IC Markets Asia Fundamental Forecast | 4th December 2023
What happened in the US session?
The CAD Employment Change showed a positive result of 24.9K as compared to the forecasted data of 14.2K, leading to an increase in CAD currency.
The US ISM Manufacturing PMI showed a decrease in the actual result, contracting at a value of 46.7, as compared to the forecasted data of 47.9. This caused the US Dollar Index (DXY) to fall sharply as it reflected a negative outlook for the economy.
Since there was a strong negative result for the US news, the US Dollar Index (DXY) hit a low of 103.06, last Friday. Gold hit an all time high of $2,134/oz due to the news release and ongoing crisis in the world.
What does it mean for the Asia Session?
The DXY is likely to recover from the drop in the past few weeks, and we could see Gold falling later during the day if the US dollar index (DXY) continues to rise up higher, towards a resistance level. We could see lesser volatility as there is no high impact news today.
The Dollar Index (DXY)
Key news events today
No major news events.
What can we expect from DXY today?
The DXY could possibly gain enough bullish momentum here, rising up further during the Asia session. DXY dropped to a low of 103.06 last Friday, and is showing slight recovery in the Asia session. However, since the FOMC has decided to bring inflation down to 2% over time, we can expect the DXY to continue its bearish momentum in the long run.
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
No major news events.
What can we expect from Gold today?
Gold has reached an all time high at $2,134/oz. Due to the ongoing crisis, Gold has been on the rise as it is a safe haven asset. However, we could expect Gold to pullback slightly today, towards a support level at $2,076/oz before continuing its bullish momentum again.
Next 24 Hours Bias
Weak Bearish
The Australian Dollar (AUD)
Key news events today
No major news events.
What can we expect from AUD today?
The Aussie hit a high of 0.6690 during the US session last Friday, breaking past previous highs dropping further in the Asia session. We could see the Aussie pulling back slightly, to a support level at 0.6657, before continuing its strong bullish momentum.
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 high of 0.6223 during the US session last Friday, and has fallen from this resistance in the Asia session. We could expect the Kiwi to continue rising towards the upside, breaking the previous high created last Friday. .
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 28 February 2024.
Next 24 Hours Bias
Medium Bullish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The USD/JPY currency pair hit a low of 146.23 during the US session last friday, and overall strong bearish momentum. The USD/JPY has been recovering during the Asia session, and could continue to rise towards a resistance level at 147.67.
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 Bullish
The Euro (EUR)
Key news events today
ECB President Lagarde Speaks (2:00pm GMT)
What can we expect from EUR today?
The EUR/USD currency pair hit a low of 1.0830 during the US session last Friday, bouncing off a support level and we can expect the EUR/USD currency pair to continue being on the upside. We could see the EUR/USD rising further if there is a hawkish statement from the speech made by ECB President Lagarde later on during the day.
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 Bullish
The Swiss Franc (CHF)
Key news events today
CPI (7:30am GMT)
What can we expect from CHF today?
The USD/CHF currency pair hit a low of 0.8668 during the US session last Friday, and is showing slight recovery in the Asia session. The USD/CHF could possibly rise higher as price could rise towards a pullback resistance level at 0.8779, recovering from the drop in the past few weeks.
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
No major news events.
What can we expect from GBP today?
The Pound hit a low of 1.2721 during the US session last Friday, rejecting a resistance level at 1.2714. We can expect the Pound to continue falling towards the downside, falling to a support level at 1.2627. We could see price reacting to a pullback support level at 1.2586 in the next 24 hours, before rising up further, continuing its bullish momentum for the long run.
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
Weak Bearish
The Canadian Dollar (CAD)
Key news events today
GDP (1:30pm GMT)
What can we expect from CAD today?
The CAD Employment Change showed a positive result of 24.9K as compared to the forecasted data of 14.2K, leading to an increase in CAD currency during the US session last Friday. This led to a fall for the USD/CAD currency pair, however, price could rise towards a pullback resistance level at 1.3565, before continuing its bearish momentum.
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 Bullish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Following six weeks of declines, oil prices steadied in Asian trade on Monday as expectations for early monetary easing in 2024 increased. At the same time, attacks on US vessels in the Red Sea increased apprehensions about interruptions to Middle Eastern supplies.
Brent Oil was flat at $78.77 a barrel, while WTI Oil steadied at $74.21 a barrel.
Weakness in the dollar, following seemingly less hawkish signals from Federal Reserve Chair Jerome Powell, also offered oil prices some relief.
Next 24 Hours Bias
Medium Bullish
