Forex Updates by Solid ECN

[Solid ECN]

A Simple Guide to the Nikkei 225’s Recent Rise​

Solid ECN – On Monday, the Nikkei 225 index rose by 85.05 points or 0.26%, ending at 33,254.03. This continued the gains from the previous session. Investors were encouraged by Wall Street’s year-end rally on Friday, especially after the US Federal Reserve’s preferred inflation measure for November was lower than expected and closer to the central bank’s 2% target.

Meanwhile, both overall and core inflation in Japan dropped to a 16-month low last month. On a quiet Christmas day, investors paid attention to a speech by Kazuo Ueda, the governor of the Bank of Japan. He suggested that the central bank might change its monetary policy if wages and prices start moving in the right direction. He also repeated that the board was keeping its very supportive monetary policy to protect the delicate economic recovery.

The healthcare sector led the increase, followed by property, tech, and consumer sectors. The top performers of the day included Nexon Co. (5.4%), NTT Data Group (4.5%), Lasertec Co. (2.8%), NH Foods (2.5%), and Takashimaya Co. (2.4%).​

 

[Solid ECN]

Dollar Index: A Holiday Trading Tale

On Tuesday, amidst holiday trading, the dollar index lingered around 101.6. This was near its five-month low, due to signs of slowing US inflation. This has led to predictions that the Federal Reserve will begin to lower interest rates next year. Data from Friday revealed that the core PCE index, the Federal Reserve’s favored inflation measure, dropped to 3.2% in November from 3.4% in October.

This was lower than the projected 3.3%. Furthermore, figures from Thursday showed a weaker than expected US economic growth in Q3 and a minor rise in unemployment benefit claims recently. The dollar was trading near multi-month lows against other major currencies. It is at risk of further depreciation against the yen, as BOJ Governor Kazuo Ueda stated on Monday that the chances of reaching the 2% inflation target were “gradually rising.”

 

[Solid ECN]

Euro Hits 5-Month High Amid Dollar Weakness

Solid ECN – The euro recently climbed to $1.1, marking its highest point in five months. This rise is largely due to the weakening U.S. dollar. The latest PCE inflation data from the U.S. has fueled expectations that the Federal Reserve might begin lowering interest rates as early as next year, potentially starting in March.

At the same time, market players are predicting that the European Central Bank (ECB) might also reduce borrowing costs next year, potentially in line with the Fed's actions. However, it's worth noting that many ECB policymakers are not in favor of this prediction. Over the course of the year, the euro has seen an approximate 3% increase in value.

 

[Solid ECN]

Understanding EURJPY’s Movement in the Ichimoku Cloud

Solid ECN – The EURJPY currency pair is presently undergoing a test of the Ichimoku cloud. Last week, the pair managed to cross above the cloud successfully. The subsequent decline post-breakout could potentially be viewed as a consolidation phase.

However, should the pair’s decline persist below the cloud, the bullish bias would be rendered invalid, indicating a false Ichimoku signal.

From a technical perspective, as long as the pair remains within the channel and above the 50% Fibonacci support level, the short-term trend is bullish. In this scenario, the target could be the upper band of the flag channel.

This analysis is subject to market conditions and should be used in conjunction with other indicators.​

 

[Solid ECN]

Bitcoin Tests Ichimoku Cloud: Price Trend Alert​

Solid ECN – Bitcoin has a shift below the Ichimoku cloud. The price is currently testing the cloud as resistance. The price is ranging inside the bearish channel. The RSI indicator hovers below the median line. We expect the bitcoin price decline to $40,600 area if the market ranges inside the flag.

Bitcoin is experiencing a notable shift, now positioned below the Ichimoku cloud. Presently, its price is testing the cloud, facing it as a resistance level. In the midst of this, we're seeing the price moving within a bearish channel. Concurrently, the RSI indicator remains below the median line, signaling a cautious market sentiment.

Should the market continue to range within this flag pattern, we anticipate a potential decline in Bitcoin's price towards the $40,600 area.

