IC Markets Asia Fundamental Forecast | 8 September 2023
What happened in the US session?
The Unemployment Claims news results were better than expected, the actual data was 216K, which was lesser than the forecasted data of 232K. Since the dollar index (DXY) and Gold have a negative correlation, this led to an increase in the dollar index (DXY), and caused Gold to plunge.
What does it mean for the Asia Session?
With no major economic news on the calendar for the Asia session, we can expect the DXY to become bearish due to the bearish divergence that was present after DXY made a higher high, and thus causing the Euro and gold prices to drop.
The Dollar Index (DXY)
Key news events today
FOMC Member Barr Speaks (1:00 pm GMT)
What can we expect from DXY today?
Federal Reserve Governor Michael Barr is due to participate in a moderated discussion at the Federal Reserve Bank of Philadelphia Seventh Annual Fintech Conference where he may drop clues on the upcoming FOMC meeting next week. His remarks could have a major impact on the direction of the DXY.
Central Bank Notes:
- The federal funds rate target range will be 5.25% to 5.50%.
- The Committee is strongly committed to returning inflation to its 2.0% target.
- The Committee will adjust monetary policy if risks emerge that could hinder achieving its goals.
- Various factors will be considered, including labour market conditions, inflation pressures, inflation expectations, and international and financial developments.
- Next meeting runs from 19 to 20 September 2023.
Next 24 Hours Bias
Medium Bearish
Gold (XAU)
Key news events today
FOMC Member Barr Speaks (1:00 pm GMT)
What can we expect from Gold today?
Federal Reserve Governor Michael Barr is due to participate in a moderated discussion at the Federal Reserve Bank of Philadelphia Seventh Annual Fintech Conference where he may drop clues on the upcoming FOMC meeting next week. His remarks could have a major impact on the direction of the DXY and thus drive gold prices as well.
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 was in consolidation overnight, and price was in a range. We can expect AUD/USD to continue ranging, until a breakout actually happens. AUD/USD could potentially breakout and fall to the downside as it is still currently in a bearish momentum. Hence, we can expect AUD/USD to be bearish since there is a possibility that a bearish pennant could be formed.
Central Bank Notes:
- The RBA kept the cash rate target unchanged at 4.10% for the third consecutive meeting.
- Inflation in Australia has passed its peak and is trending lower but needs to return to the target range.
- Further tightening of monetary policy may be necessary.
- Next meeting on 3 October 2023.
Next 24 Hours Bias
Weak Bearish
The Kiwi Dollar (NZD)
Key news events today
No major news events.
What can we expect from NZD today?
The Kiwi was in a range overnight, however, it is starting to show signs of bullishness, and broke above the overlap resistance. Nonetheless, we should monitor the NZD/USD, and see if price is able to close above this overlap resistance. If price closes above, then we can expect slight bullishness from NZD/USD.
Central Bank Notes:
- The Monetary Policy Committee kept the OCR unchanged at 5.50% for the third meeting in a row.
- The Committee believes that interest rates at a restrictive level for some time will bring inflation back within the 1% to 3% target range while supporting maximum sustainable employment.
- Headline inflation and inflation expectations have declined but the core reading remains too high.
- Next meeting is on 4 October 2023.
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?
USD/JPY formed a double top previously, and price did a retest to the neckline of this double top pattern overnight. We could potentially see USD/JPY fall further since this double top pattern indicates a bearish reversal. Price could drop further to an overlap support level, dropping further than last night’s price. Furthermore, since we expect bearishness from DXY, USD/JPY could possibly continue its bearish momentum. Therefore, it would be wise to monitor USD/JPY today and see how price reacts.
Central Bank Notes:
- The bank will continue with QQE with Yield Curve Control to achieve the price stability target of 2.0%.
- 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 around +0.5%.
- Inflation is expected to decelerate temporarily but is projected to accelerate moderately later, supported by improvements in the output gap and inflation expectations.
- Japan’s economy is expected to recover gradually.
