2023 Market Forecast by SolidECN

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EURUSD​

Bulls are losing momentum this session, while the euro against the dollar pulls back below the 1.10 level. The correction in the U.S indices is supporting the USD’s recovery, however, the pair is currently testing an important support zone. If the price stays above the uptrend line, the bullish scenario could resume again. However, if a breakout of this zone appears, then a further pullback cannot be excluded.

 

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AUDJPY​

• US indices finished yesterday's trading slightly higher. S&P 500 gained 0.33%, Dow Jones moved 0.30% higher and Nasdaq added 0.28%. Russell 2000 was an outperformer and rallied 1.22%​
• Downbeat moods could be spotted during the trading in Asia today - Nikkei gained 0.4%, S&P/ASX 200 moved 0.4% lower, Kospi dropped 0.3% and Nifty 50 traded 0.2% lower. Indices from China traded mixed​
• DAX futures point to a slightly higher opening of the European cash session today​
• Chinese GDP growth reached 4.5% YoY in Q1 2023 and was much better than 4.0% YoY expected by analysts. However, on a quarterly basis growth reached 2.2% QoQ and was in-line with expectations​
• Monthly activity data from China for March came in mixed. Chinese retail sales surged 10.6% YoY in March (exp. 8.0% YoY), industrial production increased 3.9% YoY (exp. 4.7% YoY) and urban investments were 5.1% YoY higher (exp. 5.8% YoY)​
• According to RBA minutes, RBA members considered a rate hike at April meeting before ultimately deciding on a pause. Minutes showed that there is a stronger case to pause rates and assess whether there is need for more tightening​
• BoJ Governor Ueda said that buying government debt is part of monetary policy and is not aimed at monetising it​
• Cryptocurrencies are trading slightly higher today - Bitcoin gains 0.4% higher, Ethereum gains 0.6% and Dogecoin jumps 1.3%​
• Energy commodities trade mixed - oil gains 0.3% while US natural gas prices drop over 1% following yesterday's rally​
• Precious metals gain amid USD weakening - gold and silver trade 0.3% higher while platinum adds 0.2%​
• AUD and EUR are the best performing major currencies while USD and JPY lag the most​

AUDJPY gains following the release of upbeat Chinese Q1 GDP data. The pair climbed above a downward trendline at the end of the previous week and is continuing to advance towards the 91.00 resistance zone.​

 

[SOLIDECN]

AUDUSD​

The Australian dollar is one of the best performing major currencies today. RBA minutes turned out to be neither dovish, nor hawkish. On one hand, the document showed that RBA members considered a rate hike before ultimately deciding on leaving rates unchanged. On the other hand, the document noted that the Bank should reassess whether there is still need to undertake additional tightening. AUD, however, caught a bid following release of better-than-expected GDP data from China. The Chinese economy grew at a pace of 4.5% YoY in Q1 2023, much faster than 4.0% YoY expected by economists. Moreover, retail sales data for March showed a 10.6% YoY jump - also better than the 8.0% YoY increase expected. Industrial production data for March missed estimates but showed higher growth than in February.

Taking a look at AUDUSD chart at D1 interval, we can see that the pair bounced off an important mix of support today - an intersection of 50- and 200-session moving average (orange circle). Demand side reaction to this technical support hints that another upward impulse may be about to start. In such a scenario, resistance zone in the 0.6780 area, marked with 38.2% retracement of October 2022 - January 2023 upward move may be the next target for the bulls.​

 

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EURUSD​

Statements by the CEOs of major US banks today sounded 'disinflationary' today. CEO of Bank of America, Moynihan indicated that inflation rates in the US are falling and BofA's CEO, Bortwhick conveyed that the bank is seeing lower mortgage demand. Both of these comments look rather unfavorable for the 'greenback' and may suggest that the Fed will reconsider a possible rate hike in May. But James Bullard, the St.Louis Fed chair known for his hawkish stance, spoke on the situation in the US economy - his comments strengthened the dollar. Nevertheless, EURUSD is rebounding and trying to face a key short-term resistance level.

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Fed Bullard​

• Forecasts of a recession in the US ignore the strength of the labor market, and savings from the pandemic still have to be used after all, boosting demand;​
• With little tangible progress on inflation, interest rates must continue to rise;​
• The risk of banking stress causing widespread problems seems to have diminished, but we are still watching the situation closely;​
• The Fed should avoid giving extensive decision guidance at its next meeting and keep all options on the table as possible;​
• I still see an appropriately restrictive interest rate of 5.50%-5.75%. We are leaning toward keeping the rate longer until inflation is brought under control.​

EURUSD is trying to stop the declines. However, the short-term resistance line in the form of the SMA200 on the M15 interval may prove crucial. The US Congress is scheduled to vote on the debt ceiling bill next week.​

 

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GBPUSD Gained after higher than expected UK CPI reading!​

• UK CPI (M/M) Mar: 0.8% (est 0.5%; prev 1.1%)​
• UK CPI (Y/Y) Mar: 10.1% (est 9.8%; prev 10.4%)​
• UK CPI Core (M/M) Mar: 0.9% (est 0.6%; prev 1.2%)​
• UK CPI Core (Y/Y) Mar: 6.2% (est 6.0%; prev 6.2%)​

Details of today's inflation report. High UK inflation is largely driven by food prices. This is likely to prompt the BoE to make another 25bp hike.