 

[Solid ECN]

AUDUSD Eyes May 2023 High Amid Mixed Signals​

Solid ECN – The Aussie dollar is currently seeing a 20-pip dip from yesterday's high in this trading session. At the moment, the pair is testing the Ichimoku cloud on the 1-hour chart, while technical indicators are showing mixed signals.

Should the AUDUSD price stay above its current level, the uptrend is likely to persist. In such a scenario, the price could soar to 0.6900, which was the all-time high in May 2023.

It's important to note that the lower band of the bullish flag is key. As long as the price remains within the flag, the uptrend remains intact.

 

[Solid ECN]

Silver Near 38.2% Fibonacci: Signs of Market Reversal​

Silver is currently trading near the 38.2% Fibonacci support level. On the XAGUSD 4-hour chart, a hammer candlestick pattern has emerged. The Stochastic oscillator is signaling that the market is oversold. In conclusion, if the silver price manages to stay above the Fibonacci support level, it's likely that the uptrend will continue. If this happens, the bullish target could be the 61.8% Fibonacci resistance level.​

 

[Solid ECN]

Pound Climbs to $1.28: BOE vs Fed Cuts in 2024​

Solid ECN – The British pound rose to $1.28 at the end of 2023, touching its highest level since late July and poised for a gain of near 6% for the year, as investors anticipate that the Federal Reserve will slash borrowing costs more rapidly than the Bank of England. Recent data revealing an unexpected drop in US PCE prices has significantly bolstered the probability of Fed rate reductions as early as March, with an outlook of more than 150 basis points of cuts over the upcoming year.

At the same time, the most recent UK CPI report disclosed a slowdown in inflation to 3.8% in November, marking its lowest level since September 2021 and falling below the anticipated 4.4%. This development has prompted heavy speculation among traders regarding potential interest rate cuts by the Bank of England in 2024, despite BOE Governor Andrew Bailey's insistence on maintaining higher rates for an extended period.​

 

[Solid ECN]

AUDUSD - RBA's Cautious Approach in Rate Cut Scenario​

The Australian dollar rose, reaching over $0.68. It's close to a five-and-a-half month high. This happened as people think the US Federal Reserve will lower interest rates soon, possibly in March. This expectation weakened the US dollar but helped other currencies.

Also, a report showed that China's manufacturing grew more than expected in December. This news influenced investors.

In Australia, investors are looking at what the Reserve Bank of Australia (RBA) might do next. Experts think the RBA will be slower to reduce rates compared to other countries. This is because it didn't raise rates as much as others. So, any rate cuts might be smaller or happen later.

Inflation in Australia is sticking around longer than in other places. RBA Governor Michele Bullock mentioned that the inflation problem is mainly local and due to increased demand. The market believes the RBA won't cut rates until the end of 2024.​

 

[Solid ECN]

Euro Slides Below $1.1 Amid Economic Data and Rate Cut Speculations​

At the beginning of 2024, the euro fell below $1.1. This drop came after reaching a high of $1.1139 on December 28th. Investors are now focusing on upcoming European inflation data and the US jobs report due later this week. Additionally, recent PMI data showed that Eurozone factory activity shrank for the 18th month in a row in December.

As for monetary policy, there's an 80% chance the Fed will start reducing interest rates in March. Over the year, cuts could total more than 150 basis points. Meanwhile, the European Central Bank might also cut rates, but likely slower than the Fed, even as ECB policymakers aim for a tougher stance.​

 

[Solid ECN]

The Balance of Gold in a Shifting Economic Landscape​

Solid ECN – On Wednesday, gold prices stabilized above $2,060 an ounce, recovering from the previous session's fluctuating trends. This stability comes as investors eagerly await insights from the upcoming Federal Reserve policy meeting minutes, which are expected to shed light on future monetary policies. Despite reaching intraday highs, gold experienced a slight decline of 0.2% on Tuesday. This was attributed to a resurgence in the dollar's value and an increase in Treasury yields, leading investors to reconsider their expectations for interest rate reductions by major central banks within the year.

