IC Markets Europe Fundamental Forecast | 29 November 2023
What happened in the Asia session?
The Aussie broke past a resistance at 0.6642, and could continue its strong bullish momentum, if price closes above this resistance level. Though the AUD CPI news release was negative, inflation is still expected to remain strong.
The DXY is likely to drift lower towards 102.42 while gold makes another attempt to break above the previous high created, at $2,059/oz this morning. We could see Gold rising further later during the day if the US dollar index (DXY) continues its free fall.
What does it mean for the Europe & US sessions?
The US dollar index (DXY) could fall further to the support level at 102.42, if the news release for the US Prelim GDP shows negative results as compared to the forecasted data. We could see volatility in the markets for the EUR and USD pairs as there is high impact news later on for the respective currency pairs.
The Dollar Index (DXY)
Key news events today
Prelim GDP (1:30 pm GMT)
What can we expect from DXY today?
We could expect the DXY to react to a pullback resistance level at 102.82 or fall further to a support level at 102.13.. We could expect the DXY to continue its free fall if the Prelim GDP shows a negative result. The previous prelim GDP data was at 4.9%, and the forecasted data shows a more positive outlook at 5.0%. A positive actual data release could help the DXY to recover from its previous drop.
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
Prelim GDP (1:30 pm GMT)
What can we expect from Gold today?
We could expect Gold to pullback slightly today, before continuing its bullish momentum towards the upside. Since the DXY has been on the rise since the Asia session, Gold could possibly rise up further, depending on the news results of the Prelim GDP.
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
AUD CPI (12:30AM GMT)
What can we expect from AUD today?
The Aussie has broken past a key resistance level at 0.6600, and is continuing its bullish momentum towards the upside. Though the AUD CPI news had a negative result as compared to the forecasted data, however, the RBA meeting remained on the hawkish side, and this caused the Aussie to continue on the bullish side. The Aussie hit a high of 0.6678 during the Asia session, and fell back to a pullback support level.
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 Bullish
The Kiwi Dollar (NZD)
Key news events today
Official Cash Rate (1.00am GMT)
RBNZ Monetary Policy Statement (1:00am GMT)
RBNZ Rate Statement (1:00am GMT)
RBNZ Press Conference (2:am GMT)
What can we expect from NZD today?
The Kiwi hit a high of 0.6208, after the news release earlier during the Asia session. The RBNZ monetary policy statement was hawkish, and this led to the strong bullish momentum of the Kiwi. We could expect the Kiwi to continue rising towards the upside, possibly targeting the highs at 0.6220.
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
Prelim GDP (1:30 pm GMT)
What can we expect from JPY today?
The USD/JPY currency pair has broken the low at 147.17, and has been falling further, hitting a low of 146.68 during the US session. Price is showing a slight pullback, however, we could see the USD/JPY falling further, to target the 146.19 support level.
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
German Prelim CPI (All day)
Spanish Flash CPI (8:00am GMT)
What can we expect from EUR today?
The EUR/USD currency pair hit a high of 1.1016 during the Asia session, and we can expect the EURUSD currency pair to continue being on the upside. The Spanish Flash CPI news was negative previously at 3.5%. If the news release is higher than the previous or forecasted data, we can expect bullishness, possibly targeting the resistance level at 1.1042.
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 hit a low of 0.8757 during the Asia session, and is now hovering above this support level. The USD/CHF could possibly bounce off from here, to rise towards the resistance level at 0.8824. If price breaks below the support level at 0.8757, price could continue its bearish run.
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 Bearish
The Pound (GBP)
Key news events today
BOE Gov Bailey Speaks (3.05pm GMT)
What can we expect from GBP today?
The Pound has broken the high at 1.2713, and could possibly rise up further, targeting the next resistance level at 1.275. There will be the speech made by Governor Bailey later on, which could determine whether the Pound would continue its bullish momentum, or fall to a support level at 1.2634.
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 1.3542 during the Asia session, and we could see the USD/CAD falling further, possibly reaching the next support level at 1.3521. Due to the overall market structure of USD/CAD, we can expect further bearish movements for 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?
Brent Oil was down 60 cents, at $79.98 a barrel, while the WTI Oil was down by 68 cents, to $74.86 as well. Price tumbled due to the postponement of the OPEC+ meeting, and we can expect the price to continue slipping.
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
