Making sense of the Fed decision reaction

GBPUSD – technical overview

The market recovery out from the March low has stalled out ahead of the 2019 high. Nevertheless, at this stage, setbacks are viewed as corrective, with the price seen very well supported on dips into the 1.2500 area. Look for a higher low ahead of the next major upside extension back through 1.3500 and towards 1.4000 further up.

• R2 1.3172 – 8 September high – Medium
• R1 1.3036 – 10 September high – Medium
• S1 1.2762 – 11 September low – Medium
• S2 1.2700 – Ichimoku cloud bottom – Strong

GBPUSD – fundamental overview

The Pound is under pressure in the aftermath of a Fed decision that commited to rates near zero through at least 2023, and accommodation mode until inflation averages 2% over time. It seems a lot of the selling has come from the upbeat side of things, after the Fed improved GDP forecasts and Powell said the recovery had been faster than expected.Key standouts on Thursday’s calendar include the BOE policy decision and US data in the form of initial jobless claims, housing starts, building permits and the Philly Fed.

USDJPY – technical overview

We're seeing signs of a pickup in volatility in the major pair, with the market chopping around quite a bit. Still, there is no clear directional insight, with the price confined to a larger triangle formation. Overall, rallies have been well capped above 110.00 and dips well supported below 104.00.

• R2 107.05 – 13 August high – Strong
• R1 106.56 – 3 September high – Medium
• S1 104.80 – 16 September low – Medium
• S2 104.19 – 31 July low  – Strong

Mixed flow post Fed decision, with risk off driving Yen demand, and broad based US Dollar inflow inspiring Yen selling. Key standouts on Thursday’s calendar include US data in the form of initial jobless claims, housing starts, building permits and the Philly Fed.

EURCHF – technical overview

The market remains very well capped into offers and the medium-term picture continues to favour the downside. A weekly close back above 1.1000 would be required to take the immediate pressure off the downside.

• R2 1.0916 – 5 June/2020 high – Strong
• R1 1.0878 – 1 September high – Medium
• S1 1.0600 – Figure – Medium
• S2 1.0577 – 25 May low – Strong

EURCHF – fundamental overview

The SNB remains uncomfortable with Franc appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook. Any signs of renewed risk liquidation in 2020, will likely invite a very large wave of demand for the Franc that will put the SNB in the more challenging position of needing to back up its talk with action, that ultimately, may not prove to be as effective as it once was, given where we're at in the monetary policy cycle.

AUDUSD – technical overview

Technical studies have turned up in 2020, after the market traded down to its lowest levels since 2003 earlier this year. There is evidence of a longer-term bottom following the latest push back through 0.7000, though at this stage, there is risk for a pullback to allow for shorter term studies to unwind. Next big resistance comes in at 0.7500. Setbacks should now be well supported ahead of 0.6800.

• R2 0.7414 – 1 September/2020 high – Strong
• R1 0.7310 – 8 September high – Medium
• S1 0.7192 – 9 September low – Medium
• S2 0.7136 – 20 August low – Strong

AUDUSD – fundamental overview

Aussie is under pressure despite a strong Aussie jobs report, with most of the selling attributed to the upbeat side of the Fed decision, after the Fed improved GDP forecasts and Powell said the recovery had been faster than expected. Key standouts on Thursday’s calendar include US data in the form of initial jobless claims, housing starts, building permits and the Philly Fed.

USDCAD – technical overview

Has been in the process of correcting since topping out earlier this year above 1.4600. At this stage, with the correction well extended, the market is likely to find solid support in the 1.2900 - 1.3000 area, ahead of a resumption of gains. Ultimately, only a weekly close below 1.3000 would suggest otherwise.

• R2 1.3272 – 14 August high – Strong
• R1 1.3260 – 9 September high – Medium
• S1 1.2994 – 1 September low – Medium
• S2 1.2957 – 7 January/2020 low – Strong

USDCAD – fundamental overview

The Canadian Dollar is under pressure in the aftermath of a Fed decision that commited to rates near zero through at least 2023, and accommodation mode until inflation averages 2% over time. It seems a lot of the selling has come from the upbeat side of things, after the Fed improved GDP forecasts and Powell said the recovery had been faster than expected. Key standouts on Thursday’s calendar include Canada ADP employment and US data in the form of initial jobless claims, housing starts, building permits and the Philly Fed.

