Forex Updates by Solid ECN

[Solid ECN]

Euro Drops to Lowest in a Year as Investors Favor USD

As the US jobs report came out better than expected, investors turned their attention to the USD. This made the euro drop more, reaching its lowest level since November. The common currency was already under pressure because of the ECB policymakers’ comments. They said that they were not likely to raise interest rates soon, especially after the Euro Area’s inflation rate fell to the lowest in more than two years in November.

At the same time, Francois Villeroy de Galhau, who is an ECB member and the head of the Bank of France, said to a French publication that prices were falling faster than expected. This increased the chance of a rate cut in 2024.​

 

[Solid ECN]

Impact of US Jobs Report on Australian Currency

The value of the Australian dollar recently dropped to approximately $0.655. This change was largely influenced by a strong jobs report from the United States. In November, the US reported an increase in nonfarm payrolls by 199,000 jobs, which was more than the expected 180,000. Additionally, the unemployment rate in the US decreased slightly to 3.7%, and wages grew unexpectedly. This combination of factors has led to a boost in the US dollar (USD).

Why the Aussie Dollar Weakened

This weakening of the Australian dollar, often referred to as the "Aussie," was also affected by decisions made by the Reserve Bank of Australia (RBA). The RBA decided to keep its policy rate steady at 4.35%. This decision was anticipated and is seen as a way for the RBA to take time and evaluate how previous interest rate increases are influencing the economy, particularly in terms of demand, inflation, and employment.

The RBA has expressed some uncertainty about future household spending. However, it has also noted that inflation is becoming more moderate and that there are signs of the job market becoming less tight.

Australia's Economic Growth

Regarding Australia's economic performance, there was a slight increase of 0.2% in the economy in the third quarter. This growth was less than the forecasted 0.4%, marking it as the slowest growth Australia has seen in a year.
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[Solid ECN]

Yen Falls as Dollar Strengthens, BOJ Policy in Focus

The value of the Japanese yen has recently seen a significant decline, falling beyond 145 against the US dollar. This change comes after a period of strength for the yen, which had reached a four-month peak. The shift is primarily due to the robustness of the US dollar, bolstered by unexpectedly strong job data from the United States. This information has altered perceptions, with many now doubting that the US Federal Reserve will reduce interest rates in the early part of 2024.

Furthermore, there's been a decrease in expectations for interest rate increases by the Bank of Japan, especially as the bank's monetary policy decision looms on the horizon. Just a week ago, the yen had experienced a surge, jumping by 3.5% to reach about 141.7 against the dollar. This increase was fueled by remarks from Bank of Japan Governor Kazuo Ueda, who hinted that the bank might end its negative interest-rate policy sooner than expected.

In a recent statement to the parliament, Governor Ueda mentioned the potential adjustments in short-term rates, dependent on the prevailing economic and financial circumstances. He indicated that the rates could shift from zero to 0.1%, and eventually to 0.25% or 0.50%. However, he also made it clear that Japan is yet to witness a sustainable increase in inflation that is driven by growth in wages.​

 

[Solid ECN]

The EURUSD Dilemma: Between Bullish Breakouts and Bearish Channels

The EURUSD pair experienced a surge in today's trading session. It is now trading above the 50% level of the Fibonacci retracement tool. Simultaneously, the RSI indicator has flipped above the middle line, signaling a bullish trend. Despite this, the EURUSD pair remains within a bearish channel. For a bullish shift to be confirmed, bulls need to close and stabilize the price above the upper band of the flag. If they fail to do so, the bearish trend is likely to persist, particularly if the EURUSD price dips below the 50% Fibonacci level.

In summary, the current trend of EURUSD is bearish. This trend could come to an end if the price crosses above the flag. However, if the price falls below the 50% level, the bearish trend is expected to continue. Under such circumstances, the next bearish target would be the 61.8% support level, potentially extending to the 78.6% level.​

 

[Solid ECN]

USDJPY Tests Crucial Support: Bearish Trends in Focus

Solid ECN – The USDJPY currency pair recently climbed, approaching the 23.6% support level. This particular level coincides with the previously breached bullish flag pattern. Given that the pair is currently trading below the Ichimoku cloud, it suggests a bearish outlook. Consequently, it's anticipated that the price may decline, targeting the 38.2% support level in the near future.

 

[Solid ECN]

EURUSD Faces Key Fibonacci Resistance: What's Next?