Currently, market predictions indicate about a 70% likelihood of the US central bank implementing a quarter-point rate cut in March, a decrease from the almost 90% probability previously anticipated. In addition, gold's value has found some support due to a combination of factors, including the sell-off in riskier assets and escalating geopolitical tensions in the Middle East.​

 

[Solid ECN]

Japanese Equities Dip: Nikkei 225 Hits Two-Week Low in Volatile Trade​

Solid ECN – In Thursday's post-holiday trading session, the Nikkei 225 Index experienced a significant drop, initially plunging by 2.3% and finally closing 0.53% lower at 33,288. This marked a two-week low point for the index, as it aligned with the global market trend of substantial losses. The beginning of the new year brought with it a cautious approach from investors. Many opted to secure their gains and reduce their expectations regarding the magnitude of interest rate reductions by major central banks within the current year.

Japan faced additional internal turmoil. The country was struck by a devastating earthquake, resulting in the tragic loss of at least 65 lives. Further adding to the chaos was an incident at Tokyo's Haneda airport, involving a collision with Japan Airlines. This series of events put additional pressure on the stock market.

Technology sectors bore the brunt of the downturn, with notable companies like Tokyo Electron, SoftBank Group, Disco Corp, Lasertec, and Advantest witnessing steep declines in their stock values. These companies saw their shares fall by 5%, 3.9%, 3.9%, 5.3%, and 3.8% respectively. Other prominent companies in the index, such as Fast Retailing, Sony Group, and Shin-Etsu Chemical, also experienced notable drops in their share prices.

Technical Analysis​

The JP225 Index, also known as the Nikkei, has recently experienced a rebound from the 32,689 mark. This particular point is in close proximity to the 38.2% Fibonacci retracement level.

At present, the index is undergoing a test of the lower band of what was previously a bullish flag pattern. The pivot point in this scenario is at the 33,423 mark. For the continuation of the bullish bias, it is imperative that buyers achieve a close above this pivot point. Should there be a failure to surpass the pivot, it would likely result in a decline in the index's price.

Under such circumstances, the initial target would be set at the 38.2% Fibonacci retracement level. Following this, the next level of support would be at the 50% Fibonacci retracement level.

 

[Solid ECN]

Canadian Dollar Dips Beyond 1.33 USD​

The value of the Canadian dollar has recently decreased, now exceeding 1.33 against the US dollar. This decline follows a notable peak at 1.32 on December 26th, which was the highest in five months. Several factors contribute to this shift: a strengthening US dollar, underwhelming economic data within Canada, and a decrease in foreign currency coming into the country.

Particularly impactful was the manufacturing PMI in Canada, which saw its most significant reduction since the 2020 pandemic-induced downturn. This situation constrains the Central Bank of Canada's ability to implement strict policies to combat inflation. Additionally, a global reduction in oil demand is affecting the foreign exchange inflows, further weakening the Canadian dollar. Investors are now keenly anticipating the upcoming labor market data, set to be released on Friday, hoping it will shed light on the potential direction of future monetary policy.​

 

[Solid ECN]

Swiss Franc Falls from 12-Year High​

Solid ECN – The Swiss franc dropped to 0.85 against the US dollar, down from a 12-year peak of 0.841. The DXY's recovery influenced this change. Last year, the franc gained 8.5% versus the dollar, reflecting differing interest rate policies of the Swiss National Bank and the Federal Reserve. The Fed's latest meeting hinted at a cautious approach, further affected by US inflation slowing down.

