IC Markets Europe Fundamental Forecast | 7th December 2023
What happened in the Asia session?
The Unemployment Claims data will be released later today. While often considered a lagging indicator, the number of unemployed people is a signal of overall economic health. Unemployment is also a major consideration for a country’s monetary policy.
What does it mean for the Europe & US sessions?
The ADP Non-Farm Employment Change data was released yesterday, the actual figures falling short of the forecasted. Despite the dovish results, the Dollar Index (DXY) continues to rise to our resistance level at 104.68.
The DXY is likely to be affected by the upcoming Unemployment Claims data, DXY could potentially have a bearish reversal.
The Dollar Index (DXY)
Key news events today
Unemployment Claims (1.30pm GMT)
What can we expect from DXY today?
In the US session, the DXY is losing momentum from yesterday’s trading session. DXY price has risen to a high of 104.23 during the US session, but DXY opened lower potentially is showing signs of 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 Claims (1.30pm GMT)
What can we expect from Gold today?
In the US Session, Gold recovered and closed high at $2033/oz. However, we could expect Gold to bounce off the support level at $2,016/oz, if the Unemployment Claims data turns out to be negative for 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 GDP Quarterly data was released yesterday, the Australian economy rose 0.2% in seasonally adjusted chain volume measures. In nominal terms, the GDP saw a rise of 1.2%. Meanwhile there was a 2.6% decline in terms of trade. The household savings to income ratio also decreased from 2.8% to 1.1%.
The Aussie has been falling sharply during the US session, breaking our past support level at 0.6541. We could expect the Aussie to continue falling to our next support level at 0.6522.
Central Bank Notes:
- The RBA decided to leave the cash rate target unchanged at 4.35 percent and interest rate paid on Exchange Settlement balances unchanged at 4.25 percent.
- The decision reflected the RBA view that progress in bringing inflation back to the target range of 2 to 3 percent was looking slower than earlier forecasts.
- 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 2024.
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 has fallen from a resistance at 0.6223 and is falling towards our support level at 0.6130, We can expect the Kiwi to bounce off the support level at 0.6130.
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?
What can we expect from JPY today?
The USD/JPY currency pair hit a high of 147.443 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 potentially rise to our resistance level at 148.380.
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
No major news events.
What can we expect from EUR today?
The EUR/USD currency pair hit a low of 1.07608 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 and could potentially break through this support level.
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 Bearish
The Swiss Franc (CHF)
Key news events today
Key news events today
Foreign Currency Reserves (8.00am GMT)
What can we expect from CHF today?
The Foreign Currency Reserves will be released by SNB Today. It provides insight into the SNB’s activities in the currency market. If actual results released are less than forecasted, it could boost the Swiss Franc.
The USD/CHF currency pair closed at a low of 0.87593 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.
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?
Two major news were released in the US session yesterday , the Construction PMI actual data is more dovish than forecasted and the impact is reflected on the GBP/USD pair.
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.
GBP/USD has broken the support level of 1.2601 yesterday and could potentially drop further to the 1.239 support level. We can expect volatility in the markets due to the dovish results released.
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. USD/CAD could potentially reverse from the resistance level at 1.3629.
Central Bank Notes:
- The Bank of Canada held its target for the overnight rate at 5.0%, for the third meeting in a row.
- Bank rate at 5.25% and deposit rate at 5%
- The Bank of Canada decided to hold the policy rate at 5% and to continue normalizing the Bank’s balance sheet.
- Next meeting is on 24 January 2024.
- Real GDP contracted a rate of 1.1% in the third quarter, following growth of 1.4% in the second quarter.
Next 24 Hours Bias
Weak Bullish
Oil
Key news events today
On Wednesday, oil prices closed below $70 per barrel for the first time since June. Despite a larger-than-anticipated decrease in weekly U.S. inventories, concerns about a potential supply glut overshadowed the impact of upcoming OPEC+ supply cuts scheduled for early next year, keeping bullish sentiment at bay.
Weekly U.S. crude inventories saw a decline of 4.6 million barrels, surpassing estimates for a decrease of $1.03 million. Meanwhile, gasoline supplies surged by 5.4 barrels, significantly exceeding expectations for a build of 1 million.
The notable increase in gasoline supplies coincides with recent data indicating that daily U.S. oil production reached a record high in September. This development raises concerns that the expanding non-OPEC supply could counterbalance the effects of the OPEC+ committed cuts of 2.2 million barrels per day scheduled for early next year.
WTI Oil prices fell by 4.1% to $69.38 a barrel and Brent Oil dropped 3.8% to $74.30 a barrel.
Next 24 Hours Bias
Weak Bearish
