IC Markets Asia Fundamental Forecast | 14 November 2023
What happened in the US session?
It was an empty calendar during the US session with no high impact economic news to provide a catalyst for the forex majors. The dollar index (DXY) hit a low of 105.59 before trading around 105.67 by the end of the US session. Meanwhile, spot gold prices hit a low of $1,931.53/oz overnight.
What does it mean for the Asia Session?
The dollar index (DXY) is slightly retracing towards a pullback support level, which could cause the dollar index (DXY) to reverse to the downside, falling towards the previous low. This could cause spot gold, as well as pairs such as EURUSD, GBPUSD to rise.
The Dollar Index (DXY)
Key news events today
CPI (1:30 pm GMT)
What can we expect from DXY today?
Previous CPI data maintained at a rate of 0.3%, and since we are approaching the end of the year, we can expect the rates to maintain at a rate of 0.3% until the FOMC meetings in December. Since rates may be maintained, we can expect a decrease in price for the dollar index (DXY).
Central Bank Notes:
- The Federal Funds Rate target range remained unchanged at 5.25% to 5.50% for the second meeting in a row.
- The Committee seeks to achieve maximum employment and inflation at the rate of 2.0% over the longer run.
- The Committee will continue to assess additional information and its implications for monetary policy.
- In determining the extent of additional policy firming that may be appropriate to return inflation to 2.0% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.
- Next meeting runs from 12 to 13 December 2023.
Next 24 Hours Bias
Weak Bearish
Gold (XAU)
Key news events today
CPI (1:30 pm GMT)
What can we expect from Gold today?
Previous CPI data maintained at a rate of 0.3%, and since we are approaching the end of the year, we can expect the rates to maintain at a rate of 0.3% until the FOMC meetings in December. Since rates may be maintained, we can expect a decrease in price for the dollar index (DXY), which could mean that the price for Gold will increase.
Next 24 Hours Bias
Weak Bullish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
We can expect bearishness from the Aussie as it has rejected a key pullback resistance level, and could look to break below the previous low. However, there are no major news events for the Aussie, which could mean that there will not be much volatility present to push prices.
Central Bank Notes:
- The RBA increased the cash rate target by 25 basis points to 4.35%, the first increase in five meetings.
- Inflation in Australia has passed its peak but is still too high and is proving more persistent than expected a few months ago.
- Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks.
- Next meeting is on 5 December 2023.
Next 24 Hours Bias
Weak Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The Kiwi is approaching a key pullback support level, which could mean that it could reverse to the upside. However, if it breaks past the pullback support level, the Kiwi would look to continue its bearish momentum. However, since there are no major news events for today, we can expect slower movements for the Kiwi.
Central Bank Notes:
- The Monetary Policy Committee kept the OCR unchanged at 5.50% for the third meeting in a row.
- The Committee agreed that the OCR needs to stay at a restrictive level to ensure that annual consumer price inflation returns to the 1 to 3% target range and to support maximum sustainable employment.
- While supply constraints in the economy continue to ease, inflation remains too high.
- Spending needs to remain subdued to better match the economy’s ability to supply goods and services, so that consumer price inflation returns to its target range.
- Next meeting is on 29 November 2023.
Next 24 Hours Bias
Weak Bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
USD/JPY created a higher high during the US session, and we can expect the price to pull back towards the downside to create a higher low. USD/JPY hit a high of 151.9 before trading around 151.63 by the end of the US session. Since the dollar index (DXY) is bearish, we can expect bearishness from USD/JPY as well, causing price to fall.
Central Bank Notes:
- The Bank will continue with QQE with Yield Curve Control, aiming to achieve the price stability target of 2.0%, as long as it is necessary for maintaining that target in a stable manner.
- The Bank of Japan decided on the following measures:
- Yield curve control: Negative interest rate of -0.1% on policy-rate balances and purchase of Japanese government bonds to keep 10-year JGB yields at around 0% while regarding the upper bound of 1.0% for 10-year JGB yields as a reference in its market operations.
- Medium- to long-term inflation expectations have risen moderately. Even as actual inflation decelerates, inflation expectations are expected to rise moderately toward the end of the projection period, with the output gap turning positive and changes in firms’ wage- and price-setting behaviour and in labour-management wage negotiations. This will likely lead to a sustained rise in prices accompanied by wage increases.