Despite this, the Swiss National Bank sees reasons for higher rates due to potential inflation increases. Currently, inflation in Switzerland is at 1.4%, but predictions show it might reach the 2% goal in mid-2024. This has led investors to believe that the Swiss National Bank will cut rates later than the Fed. Additionally, the franc reached a new high against the Euro, reflecting ongoing high rate expectations from the Swiss National Bank.​

 

[Solid ECN]

USDCHF Navigates Between Bullish Channel​

Solid ECN – The bull's effort to flip the price above the Ichimoku cloud continues. However, the ADX indicator hovers below the 20 level, which can be interpreted as a weak market trend. The USDCHF price should stabilize itself above the %38.2 Fibonacci level for the uptick bias to continue. If this happens, the price would rise to test the %50 level of the Fibonacci resistance as its initial target.

Conversely, the bullish scenario should be invalid if the USDCHF price exceeds the bullish channel. In this case, the downfall would extend to December 2023's low.

 

[Solid ECN]

Euro Stabilizes Amid Eurozone Inflation and Strong US Job Market​

Solid ECN - The euro maintained a steady value near $1.09. This happened as market players absorbed new information. The Eurozone showed an increase in its inflation rate. At the same time, the US job market was doing well. These developments reduced the need for the European Central Bank and the US Federal Reserve to lower interest rates.

In December, the Euro Area saw its inflation rate go up to 2.9%. This was just below the expected 3%. The main reason for this increase was the cost of energy. The core inflation rate, which excludes energy, also slowed down. It reached 3.4%, the lowest since March 2022.

In the US, the job scene was positive. There were 216,000 new jobs added last month. This was more than the expected 170,000. The unemployment rate stayed the same at 3.7%. However, there was a slight dip in the activity rate. It fell to 62.5%, the lowest since February.​

 

[Solid ECN]

GBPUSD Technical Analysis

The GBPUSD pair is currently facing challenges at the median line of the bullish channel. The RSI (Relative Strength Index) indicator remains above zero, signaling a potential uptrend continuation.

The channel's lower band supports this bullish outlook. As long as the price stays within the channel, the R1 resistance level and the channel's upper band can be the following targets for the bulls."

 

[Solid ECN]

Libya's Oil Halt Boosts WTI Above $72​

Solid ECN – WTI crude futures rose above $72.5 per barrel on Wednesday, extending gains from the previous session as escalating geopolitical tensions in the Middle East and halted oil production in Libya continued to support oil prices. Libya's Sharara oilfield has stopped oil production since last week due to political protests, removing approximately 300,000 barrels per day from the market.

A prolonged war in Gaza and Houthi attacks on ships in the Red Sea also stoked fears of a broader conflict in the region that could disrupt supply further. Moreover, industry data showed that US crude inventories declined by 5.215 million barrels last week, way above market expectations for a 1.2 million barrel drop. Meanwhile, US gasoline stockpiles rose by 4.9 million barrels, while distillate inventories gained 6.9 million. Investors now look ahead to US EIA data later on Wednesday and the International Energy Agency's monthly market report next week.

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[Solid ECN]

Australian Dollar Rises Amid Cooling Inflation​

Solid ECN – The Australian dollar climbed to nearly $0.67, recovering from its four-week low. This rise occurred despite new data indicating a slowdown in inflation. In November, Australia's CPI grew by 4.3% compared to last year, less than October's 4.9% increase and the smallest since January 2022. The figure was also lower than the anticipated 4.4%.

Given the services sector's robustness, this suggests the Reserve Bank of Australia might not raise interest rates. The market doesn't expect the central bank to increase rates beyond the existing 4.35%. Also, the likelihood of a rate cut in May has decreased to about 36%.​

 

[Solid ECN]

New Zealand Dollar Balances as Rate Cut Expectations Grow

Solid ECN – The New Zealand dollar has stabilized at $0.624 after recent ups and downs. This comes as the US dollar weakens, with many expecting the Federal Reserve to cut interest rates several times this year. US consumer inflation expectations for the short term hit a near three-year low in December, hinting at a softer approach to monetary policy.

In New Zealand, markets anticipate four rate cuts from their central bank this year, possibly starting in May. The central bank's head noted the unexpected slowdown in growth, increasing chances of an earlier rate cut. In November, New Zealand's cash rate remained at 5.5%, narrowly avoiding a hike.​