IC Markets Asia Fundamental Forecast | 28th November 2023
What happened in the US session?
The US dollar index (DXY) broke a low of 103.17 in the US session, and we saw price falling further, reaching a low of 103.08. The New Home Sales news release had a negative result of 679K in comparison to the forecasted result of 724K. This caused the DXY to fall further, breaking past the previous support.
What does it mean for the Asia Session?
The DXY is likely to drift lower towards 102.84 while gold makes another attempt to break above the previous high created, at $2,018/oz this morning. We could see possible rejection or a successful breakout for Gold later during the day if the US dollar index (DXY) drops further.
The Dollar Index (DXY)
Key news events today
CB Consumer Confidence (3:00 pm GMT)
What can we expect from DXY today?
We could expect the DXY to react to a pullback resistance level, before falling further due to the negative results of the New Home Sales release yesterday. We could expect the DXY to continue its free fall if the USD CB Consumer Confidence news shows a negative result, which results in the negative outlook of the US economy.
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
CB Consumer Confidence (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) falling due to the previous New Home Sales news results release. We can expect Gold to rise towards the 2021.4 resistance level, as we have seen strong bullish momentum from Gold.
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
RBA Gov Bullock Speaks (1:18AM 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. Through the discussion of the inflation rates during the RBA meeting, it is likely that the Aussie could continue to increase inflation rates, returning to its desired target by the end of the year.
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 broke a key resistance level at 0.6094 during the US session yesterday, and could continue its bullish momentum, towards a high of 0.6118. We can expect the Kiwi to remain bullish for the next 24 hours, until we have the high impact news tomorrow to determine its overall direction.
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
CB Consumer Confidence (3:00 pm GMT)
What can we expect from JPY today?
The USD/JPY currency pair has broken out of the range and continues to fall further towards a low of 147.16. Since the USD/JPY has continued to create lower highs and lower lows, together with the negative news results of the US New Home Sales news, we can expect the USD/JPY to show bearish continuation towards the downside.
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
No major news events.
What can we expect from EUR today?
The EUR/USD currency pair hit a low of 1.0924 and a high of 1.0957 during the US session. We can expect the EUR/USD to continue its bullish momentum towards the previous high created at 1.0967. Since the inflation is still expectation to stay high for the time being, the EUR pairs could possibly remain bullish.
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 0.8793, and retraced back to the pullback resistance at 0.8825 during the US session. The USD/CHF could possibly fall lower towards the next support at 0.8765. Hence, we can expect further bearish momentum from this currency pair.
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
No major news events.
What can we expect from GBP today?
The Pound bounced off a support level at 1.2586, which was a resistance before. The GBP/USD currency pair has been on the rise since the breakout of the resistance level, and possibly continuing its bullish momentum towards 1.2711.
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 1.3599, and we could see the USD/CAD falling further, breaking past the low created last friday at 1.3595. 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
