IC Markets Asia Fundamental Forecast | 8th December 2023
What happened in the US session?
The Unemployment Claims data was released yesterday. While often considered a lagging indicator, the number of unemployed people is a signal of overall economic health. The number of recurring jobless claims, serving as an indicator for individuals consistently receiving unemployment benefits, declined by 64,000 to reach 1.86 million for the week ending on November 25.
What does it mean for the Asia Session?
The DXY is likely to be affected by the upcoming Unemployment Rate data, DXY could potentially have a bearish reversal.
The Dollar Index (DXY)
Key news events today
Unemployment Rate (1.30pm GMT)
Non- Farm Employment Change (1.30pm GMT)
What can we expect from DXY today?
The DXY closed at a low of 103.24 at the US session and is showing signs of potential bearish reversal. 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 Bearish
Gold (XAU)
Key news events today
Unemployment Rate (1.30pm GMT)
Non- Farm Employment Change (1.30pm GMT)
What can we expect from Gold today?
Gold has bounced off the support level at $2,016/oz, due to negative results affecting the DXY.
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 AUD/USD pair has bounced off the support level at 0.659 and could potentially continue rising to our support level at 0.668.
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 6 February 2023.
Next 24 Hours Bias
Weak Bullish
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, market sentiment is neutral and we can expect the Kiwi to fall to the support level at 0.6130 before bouncing off.
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
Weak 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 new low of 141.602, during the US session last night, and it is showing signs of bearish reversal. We could see the USD/JPY fall to the support level at 141.516.
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 remains bearish during the US session, and we can expect the EUR/USD currency pair to continue being on the downside temporarily. We could see the EUR/USD falling further towards a support level at 1.0664.
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 Bearish
The Swiss Franc (CHF)
Key news events today
No major news event.
What can we expect from CHF today?
The USD/CHF currency pair is showing signs of recovery, in the US session, USD/CHF closed at 0.872. The price has bounced off the support level at 0.869 and is moving towards the resistance level at 0.882.
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?
GBP/USD has broken the support level of 1.2601 and could potentially rise to the resistance level at 1.2618 before dropping further to the 1.239 support level. We can expect volatility in the markets due to the dovish results released.
During the press conference for the Financial Stability Report, Governor Andrew Bailey stated that interest rates in Britain will likely need to be maintained at their current levels for an extended period. He emphasized the Bank of England’s vigilance regarding potential financial stability risks associated with this approach.
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 BOC released the Rate statement yesterday. The BOC decided to maintain the overnight rate at 5%, with the Bank Rate at 5¼% and the deposit rate at 5%. The Bank is persisting in its approach of quantitative tightening.
The actual Ivey PMI data released was lesser than expected, which could have an negative impact on the Canadian Dollar.
The USD/CAD currency pair is showing signs of bearish reversal, with current price moving towards the resistance level at 1.362 and thereafter, could potentially fall to the support level at 1.348.
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?
On Thursday, oil prices dropped to their lowest point in six months due to concerns among investors regarding subdued energy demand in both the United States and China. This decline occurred concurrently with U.S. output maintaining near-record highs.
WTI Oil prices fell by 0.06% at $69.34 a barrel and Brent Oil dropped 0.34% to $74.95 a barrel.
Next 24 Hours Bias
Weak Bearish