Details of today's inflation report. High UK inflation is largely driven by food prices. This is likely to prompt the BoE to make another 25bp hike.​

 

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EURGBP​

The British pound is the best performing currency in the broad FX market at the moment. The EURGBP pair is trading close to 0.35% down today, triggered by a strong UK CPI reading. The UK's March CPI inflation reading came in at 10.1% YoY against a forecast of 9.8% and the previous reading of 10.4%. Core inflation continued unabated and came out at 6.2% against an expected fall to 6.0%. It had previously been 6.2%.

As reported by Reuters, the decline in price pressures in the UK economy is disappointing, raising the prospect of another interest rate hike in the UK. The swaps market is currently pricing in an 80% chance of a 25 basis point hike at a future BoE meeting. Let's remember that the UK has the highest inflation rates among Western European countries and is the only one struggling with double-digit inflation.

UK Finance Minister Jeremy Hunt said Wednesday's data confirms why the government must continue its efforts to bring inflation down.

The EURGBP pair lost ground sharply after raising the odds of the BoE continuing its interest rate hike cycle. The currency pair has drifted below support levels set by exponential moving averages, so a further reaction to these levels could be a key factor creating further movement in the pair.​

 

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Gold falls back to early April levels!​

Currently, the probability for a 25bp hike in May is rated at 88%, but on the other hand, the probability for a hike in June is rated at 29%, so adding up the probability, it is expected that a hike will happen anyway.

From the current market perspective, we are seeing a decidedly stronger dollar, which is gaining along with treasury yields, which are above 3.6% for 10-year treasury yields. In addition to this, the BoJ is hinting that there should be no change in the yield curve management program at its April meeting, which is also propping up the dollar. In response, gold is losing heavily and falling not only below $2,000 per ounce, but already below $1,980 per ounce. Silver, on the other hand, is below $25 per ounce and losing almost 2%.

Gold is falling to its lowest level since early April. The next important support near the 23.6 Fibo retracement at $1950 per ounce.​

 

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NATGAS​

US natural gas prices (NATGAS) are plunging today. NATGAS is down over 5% on the day. There is no specific news supporting the move and today's plunge in natural gas prices can be driven by overall increase in risk aversion and strengthening of US dollar, that is putting pressure on commodity prices. In fact, new 8-14 day weather forecasts from NOAA point to below-average temperatures over the larger area of the United States than forecasts from earlier this week. However, as US heating season is over already and we are entering a period when even below-average temperatures do not require heating (as average temperatures are higher), impact of weather forecasts is not as big as it used to.

Taking a look at NATGAS chart at H1 interval, we can see that price dropped to the $2.22 area, where a short-term support zone can be found. This area is marked with previous price reaction as well as the 38.2% retracement of a recent upward impulse. A break below would pave the way for a test of the next support in-line - $2.15 zone. However, it looks like the first attempt at breaking below turned out to be a failure and an attempt to launch a recovery move off the $2.22 area can be spotted at press time. In case the recovery run lasts, the first target for bulls will be the $2.30 price zone, which was broken earlier today.​

 

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NZDUSD​

The New Zealand dollar has been one of the worst performing major currencies today. The sell-off was primarily caused by the inflation report, which showed that price growth in the economy is slowing much faster than expected. The quarterly data showed that inflation on a QoQ basis came in at 1.2% against forecasts of 1.7% and an earlier reading of 1.4%. In YoY terms, inflation came in at 6.7% against expectations of 7.1% and an earlier reading of 7.2%.

The swap market is currently pricing in a near 78% chance of a 25 basis point interest rate hike at the next RBNZ meeting. As recently as this morning, those odds were close to 85%, so the surprise inflation reading has lowered the prediction for a further hike. The RBNZ had forecast Q1 inflation at an annualized rate of 7.3%, slowing to 6.6% in Q2. As such, today's reading of 6.7% for Q1 goes a long way to putting the brakes on further aggression in the tightening cycle.

