Fed refuses to bend to the will of the market

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 1.2680.

• R2 1.2800 – Figure – Medium
• R1 1.2700 – 14 June/2023 high – Medium
• S1 1.2487 – 12 June low – Medium
• S2 1.2368 – 5 June low – Medium

GBPUSD – fundamental overview

The Pound has continued to benefit from stronger UK jobs earlier this week, highlighted by an ongoing surge in wages. All of this points to higher peak rates in the UK, which pushes yield differentials in the Pound's favor. At the same time, we are seeing some profit taking into Thursday on Dollar demand from the more hawkish Fed dot plot. Key standouts on Thursday’s calendar come from Eurozone trade, Canada housing starts, the ECB decision, Canada manufacturing sales, US retail sales, NY empire state manufacturing, the Philly Fed, initial jobless claims, industrial production, and business inventories.

USDJPY – technical overview

The 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.

• R2 142.00 – Figure – Strong
• R1 141.33 – 15 June/2023 high – Medium
• S1 138.43 – 1 June low – Medium
• S2 137.29 – 18 May low – Medium

USDJPY – fundamental overview

Yield differentials continue to be the main driver of Yen weakness on the back of the monetary policy divergence between the Fed and BOJ. Wednesday's Fed decision has opened another wave of Yen selling after the Fed dot plot leaned more hawkish than expected. Key standouts on Thursday’s calendar come from Eurozone trade, Canada housing starts, the ECB decision, Canada manufacturing sales, US retail sales, NY empire state manufacturing, the Philly Fed, initial jobless claims, industrial production, and business inventories.

AUDUSD – technical overview

There are signs of the potential formation of a longer-term base following the late 2022 surge back above 0.6500. Next key resistance comes in at 0.7284. Setbacks should continue to be well supported in the 0.6500 area. Only a monthly close below 0.6500 would give reason for rethink.

• R1 0.6900 – Figure – Medium
• R2 0.6836 – 14 June high – Medium
• S1 0.6693 – 9 June low – Medium
• S2 0.6642 – 7 June low – Strong

AUDUSD – fundamental overview

The Australian Dollar is getting another boost on Thursday after Aussie jobs data came in stronger than expected. Meanwhile, consumer inflation expectations remained unchanged. Key standouts on Thursday’s calendar come from Eurozone trade, Canada housing starts, the ECB decision, Canada manufacturing sales, US retail sales, NY empire state manufacturing, the Philly Fed, initial jobless claims, industrial production, and business inventories.

USDCAD – technical overview

A 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.

• R2 1.3568 – 15 May high – Strong
• R1 1.3462 – 5 June high – Medium
• S1 1.3300 – Figure – Medium
• S2 1.3272 – 14 June low– Strong

USDCAD – fundamental overview

The Canadian Dollar was weaker on Wednesday on the back of a more hawkish Fed dot plot, lower oil, and the softest Canada mortgage loan growth in 20 years. Key standouts on Thursday’s calendar come from Eurozone trade, Canada housing starts, the ECB decision, Canada manufacturing sales, US retail sales, NY empire state manufacturing, the Philly Fed, initial jobless claims, industrial production, and business inventories.

NZDUSD – technical overview

Overall 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. A monthly close below 0.6000 would intensify bearish price action.

• R2 0.6257 – 24 May high – Medium
• R1 0.6236 – 14 June high – Medium
• S1 0.6031 – 7 June low – Medium
• S2 0.5985 – 31 May/2023 low – Strong

NZDUSD – fundamental overview

New Zealand's latest GDP read came in soft and puts the economy in a technical recession. Overall, concerns over slowing growth in New Zealand have resulted in a lagging New Zealand Dollar that has also been weighed down by expectations the RBNZ will be leaning more towards accommodation, all while other central banks continue to lean more hawkish. At the same time, higher US equities have been helping to offset and drive Kiwi higher. Key standouts on Thursday’s calendar come from Eurozone trade, Canada housing starts, the ECB decision, Canada manufacturing sales, US retail sales, NY empire state manufacturing, the Philly Fed, initial jobless claims, industrial production, and business inventories.

US SPX 500 – technical overview

Longer-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 4400 will be required at a minimum to take the immediate pressure off the downside. Next key support comes in at 4260.

• R2 4400 – Psychological – Medium
• R1 4398 – 14 June/2023 high – Medium
• S1 4260 – 8 June low – Medium
• S2 4106 – 24 May low – Strong

US SPX 500 – fundamental overview

We'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 2023 that results in downside pressure into rallies.

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 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 2100, above which opens the next extension towards 2,500.

• R2 2100 – Round Number – Strong
• R1 2076 – Record high/2020 – Strong
• S1 1932 – 30 May low – Medium
• S2 1900 – 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 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.