NZDUSD – technical overview

There's a case to be made for a meaningful bottom, after the market collapsed below massive psychological support at 0.5500 earlier this year. The latest break back above the 0.6600 area further strengthens this outlook, with the market back in uptrend mode as per the weekly Ichimoku cloud. Any setbacks are expected to be well supported ahead of 0.6200.

• R2 0.6791 – Monthly high, July 2019 – Strong
• R1 0.6789 –  2 September/2020 high – Medium
• S1 0.6600 – 27 August low – Medium
• S2 0.6489 – 20 August low – Strong

NZDUSD – fundamental overview

Kiwi is under pressure in the aftermath of a Fed decision that commited to rates near zero through at least 2023, and accommodation mode until inflation averages 2% over time. It seems a lot of the selling has come from the upbeat side of things, after the Fed improved GDP forecasts and Powell said the recovery had been faster than expected. Key standouts on Thursday’s calendar include US data in the form of initial jobless claims, housing starts, building permits and the Philly Fed.

US SPX 500 – technical overview

The market has seen a massive run up since bottoming in March, finally managing to stretch to retest and break the record high from February. While the upside break has opened the door for a fresh upside extension through 3500, the move looks exhausted and risk is building for a major topside failure. A weekly close back below 3400 will strengthen this outlook.

• R2 3590 –  2 September/Record high – Strong
• R1 3486 – 4 September high – Medium
• S1 3297 – 9 September low – Medium
• S2 3200 – 24 July low – Strong

US SPX 500 – fundamental overview

Although we've seen a push to fresh record highs in response to unlimited QE from the Fed and massive US stimulus, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for additional runs to the topside, on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, tension on the global trade front, geopolitical risk, and ongoing worry associated with recovery post coronavirus, should weigh more heavily on investor sentiment in 2020.

GOLD (SPOT) – technical overview

The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1700. Technical studies are however in the process of unwinding from overbought readings, with the market in search of a higher low ahead of a bullish continuation.

• R2 2075 – 7 August/Record high – Strong
• R1 2016 – 18 August high – Medium
• S1 1863– 12 August low – Medium
• S2 1800 – Round number – 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 exhausted monetary policy, extended global equities, political uncertainty, coronavirus fallout, systemic risk and trade war threats. 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.

BTCUSD – technical overview

The market has come under pressure, in search of a a higher low above the March low, ahead of an eventual bullish continuation back above the 2019 high and towards the record high from late 2017 further up. Ultimately, only a weekly close below 6,400 would delay the constructive outlook.

• R2 12,475– 17 August/2020 high – Strong
• R1 11,000 – Previous support zone – Medium
• S1 9,807 – 8 September low – Medium
• S2 8,900 – June low – Strong

BTCUSD – fundamental overview

Bitcoin has enjoyed a nice recovery since bottoming in March, with the runup in stocks and ongoing increased adoption and progress in the space contributing to the strong demand. News that US banks can custody Bitcoin and interest from well known traditional market participants is also helping to generate plenty of buzz. At the same time, given the extended nature of technical readings into important resistance, we see this as timing well for another period of weakness, especially with global equities once again looking vulnerable.

BTCUSD - Technical charts in detail

ETHUSD – technical overview

The market is in the process of attempting to establish a meaningful base after stalling out in the latter half of 2019. Look for setbacks to be well supported above 200, in favour of a push back through 500.

• R2 500 – Psychological – Strong
• R1 488 – 1 September/2020 high – Medium
• S1 322 – 7 September low – Medium
• S2 306 – 28 July low  – Strong

ETHUSD – fundamental overview

While there is plenty of Ether demand built up, with so much optimism around prospects for the blockchain, given all of the development going on in the decentralised finance space, macroeconomics will likely play a weighing influence into rallies, with Ether expected to underperform in a risk off backdrop, in light of Ethereum's higher sensitivity and correlation with risk themes.