IC Markets Europe Fundamental Forecast | 1st December 2023
What happened in the Asia session?
The DXY is likely to recover from the drop in the past few weeks, and we could see Gold falling rising later during the day if the US dollar index (DXY) continues to rise up higher, towards a resistance level. We could see lesser volatility in the Asia session and price is most likely preparing for the upcoming US session, when there will be impact news release.
What does it mean for the Europe & US sessions?
We could see volatility in the markets for the USD pairs as there is high impact news later on during the day, especially for the US currency pairs, which could determine whether the DXY would continue to recover to the upside or fall further to the downside.
The Dollar Index (DXY)
Key news events today
ISM Manufacturing PMI (3:00 pm GMT)
Fed Chair Powell Speaks (4:00 pm and 7:00pm GMT)
What can we expect from DXY today?
The DXY could possibly gain enough bullish momentum here, rising up further during the Asia session. Due to the positive results of both the US news yesterday during the US session, we could expect DXY to recover from the previous low, to rise towards the next resistance level at 103.95. However, the movement of DXY will be determined by the high impact news release later on today.
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
Weak Bullish
Gold (XAU)
Key news events today
ISM Manufacturing PMI (3:00 pm GMT)
Fed Chair Powell Speaks (4:00 pm and 7:00pm GMT)
What can we expect from Gold today?
We could expect Gold to pullback slightly today, falling to a support level at 2037.5. Gold could possibly continue its bullish momentum or fall lower, breaking past the previous low created last night at $2,032/oz. However, it will be determined by the news release for the DXY later on during the day.
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 Aussie hit a low of 0.6830 during the Asia session, and is hovering above a support level, at 0.6585. We could see the Aussie pulling back slightly, to the support level at 0.6585 before rising up further towards the resistance at 0.6642.
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
No major news events.
What can we expect from NZD today?
The Kiwi has been trading between the high of 0.6204 and the low of 0.6123. We could expect the Kiwi to continue trading between this range, before breaking out towards the upside, or falling further to a support level at 0.6094.
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
ISM Manufacturing PMI (3:00 pm GMT)
Fed Chair Powell Speaks (4:00 pm and 7:00pm GMT)
What can we expect from JPY today?
The USD/JPY hit a low of 147.6 during the Asia session, however, we could see the USD/JPY continue rising towards the high as there was a shift in market structure after the US news release yesterday night, possibly continuing its bullish momentum, rising towards the resistance at 148.38.
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 Bullish
The Euro (EUR)
Key news events today
ECB President Lagarde Speaks (11:30am GMT)
What can we expect from EUR today?
The EUR/USD currency pair hit a low of 1.0882 during the Asia session, bouncing off a support level and we can expect the EUR/USD currency pair to continue being on the upside. We could see the EUR/USD rising further if there is a hawkish statement from the speech made by ECB President Lagarde later on during the day.
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
GDP (8:00am GMT)
What can we expect from CHF today?
The USD/CHF currency pair hit a low of 0.8668, and has been falling during the Asia session. There has been lesser market volatility, and the USD/CHF could possibly trade between a range, with the lows at 0.8718 and the highs at 0.8770.
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 hit a high of 1.2651 during the Asia session. We can expect the Pound to continue rising towards the upside, towards the resistance at 1.2700. However, price could react to a pullback support level at 1.2586 in the next 24 hours, before rising up further, continuing its bullish momentum for the long run.
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
Weak Bullish
The Canadian Dollar (CAD)
Key news events today
Employment Change (1:30pm GMT)
Unemployment Rate (1:30pm GMT)
What can we expect from CAD today?
The USD/CAD could possibly continue its bearish momentum, falling to the support level at 1.3525. The USD/CAD has been creating lower highs and lower lows, and with the bearish confirmation during the Asia session, price could continue falling, creating a new lower low. A lower than expected reading for the employment change and higher unemployment rate could push prices further to the downside.
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 Bearish
Oil
Key news events today
No major news events.
What can we expect from Oil today?
Oil prices dipped in early Asian trade on Friday, extending losses following an agreement by OPEC+ producers to voluntary oil supply curbs for the first quarter of next year that fell short of market expectations.
WTI Oil dropped 0.2% to $75.84 a barrel, while Brent Oil declined 0.2% to $80.72 a barrel.
Next 24 Hours Bias
Medium Bearish