Looking at the NZDUSD price chart, we can see that the pair has broken out below the support zone set by the April 17 low and is currently trading near the levels outlined by the 38.2% Fibo retracement of the upward wave started in October 2022. For the moment, the key support and resistance levels are: (support) the zone between the previously mentioned 38.2 retracement and the 50% Fibo measure; (resistance) the downward trendline initiated in February 2023.​

 

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Palladium pulls back from 2-months high and drops below $1,600​

PALLADIUM is the worst performing precious metal today, dropping around 2.5% at press time and moving further away from a recent 2-month high. Palladium is a clear outlier among precious metals today as USD weakening allows gold to rise 0.6% and platinum to add 0.2%. Silver is trading flat. While gold and silver, and to a lesser extent platinum, are driven primarily by the investment demand, palladium is more reactive to industrial developments. Today's drop may be to some extent driven by poor performance of EV stocks, especially Tesla as it slumps 10% following a lackluster Q1 2023 earnings report.

Taking a look at PALLADIUM at D1 interval, we can see that the price is pulling back after a failed attempt at breaking above the $1650 resistance zone. Downward move accelerated today with price dropping below the $1600 mark. The near-term support can be found ranging above the $1,500 mark and served as the upper limit of a previous short-term trading range.​

 

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JAP225​

• Wall Street indices finished yesterday's trading lower but off the session lows. S&P 500 dropped 0.60%, Dow Jones moved 0.33% lower and Nasdaq plunged 0.80%. Russell 2000 traded 0.54% lower​
• Indices from Asia-Pacific traded lower today - Nikkei dropped 0.2%, S&P/ASX 200 traded 0.4% down, Kospi declined 0.7% and Nifty 50 dipped 0.1%. Indices from China traded 0.5-1.5% lower​
• DAX futures point to a slightly lower opening of the European cash session today​
• Bloomberg reported that United States and other Western countries are considering a near total ban on exports to Russia​
• Fed's Harker said he expects US GDP to grow by less than 1% and inflation to decelerate to 3.0-3.5% this year. Harker also said that some additional tightening is needed after which rates will stay high for some time​
• ECB Schnabel said that while headline inflation started to drop on the back of falling energy prices, other components continue to rise​
• BoE Tenreyro said that Bank of England may have already tightened policy too much​
• Japanese CPI inflation decelerated from 3.3% to 3.2% YoY in March (exp. 3.2% YoY). Core CPI inflation stayed unchanged at 3.1% YoY (exp. 3.1% YoY)​
• Flash manufacturing PMI from Australia for April dropped from 49.1 to 48.1. Services gauge jumped from 48.6 to 52.6​
• Japanese manufacturing PMI ticked higher from 49.2 to 49.5 in April (exp. 49.9)​
• Cryptocurrencies trade mostly higher - Bitcoin gained 0.3%, Ethereum drops 0.1% and Dogecoin jumps 0.5%​
• Oil is trading little changed while precious metals trade mixed​
• USD and JPY are the best performing major currencies while AUD and NZD lag the most​

Nikkei (JAP225) broke above the upper limit of a medium-term trading range in the 28,250 pts area. However, advance was halted and the index struggles to break above the 28,750 level, marked by a peak of previous false breakout.​

 

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EURUSD​

Flash PMI indices for April from France and Germany were released at 8:15 am BST and 8:30 am BST, respectively.

French reading was mixed - services index showed a big and unexpected improvement while the manufacturing sector showed large and also unexpected deterioration. Deterioration in manufacturing, which reached 35-month low, can be explained with massive employee strikes that are occuring in France in response to new pension reform. Improvement in services is puzzling but we will have to wait for the final release for details.

German reading was mixed on the same note - miss in manufacturing and beat in services. However, in case of German data, strikes cannot be used as an explanation so we will have to wait for final data with sector/industry breakdown.

France​

• Manufacturing: 45.5 vs 47.9 expected (47.3 previously)​
• Services: 56.3 vs 53.5 expected (53.9 previously)​

Germany​

• Manufacturing: 44.0 vs 45.6 expected (44.7 previously)​
• Services: 55.7 vs 53.3 expected (53.7 previously)​

EUR ticked higher following the release of French data but the move was minimal. Indices also moved higher in a knee-jerk move but have later turned lower. Those moves were magnified after German release with EURUSD adding to previous gains and DE30 deepening slide.

DE30 deepens drop below 15,900 pts price zone after mixed PMIs from France and Germany.​

 

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Chart of the Day - EURUSD​

EURUSD is pulling back this morning. The move lower is driven mostly by strengthening of the US dollar. The main currency pair tried to recover some losses after the release of mixed PMIs for France and Germany that showed major improvement in the services sector and significant deterioration in manufacturing. While flash PMIs failed to trigger a strong recovery move, they seem to have been enough to halt declines.

Taking a look at EURUSD at the H1 interval, we can see that the pair dropped to the 1.0940 area, where the short-term upward trendline can be found. Bulls managed to defend this price zone and now we can see the pair trying to climb back above 1.0950. From a technical point of view, this is a bullish development but whether this translates into a large upward impulse will depend on whether bulls manage to break above the 1.0980 resistance zone that has been limiting upward moves this week. Should such a break occur, EUR bulls may target recent highs in the 1.1070 area next.