- Next meeting is on 22 September 2023.
Next 24 Hours Bias
Weak Bearish
The Euro (EUR)
Key news events today
German CPI (6:00 am GMT)
What can we expect from EUR today?
The German consumer price inflation rate moderated to 6.1% YoY in August 2023, a marginal decline from 6.2% in the previous month based on the preliminary estimate. Should the final reading print lower than the estimate, this could cause the Euro to weaken.
Central Bank Notes:
- The ECB raised the three key interest rates by 25 basis points.
- Economic growth projections have been slightly lowered.
- The Governing Council will ensure interest rates are sufficiently restrictive to achieve the inflation target and keep them at those levels as long as needed.
- Rate decisions will be data-dependent, considering inflation outlook, economic data, underlying inflation dynamics, and monetary policy transmission strength.
- Next meeting on 14 September 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?
USD/CHF was not able to break past the previous highs yesterday night, and it reached a resistance level where it began to plunge to the downside. We can expect USD/CHF to continue dropping further to a support level since we are expecting DXY to continue its bearish momentum.
Central Bank Notes:
- SNB has tightened its monetary policy further, raising the SNB policy rate by 0.25 percentage points to 1.75%.
- The new forecast predicts average annual inflation at 2.2% for 2023 and 2024 and 2.1% for 2025. Without the rate increase, the estimates would be even higher.
- 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 GDP is projected to grow around 1.0% this year.
- Next meeting on 21 September 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 was in a descending parallel channel, and it bounced off a support level, which was at the bottom of the descending parallel channel. Price is starting to rise towards a pullback resistance level, and could possibly make a correction to the upside. Hence, we are expecting bullishness from GBP/USD and GBP/JPY.
Central Bank Notes:
- The Bank of England’s Monetary Policy Committee (MPC) voted to increase the Bank Rate by 0.25 percentage points to 5.25%.
- One member preferred to maintain the Bank Rate at 5.0% while another two preferred to increase it by 0.5 percentage points.
- CPI inflation is expected to fall significantly to around 5% by the end of the year, accounted for by lower energy prices but services price inflation is projected to remain elevated in the near term.
- The updated projections show that CPI inflation is expected to decline to 2.0% and 1.9% at the two and three-year horizons respectively.
- Next meeting on 21 September 2023.
Next 24 Hours Bias
Medium Bullish
The Canadian Dollar (CAD)
Key news events today
Employment Change (12:30 pm GMT)
Unemployment Rate (12:30 pm GMT)
What can we expect from CAD today?
Canada’s equivalent of the US NFPs will be released today and could have a major impact on the direction of USD/CAD. The unemployment rate has increased over the past three months with the latest rate at 5.5% – the latest estimate for the month of August points to another increase to 5.6%. Canada’s labour market has lost jobs in two out of the last three months but the forecast for August indicates a return to growth with approximately 19k jobs to be added to the labour market.
Central Bank Notes:
- The Bank of Canada held its target for the overnight rate at 5.0%.
- Canada’s economy was more substantial than expected in the second quarter of 2023, with GDP growth of 3.3%.
- The Bank expects CPI inflation to ease to around 3.0% in the summer, but concerns have increased about inflation staying above the 2.0% target.
Next 24 Hours Bias
Medium Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
EIA Crude Oil Inventories (7th Sept)
The actual data for the EIA Crude Oil Inventories was -6.307M as compared to the forecast of -2.064M, which indicates a larger decrease in crude oil inventories. This means that there has been a more significant reduction in the stockpile of crude oil than what analysts had expected.
Although the most recent data indicated a larger-than-anticipated reduction in U.S. inventories during the week ending September 1st, analysts expressed doubts about the continuation of robust demand in the upcoming weeks, particularly with the conclusion of the travel-intensive summer season.
Crude prices fell 0.2% to $89.61 a barrel, while WTI oil fell 0.4% to $86.56 a barrel.
Next 24 Hours Bias
Medium Bearish