The EURUSD currency pair recently encountered the 38.2% Fibonacci resistance level. This significant resistance is further reinforced by the presence of the Ichimoku Cloud. As long as the EURUSD price remains below this 38.2% level, the bearish outlook continues to be relevant. Currently, if the bearish trend persists, the next objective for sellers could be the low experienced in December. Following that, the lower boundary of the established bearish channel could be the subsequent target.

 

[Solid ECN]

EURUSD's Recent Surge: A Technical Analysis

Solid ECN – Recently, the EURUSD currency pair has shown a significant increase in activity, managing to close above the Ichimoku cloud. It formed an inverted hammer candlestick pattern, which occurred right at the 61.8% resistance level. At the same time, the RSI indicator signaled that the pair was overbought. If the price remains under the 61.8% support level, there's a chance it could fall to the 50% level, and maybe even down to 38.2%.

On the other hand, if the currency breaks past the 61.8% resistance level, this upward trend might push it towards the 78.6% resistance level.​

 

[Solid ECN]

AUDUSD’s Bullish Journey: A Technical Analysis​

Solid ECN – In our last analysis, we highlighted the potential for a positive shift in the AUDUSD pair. Following the Fed’s cautious stance on interest rates, the AUDUSD price has indeed risen above the Ichimoku cloud.

Currently, the AUDUSD price is grappling with a previously broken resistance. This resistance area is defined by the range of 0.6678 to 0.669. Interestingly, the RSI indicator is lingering in the overbought zone, suggesting a possible consolidation phase. As a result, the price may stabilize above 0.6678.

When we take a broader look at the daily chart, we can see the AUDUSD pair moving within a bullish channel. The bulls in the AUDUSD market appear to be aiming for the 78.6 Fibonacci resistance next.

As long as the pair continues to trade within this channel, the primary trend remains optimistic.

 

[Solid ECN]

Predicting NZDUSD's Next Moves

Recently, the NZDUSD currency pair reached the important 38.2% Fibonacci support level. This was something we had anticipated earlier, suggesting that the pair might regain and stabilize some of its recent increases. Looking ahead, if buyers, or 'bulls', can keep the currency above this crucial 38.2% mark, we could see the NZDUSD's value start to climb.

However, if sellers, known as 'bears', manage to push the value below this 38.2% Fibonacci level, the pair might enter a longer phase of stabilization, possibly reaching the area known as the Ichimoku cloud.​

 

[Solid ECN]

Euro and the Impact of Global Monetary Policies and PMI Data

Recently, the euro has been lingering just under the $1.1 level. This comes as investors are taking in a series of decisions made by central banks last week, as well as the latest PMI (Purchasing Managers' Index) data. Last Thursday, the European Central Bank (ECB) chose to keep interest rates stable, going against some expectations of a rate cut. ECB President Lagarde emphasized that the idea of reducing borrowing costs wasn't discussed, and any future decisions will be based on upcoming data.

In contrast, the US Federal Reserve indicated on Wednesday that its period of significant monetary policy tightening might be over, suggesting that we could see up to three rate reductions in 2024. Additionally, there’s a focus on the recent PMI numbers from Europe, which were lower than expected, showing a greater decline in the Eurozone's private sector activities for December.​

 

[Solid ECN]

EURUSD Bullish Wave: Eyes on Fibonacci Levels​

In mid-December, the EURUSD pair soared, reaching a peak of 1.1016, mirroring the November high. This notable resistance was bolstered by signals from the Awesome Oscillator, indicating divergence. Consequently, the EURUSD's value dipped beneath the critical 38.2% Fibonacci support level, a move further backed by a previously breached bullish flag.

Technical analysis suggests a potential continuation of the upward trend. The ADX indicator's green bar ascended past the 20 mark, while the RSI remains steadfast above 50. However, the Awesome Oscillator stands alone in signaling bearish possibilities.

Should the bulls successfully maintain the EURUSD above the 38.2% threshold, a fresh surge in bullish momentum is likely, targeting the recent highs. Conversely, a decline below this pivotal level could signal a prolonged consolidation phase, potentially stretching down to the 61.8% and 78.6% Fibonacci support levels.​

 

[Solid ECN]

AUDUSD Stays Bullish Above Key Support​

In the realm of technical analysis, the AUDUSD currency pair has impressively established itself above a key support zone, which spans a tight range from 1.6678 to 1.6690.

