IC Markets Europe Fundamental Forecast | 27 November 2023
What happened in the Asia session?
The US dollar index (DXY) hit a low of 103.32 when the markets closed, and could possibly fall lower to a support level at 103.17. We could see lesser volatility in the markets today as there are no major news events for the major pairs.
What does it mean for the Europe & US sessions?
The US dollar index (DXY) has been bearish since the Asia session, and is approaching the previous low at 103.17. There could be further bearish movement from DXY, and if DXY breaks below the previous low, it would cause Gold to rise. Gold could bounce off a pullback support level and rise to the upside.
The Dollar Index (DXY)
Key news events today
New Home Sales (3:00 pm GMT)
What can we expect from DXY today?
We could expect the DXY to recover from Friday after the release of the US S&P Global Manufacturing PMI falling from 49.4 from 50.0, worse than the expectation of 49.8. However, the DXY could be targeting the low created at 103.17, and could fall lower after the release of the New Home Sales.
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
Medium Bearish
Gold (XAU)
Key news events today
New Home Sales (3:00 pm GMT)
What can we expect from Gold today?
We could expect the Gold to cause a bullish breakout towards the upside as we can see the US dollar (DXY) recover from Friday after the release of the US S&P Global Manufacturing PMI falling from 49.4 from 50.0, worse than the expectation of 49.8. Gold could be breaking the previous highs at $2,009/oz after the release of the New Home Sales.
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The Aussie closed at a high of 0.6595, and started to become bearish during the Asian session. However, it retraced towards the upside when the US session opened, and could rise up further, towards the resistance level at 0.6617.
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
Medium Bullish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The Kiwi hit a low of 0.6060 during the Asia session, and price retrace towards the upside. We could see price breaking past last week’s high at 0.6093, and possibly reaching the resistance at 0.6118.
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
Medium Bullish
The Japanese Yen (JPY)
Key news events today
New Home Sales (3:00 pm GMT)
What can we expect from JPY today?
The USD/JPY currency pair hit a low of 148.77, and could possibly continue its bearish momentum since we saw a breakout of the support. The USD/JPY could trade between the range 148.77 and 149.75, before having a major breakout. The New Home Sales news release could determine the overall direction of the currency pair later on during the day.
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
Medium Bearish
The Euro (EUR)
Key news events today
ECB President Lagarde Speaks (2:00 GMT)
What can we expect from EUR today?
Following last Friday’s flash PMI readings – which showed business activity continuing to contract in November – the ECB President will address underlying concerns and further announcements on the interest rates towards the end of the year.
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
Medium Bullish
The Swiss Franc (CHF)
Key news events today
No major news events.
What can we expect from CHF today?
The USD/CHF currency pair broke out of the range last Friday, and closed at a low of 0.8807. Since the USD/CHF currency pair has shown bearish momentum in the Asia session, we can expect the USd/CHF currency pair to reject this level and fall further to the previous low at 0.8795.
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
Medium Bearish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
The Pound broke above a level of resistance at 1.2586 last Friday, and we could possibly see the Pound falling to a pullback support level, before continuing its bullish momentum. We could see the Pound gaining strong bullish momentum later on today.
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 Bullish
The Canadian Dollar (CAD)
Key news events today
No major news events.
What can we expect from CAD today?
The USD/CAD currency pair fell to a low of 1.3594 last Friday, and price recovered from there, rising to a pullback resistance at 1.3665. The USD/CAD currency pair rose to a pullback resistance level during the Asia session, and is now falling towards a level of support at 1.3609. Hence, we could see further bearish movement from USD/CAD later on today.
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
Medium Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Crude oil prices continued to slip as concerns surrounding the delayed OPEC+ meeting mount. The meeting was originally set to take place on the 26th of November but now looks to be delayed to the 30th as some OPEC+ members struggled to agree on production output levels. Macro-fundamentals remain weak for this commodity and the bias for crude is to the downside.
Next 24 Hours Bias
Medium Bearish
