No surprises from the Fed Minutes

Next 24 hours: The market is feeling good today

Today’s report: No surprises from the Fed Minutes

In our Wednesday special report previewing the Fed Minutes, we said the balance of risk was tilted in favor of a risk on reaction post Minutes. Indeed, this is how things played out. Key standouts on Thursday’s calendar come from German, Eurozone, and UK PMI reads, Eurozone inflation, the ECB Minutes, Canada retail sales, US initial jobless claims, and existing home sales.

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 2023 high at 1.1276 to strengthen the constructive outlook and extend the recovery run towards 1.2000. Only back below 1.0400 negates.

  • R2 1.0898 – 2 February high – Medium
  • R1 1.0839 - 20 February high – Medium
  • S1 1.0695 - 14 February/2024 low – Medium
  • S2 1.0656 – 10 November low – Strong

EURUSD – fundamental overview

The Euro continued to find bids, this time on the back of a wave of hawkish ECB comments. ECB Wunsch was one of the standouts after downplaying rate cuts. Front end rates spiked in the aftermath to their highest level since late November. On the data front, Eurozone consumer confidence was less bad than expected and the local rate market sees just 100 basis points of cuts in 2024, down from 160 basis points at the end of January. Key standouts on Thursday’s calendar come from German, Eurozone, and UK PMI reads, Eurozone inflation, the ECB Minutes, Canada retail sales, US initial jobless claims, and existing home sales.

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 1.2849.

  • R2 1.2700 – Figure – Medium
  • R1 1.2693 – 13 February high – Medium
  • S1 1.2518 – 5 February/2024 low – Medium
  • S2 1.2500 – 13 December low – Strong

GBPUSD – fundamental overview

The Pound was held back on Wednesday on account of dovish speak from BOE Dhingra who warned against delaying rate cuts as it would come with substantial costs. The selling was however mitigated by stronger UK CBI data and a not so bad public spending report. Key standouts on Thursday’s calendar come from German, Eurozone, and UK PMI reads, Eurozone inflation, the ECB Minutes, Canada retail sales, US initial jobless claims, and existing home sales.

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 145.90, with only a weekly close below to delay the constructive outlook.

  • R2 151.00 – Figure – Medium
  • R1 150.89 – 13 February/2024 high – Medium
  • S1 148.92 – 12 February low – Medium
  • S2 147.62– 7 February low – Strong

USDJPY – fundamental overview

The came under more pressure on Wednesday after the Japanese government downgraded the economic outlook for the economy. Key standouts on Thursday’s calendar come from German, Eurozone, and UK PMI reads, Eurozone inflation, the ECB Minutes, Canada retail sales, US initial jobless claims, and existing home sales.

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 0.6625– 30 January high – Strong
  • R2 0.6579 – 20 February high – Medium
  • S1 0.6442– 13 February/2024 low – Strong
  • S2 0.6400 – Figure – Medium

AUDUSD – fundamental overview

Thursday's run of economic data out of Australia was offsetting. Manufacturing PMI reads slipped back below 50, while services PMIs improved, marking the first expansion in services activity in five months. Key standouts on Thursday’s calendar come from German, Eurozone, and UK PMI reads, Eurozone inflation, the ECB Minutes, Canada retail sales, US initial jobless claims, and existing home sales.

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 1.3600 – Figure – Medium
  • R1 1.3587 – 13 February/2024 high – Medium
  • S1 1.3413 – 9 February  low – Medium
  • S2 1.3358 – 31 January low – Strong

USDCAD – fundamental overview

Most of Wednesday's recovery in the Canadian Dollar was attributed to the recovery in energy prices. Natural gas was up 12% on the day. Key standouts on Thursday’s calendar come from German, Eurozone, and UK PMI reads, Eurozone inflation, the ECB Minutes, Canada retail sales, US initial jobless claims, and existing home sales.

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 0.6223 – 4 December high– Strong
  • R1 0.6200 – Figure – Medium
  • S1 0.6038 – 5 February/2024 low– Medium
  • S2 0.6000 – Psychological – Strong

NZDUSD – fundamental overview

The New Zealand trade deficit widened out earlier today, underpinned by a larger fall in exports. Still, the data hasn't done much to weigh on the New Zealand Dollar, with the risk correlated currency more focused on recovering US equities. Key standouts on Thursday’s calendar come from German, Eurozone, and UK PMI reads, Eurozone inflation, the ECB Minutes, Canada retail sales, US initial jobless claims, and existing home sales.

US SPX 500 – technical overview

Longer-term technical studies continue to look quite extended after pushing to fresh record highs, begging for a deeper correction ahead. Look for rallies to be well capped in favor of lower tops and lower lows. A monthly close above 5000 will be required to delay the outlook. Next key support comes in at 4842.

  • R2 5100 – Figure – Strong
  • R1 5049 – 13 February/Record – Strong
  • S1 4920– 13 February low – Strong
  • S2 4842 – 31 January low – Strong

US SPX 500 – fundamental overview

The Fed has finally bent to the will of the market, with the December 2023 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, opening the door for a run to fresh record highs in early 2024. At the same time, with the inflation outlook still uncertain, the central bank not willing to fully play into market expectations for aggressive rate cuts, which could prove to be a disappointment for investors and start to weigh more 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 1984 – 14 February/2024 low– Medium
  • S2 1973 – 13 December 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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