Turning to the indicators, the Relative Strength Index (RSI) is inching closer to the overbought threshold, indicating a strong buying interest. Simultaneously, the Awesome Oscillator and the Average Directional Index (ADX) both point towards a sustained bullish momentum. While the rising RSI does hint at a possible consolidation phase, the bullish trajectory appears likely to aim for the upper boundary of the bullish channel. This bullish sentiment is further reinforced by the 61.8% Fibonacci retracement level. As the AUDUSD pair continues trading above this level, the bullish forces are expected to maintain their dominance.

 

[Solid ECN]

USDJPY Forecast: A Turnaround Imminent?​

Solid ECN – Since mid-November, the USDJPY currency pair has demonstrated a bearish trend, effectively establishing its position beneath the Ichimoku Cloud. Presently, it's encountering the 38.2% Fibonacci resistance, while simultaneously, the RSI indicator is exiting the oversold zone. Adding to this analysis, the Awesome Oscillator is signaling a divergence, hinting at either a consolidation phase or an imminent trend reversal for the pair.

Given these technical indicators and the current market movements, a consolidation phase seems likely for USDJPY. This could lead to a rise in its value, potentially surpassing the 38.2% Fibonacci level. Bolstering this analysis is the 50% Fibonacci support level. However, should the price fall below the critical support at 140.76, this bullish scenario would be effectively invalidated.​

 

[Solid ECN]

Dollar Climbs Back, Awaits Inflation Data​

Solid ECN – The value of the dollar has seen an uptick, currently hovering around 102.5 this Tuesday. This rise comes after a dip below 102 just last week. The shift in momentum is partly due to comments from officials at the US Federal Reserve, who have been hinting that expectations for a decrease in interest rates might be a bit hasty.

Among the voices urging caution were Chicago's Austan Goolsbee and Cleveland's Loretta Mester, adding to similar sentiments previously expressed by John Williams from New York. Across the Atlantic, the European Central Bank and the Bank of England have held their rates steady, committing to higher rates in the fight against inflation. Market participants are now keenly awaiting the US PCE inflation figures, hoping for a clearer picture of inflation trends.​

 

[Solid ECN]

Rising Aussie Dollar: A Five-Month High​

Solid ECN – The Australian dollar has maintained a strong position, staying around $0.675, which is its highest level in nearly five months. This strength is largely due to the dovish (less aggressive) monetary policies of the US Federal Reserve and the Bank of Japan. These policies have put pressure on the US dollar and the yen, in turn boosting other major currencies, including the Australian dollar, commonly referred to as the Aussie.

Furthermore, the Aussie has been positively influenced by an increase in commodity prices. This rise in prices can be attributed to supply disruptions caused by attacks in the Red Sea. Additionally, the possibility of lower interest rates has also played a role in enhancing the overall demand outlook, thus supporting the Australian dollar's value.

Domestically, the situation is also noteworthy. The latest meeting minutes from the Reserve Bank of Australia (RBA) revealed that the central bank had contemplated raising interest rates for a second consecutive month in December. However, the RBA opted to wait for more data before making such a decision, as there were promising signs regarding inflation.

The RBA has also observed that aggregate demand within Australia has slowed more rapidly than they had anticipated. This slowing of demand is coupled with an observation of an accelerating pace of disinflation (a slowing down in the rate of inflation) in other parts of the world. These factors together contribute to the complex economic landscape that the RBA and the Australian dollar are currently navigating.​

 

[Solid ECN]

France's Manufacturing Sector: A Mixed Outlook for 2024

Solid ECN – In December 2023, France's manufacturing sector showed signs of positive change. The manufacturing climate indicator, a measure of the health of the industry, reached 100, the highest level since July. This increase, up from 99 in November, surpassed expectations of 98. Key factors behind this rise included a more positive view from industrialists about recent production, moving from a negative perception (-9) in the past to a neutral stance (0). Additionally, there was a slight improvement in the inventory of finished goods, with the index moving from 13 to 14.

However, not all aspects were upbeat. The overall order books didn't show any change, remaining at a low level (-17), though foreign orders saw a marginal improvement. Concerns emerged regarding the future, as manufacturers' expectations for their own production dropped slightly, and their outlook on selling prices also deteriorated.

An encouraging sign was the decrease in perceived economic uncertainty, which fell to 25 in December from 28 in November. This suggests that manufacturers are becoming slightly more confident about the economic environment.