- Japan’s economy is likely to continue recovering moderately for the time being, supported by factors such as the materialization of pent-up demand, although it is expected to be under downward pressure stemming from a slowdown in the pace of recovery in overseas economies.
- Next meeting is on 19 December 2023.
Next 24 Hours Bias
Weak Bearish
The Euro (EUR)
Key news events today
No major news events.
What can we expect from EUR today?
The EUR has been fluctuating in a range since last week, and price has been creating higher lows, which could mean that price is not able to rise up further. The EUR is likely to become bearish, however, price is waiting to breakout of the range before showing any significant movements.
Central Bank Notes:
- The ECB kept the three key interest rates unchanged.
- Inflation is still expected to stay too high for too long, and domestic price pressures remain strong.
- The Governing Council’s past interest rate increases continue to be transmitted forcefully into financing conditions.
- The Governing Council will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction.
- Next meeting is on 14 December 2023.
Next 24 Hours Bias
Weak Bearish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
The Swiss Franc has been creating higher highs and higher lows, which could possibly show signs of bullishness. Price has been ranging in a parallel channel on the 4-Hour chart, and we can expect bullishness for the Swiss Franc since price did not break the previous low during the US session last night.
Central Bank Notes:
- The SNB unexpectedly kept the policy rate unchanged at 1.75% in September.
- Inflation forecasts remain unchanged at 2.2% for both 2023 and 2024 while it was lowered from 2.1% to 1.9% for 2025.
- SNB predicts modest growth for the rest of the year due to subdued foreign demand, loss of purchasing power from inflation, and stricter financial conditions.
- The projection for GDP growth this year remained unchanged at 1.0%.
- Next meeting is on 14 December 2023.
Next 24 Hours Bias
Weak Bullish
The Pound (GBP)
Key news events today
Claimant Count Change (7:00 am GMT)
What can we expect from GBP today?
With no major news overnight, the Pound hit a high of 1.2276 before trading around 1.2280 by the end of the US session. With the major news today, there could be significant price movements for the currency pair. Since price is reaching a resistance level, it could possibly become bearish. Previous data showed negative results of the employment situation, and we could possibly see similar results.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6-to-3 to maintain its Official Bank Rate at 5.25%.
- Three members preferred to increase the Bank Rate by 0.25 percentage points to 5.5%.
- CPI inflation remains well above the 2% target, but is expected to continue to fall sharply, to 4¾% in 2023 Q4, 4½% in 2024 Q1 and 3¾% in 2024 Q2.
- This decline is expected to be accounted for by lower energy, core goods and food price inflation and, beyond January, by some fall in services inflation.
- The mean projection for CPI inflation is 2.2% and 1.9% at the two and three-year horizons respectively.
- Next meeting is on 14 December 2023.
Next 24 Hours Bias
Medium Bearish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
With no major news overnight, the Pound hit a high of 1.3828 before trading around 1.3791 by the end of the US session. This currency pair is expected to show signs of bearish movement today as it is approaching a resistance level. Rejecting the resistance level would mean that there will be further downward movement.
Central Bank Notes:
- The Bank of Canada held its target for the overnight rate at 5.0%, for the second meeting in a row.
- Canada’s economy has weakened with growth forecast for 2023 lowered to 1.2% from 1.8%
- Economic growth is expected to continue to be weak, growing 0.9% and 2.5% in 2024 and 2025 respectively.
- The Bank expects CPI inflation to average around 3.5% through the middle of 2024 before gradually easing to 2.0% in 2025.
- However, the near-term path for CPI is higher because of energy prices and ongoing persistence in core inflation.
- Next meeting is on 6 December 2023.
Next 24 Hours Bias
Weak Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Oil prices inched up on Tuesday after an OPEC report said market fundamentals remained strong and due to concerns supplies might be disrupted as the U.S. cracks down on Russian oil exports.
Brent crude oil rose to $82.85 a barrel, and WTI crude oil rose to $78.59 a barrel.
We can expect further bullish momentum, for oil prices to increase as it has broken past a resistance level, along with the positive market fundamentals.
Next 24 Hours Bias
Medium Bullish