The pair may see some volatility around 2:45 pm BST when flash PMIs from the United States for April are released. Market expects a small deterioration in both manufacturing and services.​

 

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JPY Recovers losses ahead of upcoming BOJ meeting​

Japanese central bankers will meet this week to decide on monetary policy (Friday). This will be the first meeting under new Bank of Japan governor Ueda. There was some hope in the markets that change at BoJ helm will result in change in BoJ policy. However, Ueda so far has been hinting at continuation of the ultra-loose policy of his predecessor, at least for now. On the other hand, Sankei reports that the central bank may review and assess the past 10 years of monetary policy. One cannot rule out that even in spite of lack of change in policy or statement, assessment alone may offer some guidance. JPY is recovering some of its recent losses as the meeting draws closer.

USDJPY is trading higher today, due to USD strength, but has lost some ground after the Sankei news report. USDJPY continues to trade in an uptrend started at the end of March but has run into resistance in the 135.00 area.​

 

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US100​

Taking a look at US100 chart at H1 interval, we can see that the index has been trading in a triangle pattern for some time with a 13,000 pts area serving as the lower limit of the pattern. This is a continuation pattern so traders should be aware of a potential for a downside breakout, especially as price has reached a lower limit recently. In case of a break below 13,000 pts, textbook range of breakout from the pattern suggests possibility of an around 350-points drop, to 12,650 pts area.

 

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Coca-Cola on wave of strong demand and higher prices​

Like other companies in the industry, the Coca-Cola Company has increased the prices of its products, but this has not affected consumer demand. In recent years, as pandemic-related restrictions have disappeared, the company has seen an increase in productivity. This is mainly due to consumers being willing to pay more for drinks in public places such as restaurants, stadiums and concerts.

Current premarket trading on Wall Street indicates that Coca-Cola (KO.US) shares have broken above the important resistance set by the local peaks of December 2022.​

 

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EURUSD​

EURUSD has once again moved above the resistance zone at 1.10 USD. If this break is sustained, a continuation of the upward movement towards the next resistance level at 1.1273 is not excluded.

 

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Microsoft​

Microsoft (MSFT.US), interval D1. The major supply has activated in $280 zone, it's level of resistance from summer 2022 highs. If the earnings will be weaker than expected, the major support may be at 270 or 260 USD levels, where we can see 23,6 and 38,2 Fibonacci retracement of upward wave started in the October 2022. On the other hand if the financial report will be strong, with possible optimistic guidance the major resistance at $300 level may be exceed. Also 'golden cross' formation of moving averages (SMA200, SMA100) may indicate that bulls will be still strong.

 

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USD dips after US survey, new home sales data​

A pack of US data was released at 3:00 pm BST today. While both soft and hard data was released, the market was more focused on the former, especially Conference Board consumer confidence reading for April. CB reading turned out to be a disappointment with headline index dropping from 104.2 to 101.3 (exp. 104.0). Lower reading was driven by a drop in expectations subindex. Other data released simultaneously to CB reading turned out to be mixed - new home sales increased 9.6% MoM in March and beat expectations while Richmond Fed index came in lower than expected.

US data released at 3:00 pm BST today​

• Conference Board Consumer Confidence for April:101.3 vs 104.0 expected (104.2 previously)​
• Present situation: 151.1 vs 151.1 previously​
• Expectations: 68.1 vs 73.0 previously​
• Richmond Fed manufacturing index for April: -10.0 vs -8.0 expected (-5.0 previously)​
• New home sales for March: 683k vs 630k expected (640k previously)​

Markets barely saw any reaction to the release of US data. USD ticked lower with EURUSD attempting to halt a decline in the 1.10 area while US index futures moved slightly higher following the release.

EURUSD attempts to bounce off the 1.1000 area after release of US survey and housing market data.​

 

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Oil

Oil continues to trade near but has not yet managed to close a bullish price gap, triggered by an unexpected OPEC+ output cut announcement. A bearish sentiment can be spotted on the crude market since mid-April and is trading less than $1 per barrel away from closing a bullish gap. Taking a look at OIL.WTI at the D1 interval from a technical point of view, we can see that downward move accelerated after the price failed to break above $82 resistance. According to the Overbalance methodology, this hints that the long-term trend remains bearish. Moreover, price dropped back below 100-period EMA, what further supports the bearish outlook.

Taking a look at WTI at a lower interval (H1), we can see that price tested a recently-broken support as a resistance and, after a failure to break above it, downward move was resumed. Currently, we are observing OIL.WTI testing recent local lows in the $76.85 per barrel area and should we see a break below this zone, the way towards $75.50 - lower limit of bullish price gap - will be left open.