Head of FX Strategy
Please see today's FX Board PDF (linked here) for the latest Notes of Interest, Trend and Trend Heat readings, as well as a few thoughts on key chart developments below.
Charts: EURUSD
EURUSD has teased the key range support near 1.2200 and is trading just below it as of this writing; the next major zone of interest lower is the former high on the way up around 1.2095. This weekend's Italian election looks like the next sentiment test for the euro, which needs to pick up a bid well ahead of 1.2000 to avoid facing a more major challenge to the longer term uptrend.
It wouldn't take much to reassure bears here... a smart reversal of this break attempt, for example, given the chart structure.
EURJPY (weekly)
EURJPY has broken down below range lows and the 200-day moving average, possibly opening up for considerable progression lower if the move holds. The weekly Ichimoku rises toward the 127.50-plus area over the next couple of weeks and could be a bearish target.
GBPUSD
Cable is in a steep retreat in the wake of fresh Brexit uncertainties hitting sterling just as the greenback is also posting notable strength. The plunge through the 1.3855 area local pivot has taken the action lower (note the 200-day moving average in GBPJPY giving way as this was written as a possible accelerant).
The more major challenge to the trend is not until the 1.3600-50 zone, the major resistance level on the way up.
AUDUSD
AUDUSD is at pivotal levels with a break of 0.77500-75 the downside blow needed to set a more bearish outlook in motion. Failing that, the range is the range.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
