IC Markets Asia Fundamental Forecast | 5th December 2023
What happened in the US session?
The CHF CPI showed a negative result of -0.2% as compared to the forecasted data of 0.1%, leading to an increase in the CHF currency.
There was no high impact news yesterday, however, the Dollar Index (DXY) hit a high of 103.85, while Gold fell sharply, hitting a low of $2,020/oz.
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, bouncing off a support level at 103.5. This could be determined by the US ISM Services PMI data later on during the day.
The Dollar Index (DXY)
Key news events today
ISM Services PMI (3:00pm GMT)
JOLTS Job Openings (3:00pm GMT)
What can we expect from DXY today?
The DXY could possibly gain enough bullish momentum here, rising up further during the Asia session. DXY hit a high of 103.85 during the US session, showing signs of recovery. However, we can expect volatility in the markets due to the high impact news release later on during the day.
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 Bullish
Gold (XAU)
Key news events today
ISM Services PMI (3:00pm GMT)
JOLTS Job Openings (3:00pm GMT)
What can we expect from Gold today?
Gold fell sharply to a low of $2,020/oz after hitting an all time high. However, we could expect Gold to continue falling, towards a support level at $2,009/oz, if the US news turns out to be positive for the DXY.
Next 24 Hours Bias
Medium Bearish
The Australian Dollar (AUD)
Key news events today
Cash Rate (3:30am GMT)
RBA Rate Statement (3:30am GMT)
What can we expect from AUD today?
The Aussie has been falling sharply during the US session, after hitting a high at 0.6690. We could see the Aussie continue falling, breaking past a support level at 0.6608. If the RBA rate statement is dovish, the Aussie will continue its free fall.
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 Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The Kiwi has fallen from a resistance at 0.6223, and we can expect the Kiwi to continue falling to the downside, towards a support level at 0.6110.
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 Bearish
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 high of 147.43 during the US session last night, and it is showing signs of recovery from the major drop previously. The USD/JPY has been recovering during the Asia session, and could continue to rise towards a resistance level at 148.22 after bouncing off a support level at 146.56.
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
No major news events.
What can we expect from EUR today?
The EUR/USD currency pair hit a low of 1.0804 during the US session, and we can expect the EUR/USD currency pair to continue being on the upside temporarily. We could see the EUR/USD rising further towards a resistance level at 1.0864 before falling further.
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
No major news events.
What can we expect from CHF today?
The USD/CHF currency pair hit a high of 0.8755 during the US session, and is currently in a range during the Asia session. The USD/CHF could possibly rise higher as price could rise towards a pullback resistance level at 0.8764, recovering from the drop in the past few weeks. Since the CHF CPI showed a negative result of -0.2%, we could expect the USD/CHF to become bullish.
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 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 1.2603 during the US session, and we can expect the Pound to continue falling towards the downside, falling to a support level at 1.2590.
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?
The USD/CAD currency pair has been showing slight recovery after the major drop from the past few weeks. The USD/CAD hit a low of 1.3517, before rising up towards the resistance level at 1.3578. We can expect further bullish momentum from this currency pair 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
Weak Bullish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Tuesday’s oil prices were stable due to supply concerns raised by ongoing Middle East unrest and ambiguity around OPEC+’s voluntary output reduction.
WTI Oil in the US increased by 18 cents to $73.22 per barrel, while Brent oil increased by 13 cents to $78.16.
The previous trading session saw a decrease in oil prices as traders questioned if production curbs by OPEC+ would have a major effect. Additionally, the higher US currency also affected commodities prices more broadly.
Next 24 Hours Bias
Weak Bullish