France Manufacturing Sector: Economic Implication

Looking ahead, these mixed signals in France's manufacturing sector offer a nuanced view of the economic future. The improvement in the manufacturing climate indicator and the reduction in uncertainty are positive signs, indicating potential growth and stability in the industry. However, the stagnant order books and cautious outlook on production and pricing point to ongoing challenges. The sector might experience moderate growth but will likely continue facing hurdles, such as fluctuating demand and pricing pressures.

Overall, while the immediate future seems cautiously optimistic, the long-term outlook remains uncertain, dependent on both domestic and global economic conditions.​

 

[Solid ECN]

EURUSD Trades Below $1.1

Solid ECN – The EURUSD currency pair is currently trading at less than $1.1. The participants are forecasting a potential dip in the Euro zone interest rates. Francois Villeroy de Galhau from France hinted on Tuesday that a rate cut might be on the horizon next year. The goal would be stabilizing inflation at 2% no later than 2025.

However, Yannis Stournaras of Greece has a more conservative approach, insisting that inflation should be kept under 3% by the middle of the following year before considering a reduction in borrowing costs. Despite inflation falling to 2.4% in November, economic analysts are predicting a possible surge in the latter part of the year.

 

[Solid ECN]

Offshore Yuan Slips to 7.15

Solid ECN – The offshore yuan dropped to around 7.15 per dollar, moving down from its six-month high. This happened because China's central bank did not change its main lending rates, even though there was pressure to loosen monetary policy due to a weak economic recovery.

The People’s Bank of China kept its one-year rate at 3.45% and its five-year rate at 4.2%, as many had expected. Now, markets are looking forward to possible rate cuts next year and maybe a lower reserve requirement ratio to keep enough money in circulation. Experts believe that China’s low inflation and slow economic growth justify this expectation. However, the yuan is still strong because the US Federal Reserve might start to cut interest rates next year. Also, the Bank of Japan has not said anything about changing its policies in 2024.

 

[Solid ECN]

UK Pound Rises Amid Economic Shifts​

Solid ECN – The UK pound recently surged past $1.27, driven by investor reactions to fresh economic data and predictions about future monetary policies. Recent reports have painted a mixed picture of the UK's economic health. The third quarter showed a shrinkage in the economy, a downturn further emphasized by revised figures from the second quarter, signaling a looming recession risk. On a brighter note, retail sales in November surpassed expectations.

Inflation trends are also shifting. The latest Consumer Price Index (CPI) report indicates a drop in UK inflation to 3.8%, significantly lower than the anticipated 4.4%. Additionally, core inflation has fallen to 5.1%, which is below the forecasted 5.6%. These changes have led traders to strongly anticipate interest rate cuts by the Bank of England (BOE) in the coming year. Market expectations suggest a total decrease of 143 basis points, translating to five quarter-point reductions and a 70% likelihood of a sixth cut. However, this contrasts with BOE Governor Andrew Bailey's insistence on keeping rates higher for a longer duration.

Despite the recent slowdown, inflation in the UK remains nearly double the BOE’s 2% target and is the highest among the Group of Seven nations. This situation poses a delicate balance for policymakers, who must navigate between supporting growth and controlling inflation.

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Economic Implication​

In a fundamental analysis, the future of the UK economy hinges on several factors. The anticipated interest rate cuts could stimulate spending and investments, potentially aiding in recession recovery. However, persistent high inflation remains a challenge. If inflation continues to outpace targets, the BOE may need to reconsider its stance on rate cuts to prevent further devaluation of the pound and manage cost-of-living increases. The economic outlook will largely depend on the BOE’s ability to balance these competing priorities and the government's measures to support economic growth.​

 

[Solid ECN]

AUDUSD: Buy or wait?​

The AUDUSD's rise is still going strong, moving near the top of its bullish trend. Yet, in today's market, the pair approached the 78.6% Fibonacci level, with the RSI near 70. This means the pair isn't overvalued despite the ongoing uptrend.

For those with smaller budgets, buying now may not be the best move. It's better to wait for a slight price drop. If the price dips below 78.6%, it could fall to the support zone between 0.6681 and 0.6676, a better buy-in point for those bullish on AUDUSD.

However, buying the Australian dollar now isn't advisable, strong trend or not. The market looks overbought, and AUDUSD is likely to lose some value. A smarter strategy is to wait for a drop before joining the upward trend.

With its upward momentum, the pair might reach its June 2023 high.​