a March ECB cut were probably too low. Key standouts on Monday’s calendar come from German Ifo reads, Canada housing data, some ECB speak, and US NAHB housing.

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 November 2022 monthly close back above 1.2000 strengthens this prospect. Any setbacks should now be well supported ahead of 1.2000. Next key resistance comes in at 1.2818.

  • R2 1.2818 – 10 August high – Strong
  • R1 1.2794 – 14 December high – Medium
  • S1 1.2635 – 13 December high – Medium
  • S2 1.2612 – 14 December low – Medium

GBPUSD – fundamental overview

Though we did see a broad recovery in the US Dollar on Friday, the Pound was able to find some demand into the dip on the back of a slight improvement in UK PMI data. Key standouts on Monday’s calendar come from German Ifo reads, Canada housing data, some ECB speak, and US NAHB housing.

USDJPY – technical overview

The market remains confined to a strong uptrend, with sights set on a retest and break of the multi-year high from 2022 at 151.95. A push through this level will open the next major upside extension towards 155.00. Key support comes in at 140.00, with only a weekly close below to delay the constructive outlook.

  • R2 144.44 – 1 September low – Strong
  • R1 142.92 – 14 December high – Medium
  • S1 140.95 – 14 December low – Medium
  • S2 140.00 – Psychological – Strong

USDJPY – fundamental overview

There is going to be a lot of attention around this week's BOJ meeting in light of all of the speculation in the lead up to the event around a possible hawkish shift in policy. But we've also heard this tale before and the end result is always a BOJ that lets down any thoughts of a lean in the more restrictive policy direction. We did see some Yen demand from Japan PMI data returning to expansionary territory at the end of last week, but at this point, Yen offers have begun to resurface after a very big recovery run in the Japanese currency. Key standouts on Monday’s calendar come from German Ifo reads, Canada housing data, some ECB speak, and US NAHB housing.

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 0.6740– 31 July high – Strong
  • R2 0.6729 – 14 December high – Medium
  • S1 0.6655– 14 December low – Medium
  • S2 0.6620 – 7 December high – Medium

AUDUSD – fundamental overview

Aussie composite PMIs rose from post pandemic lows and US equities remained bid. All of this allowed for the Australian Dollar to outperform into the end of last week. Key standouts on Monday’s calendar come from German Ifo reads, Canada housing data, some ECB speak, and US NAHB housing.

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 1.3517 – 14 December high – Medium
  • R1 1.3480 – 4 December low – Medium
  • S1 1.3350 – 15 December low – Medium
  • S2 1.3300 – Figure – Medium

USDCAD – fundamental overview

Economic data out of Canada came in mixed on Friday. Housing starts slowed down, but wholesale sales were less bad. In the end this was a wash, leaving the Canadian Dollar more focused on bid oil and ongoing demand for US equities. Key standouts on Monday’s calendar come from German Ifo reads, Canada housing data, some ECB speak, and US NAHB housing.

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 0.6274 – 27 July high– Strong
  • R1 0.6250 – 14 December high – Medium
  • S1 0.6170 – 14 December low – Medium
  • S2 0.6084 – 13 December low – Strong

NZDUSD – fundamental overview

New Zealand manufacturing PMI data came in on the stronger side at the end of last week, putting in the highest print since July. This, along with an ongoing bid for US equities helped to keep the Kiwi rate propped up into the weekly close. Key standouts on Monday’s calendar come from German Ifo reads, Canada housing data, some ECB speak, and US NAHB housing.

US SPX 500 – technical overview

Longer-term technical studies continue to look quite extended, begging for a deeper correction ahead. Look for rallies to be well capped in favor of lower tops and lower lows. A monthly close back above 4800 will be required to delay the outlook. Next key support comes in at 4536.

  • R2 4749 – 12 January 2022 high – Strong
  • R1 4739 – 14 December/2023 high – Medium
  • S1 4643– 13 December low – Medium
  • S2 4536 – 30 November low – Strong

US SPX 500 – fundamental overview

The Fed has finally bent to the will of the market into year end, with the December policy decision revealing rate projections coming down from previous and more in line with what the market has been looking for. This has translated to more investor friendly policy going forward, which could now open the door for a run to fresh record highs in 2024. At the same time, we worry inflation remains a risk both the market and Fed are not taking as seriously as needed, which could once again force the Fed back into a more restrictive path and weigh heavily on stocks.

GOLD (SPOT) – technical overview

The 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 1900 on a monthly close basis ahead of the next major upside extension towards 2500.

  • R2 2175 – 4 December/Record high– Strong
  • R1 2100 – Round Number – Medium
  • S1 1973 – 13 December low – Medium
  • S2 1965 – 20 November low – Strong

GOLD (SPOT) – fundamental overview

The 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 stable and 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.

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

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