IC Markets Europe Fundamental Forecast | 22 November 2023
What happened in the Asia session?
As markets digest the latest insights from November’s FOMC meeting, we could see the DXY move higher towards the 104-level following a strong sell-off over the past two trading days. DXY was bullish in the Asia session, and could approach a resistance level at 104.
What does it mean for the Europe & US sessions?
DXY could possibly continue its temporary bullish momentum to the first resistance level at 104, followed by a strong sell-off after. We would have to monitor if DXY is able to cause a bullish breakout to rise above the resistance level, or rejet off this resistance level to fall further. This would impact multiple pairs such as EUR/USD, GBP/USD and Gold.
The Dollar Index (DXY)
Key news events today
FOMC Meeting Minutes (7:00 pm GMT)
What can we expect from DXY today?
DXY could possibly continue its temporary bullish momentum to the first resistance level at 104, followed by a strong sell-off after. We would have to monitor if DXY is able to cause a bullish breakout to rise above the resistance level, or rejet off this resistance level to fall further.
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
FOMC Meeting Minutes (7:00 pm GMT)
What can we expect from Gold today?
Not only have unemployment claims in the US trended higher over that past four weeks, but the results have also printed higher than the respective forecasts. Higher claims signal potentially weakening of the labour market and could cause the Federal Reserve to adopt a more neutral stance with regard to monetary policy. Should the latest results come in stronger than anticipated, the DXY could potentially come under heavy selling pressures once more and thus lift gold prices higher.
Next 24 Hours Bias
Medium Bullish
The Australian Dollar (AUD)
Key news events today
Monetary Policy Meeting Minutes (12:30 am GMT)
What can we expect from AUD today?
RBA Governor Michele Bullock will be speaking on the economic outlook and monetary policy at the Australian Business Economists Annual Dinner in Sydney where her remarks could have a profound impact on the direction of the Aussie during the Europe session.
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 broke a pullback support level last night, and could possibly continue its bearish momentum, to break a recent low at 0.6005. The Kiwi continued its bearish momentum till another pullback support level at 0.6012. We could possibly see rejection from here to rise to the upside or a bearish breakout to fall further.
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
Weak Bearish
The Japanese Yen (JPY)
Key news events today
No major news events.
What can we expect from JPY today?
The Japanese yen saw strong inflows causing USD/JPY to dive and fall as Japan’s economy has shown recovery in the past week. However, USD/JPY respected a key support level, and we could possibly see price gaming slight bullish momentum before continuing its bearish run. Price broke through a resistance level at 148.40, and is now rising to a pullback resistance level at 149.30. We can expect temporary bullishness until price continues its bearish momentum.
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 (4:00 pm GMT)
What can we expect from EUR today?
The ECB’s Financial Stability Review is an assessment of the conditions in the financial system and potential risks to financial stability. Any evidence on strains and imbalances in the system could provide insight into the future of monetary policy for the Eurozone. Any risks highlighted to inflationary pressures could cause the Euro to extend its current rally.
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
Trade Balance (7:00 am GMT)
What can we expect from CHF today?
USD/CHF has been consolidating for the past few days since Monday, and we could possibly see a breakout happening in the near future. In the Asia session, price gained slight bullish momentum, and is bouncing off from a level of support. We can expect temporary bullishness until price reaches the next resistance level at 0.8865, before becoming bearish.
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 Bullish
The Pound (GBP)
Key news events today
No major news events.
What can we expect from GBP today?
The Bank of England’s (BoE) Autumn Forecast Statement provides an updated economic outlook and previews the government’s budget for the coming year. Data such as expected spending and income levels, borrowing levels, and financial objectives are covered along with comments on the latest independent economic forecasts. This statement could impact the direction of the Pound when it is released, although the time is yet to be determined.
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
CPI (1:30 pm GMT)
What can we expect from CAD today?
Bank of Canada (BoC) Governor Tiff Macklem is due to speak at the Saint John Region Chamber of Commerce in New Brunswick. The text version of his speech will be released at 4;30 pm GMT and could create some volatility for the Canadian dollar during the US session.
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
API Weekly Crude Oil Stock (9:30 pm GMT)
What can we expect from Oil today?
API stockpiles added 9.1M barrels of crude to its inventories versus the estimate of 1.5M, signally a strong drop-off in oil demand in the US. The EIA forecast also points to a modest increase of 0.9M but another stronger than expected build could dampen oil prices once more.
WTI oil climbed as high as $77.90 per barrel overnight before pulling back slightly as Asian markets came online. This commodity is likely to remain under pressure today.
Next 24 Hours Bias
Medium Bullish
