2023 Market Forecast by SolidECN

[SOLIDECN]

AUDUSD​

Investors' morning attention in the FX market turned towards Australia, where we learned the latest inflation data. Australia's headline CPI came in at 1.4% k/k in Q1 2023 (versus the expected 1.3%). However, the AUDUSD pair saw declines, dictated by a lower core inflation reading (1.2% quarter-on-quarter versus expectations of 1.4%). By weight, it is core inflation that is the more important factor creating predictions for future RBA policy.

The Reserve Bank of Australia has forecast and continues to forecast a slowdown in inflation in the near future. The bank's rhetoric comments relatively bluntly that changes in monetary policy have a lagged effect on economic activity and its indicators. The combination of these two factors persuaded the RBA to hold the cash rate steady at its April meeting, and today's decline in core inflation will add to the case for another pause at the RBA's next meeting on 2 May. At the moment, the swap market is pricing in a near 80% probability of holding rates at 3.6%.

Looking at the technical situation of the AUDUSD currency pair, we can see that the AUD is weakening against the US dollar and is currently descending into the support area defined by the March 2023 lows and the 61.8% Fibo retracement of the upward wave initiated in October 2022. The nearest region of resistance is the confluence of the 50-, 100- and 200-day exponential moving averages marked on the chart.​

 

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Gold​

Risky assets, like equities or commodity currencies, dipped shortly before the Wall Street cash session opened following a report from CNBC on First Republic Bank. According to the media piece, the US government is currently unwilling to intervene to save First Republic Bank. First Republic Bank is on watch after Q1 earnings release highlighted the bank was close to collapse during recent US banking turmoil and that this risk has not waned yet.

S&P 500 futures (US500) dropped around 0.2% on the news. Interestingly, we also saw a move lower in USD with GBPUSD jumping above 1.25 mark and EURUSD moving closer to 1.11 handle. Safe haven flows as well as weaker USD provided fuel for around-0.5% jump on gold market, with precious metal climbing above the $2,000 mark.

GOLD jumped above the 200-hour moving average and $2,000 mark following CNBC report on First Republic Bank.​

 

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US500​

• Wall Street indices finished yesterday's trading mixed - Dow Jones and S&P 500 dropped while Nasdaq gained fueled by solid performance of Microsoft and NVIDIA​
• US index futures caught a bid after close of the session following better-than-expected earnings release from Meta Platforms​
• Meta Platforms jumped over 11% in the after-hours trading, following Q1 earnings release. Company reported Q1 EPS at $2.20 (exp. $2.03), revenue at $28.65 billion (exp. $27.65 billion) and revenue per user at $9.62 (exp. $9.30)​
• Meta had 2.04 billion daily active users in Q1 2023 (exp. 2.01 billion) while monthly active users were reported at 2.99 billion - in-line with expectations. Meta's Reality Lab reported a $3.99 billion operating loss and company expect this losses in the unit to increase this year​
• Indices from Asia-Pacific traded mostly higher today - Nikkei and Nifty 50 gained 0.1%, Kospi moved 0.4% higher and indices from China traded up to 0.7% higher. S&P/ASX 200 was a laggard and dropped 0.4%​
• DAX futures point to a slightly lower opening of the European cash session today​
• The US House of Representatives passed a bill on spending cuts and debt ceiling. However, bill still needs to win backing in the Senate​
• New prime minister of New Zealand Hipkins said that there will be no major tax changes in the upcoming budget announcement (May 18, 2023)​
• Russian deputy prime minister Novak said that OPEC+ cooperation may be extended beyond this year (current agreement is valid until end-2023)​
• Chinese industrial profits dropped 21.4% YoY in the January-March period. Profits were down 19.2% YoY in March alone​
• Cryptocurrencies are trading higher - Bitcoin gains 1.6% while Dogecoin and Ethereum jump 1.7%​
• Energy commodities trade little changed this morning - oil gains 0.3% while US natural gas prices drop 0.1%​
• Precious metals benefit from USD weakness and trade higher - gold adds 0.6%, silver gains 0.7% and platinum jumps 1.1%​
• AUD and NZD are the best performing major currencies while JPY and USD lag the most​

US500 recovered part of yesterday's losses after Meta reported better-than-expected earnings. Nevertheless, the technical picture remains bearish following the recent failure to break above the upper limit of the Overbalance structure at 4,190 pts.​

 

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US100 tests 13,000 pts ahead of GDP data​

Reading close to market estimates could be a positive for Wall Street and may help alleviate concerns around banking sectors. Simultaneously, it should be neutral for USD as it will be more reactive to Fed. A strong GDP reading could provide fuel for USD gains as it would boost odds for more hikes from Fed. This, in turn, could be negative for Wall Street. Weak GDP report may have mixed impact on Wall Street but would most likely be negative for USD.

US100 is trading in the 13,000 pts area. Yields resumed climb (drop on TNOTE) and suggest a pullback.​

 

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3 markets to watch this week​

First week of May looks busy, especially the second half of it, as investors will be offered top-tier macro data from North America as well as rate decisions from Fed and ECB. Stock markets will continue to react to earnings. Among top earnings releases next week one can find Apple, AMD and Qualcomm. Be sure to watch GOLD, USDCAD and US100.

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GOLD​

Investors will get rate decisions from two major central banks next week - Fed on Wednesday, 7:00 pm BST and ECB on Thursday, 12:45 pm BST. Both banks are expected to deliver 25 basis point rate hikes. Forward guidance will be crucial - hint that rate hike cycle is about to be paused, or nears its end, could be an important mover for GOLD which has recently struggled to climb back above $2,000 per ounce. On the other hand, hawkish guidance would be negative for precious metals and can add more fuel to recent pullback.

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USDCAD​

While central bank decisions will be the most closely watched events in the week ahead, investors will also be offered some top-tier macro releases. USDCAD may experience elevated volatility on Friday as jobs reports for April from the United States and Canada will be released at 1:30 pm BST. Apart from that, USD may also see some moves on the release of manufacturing ISM (Monday, 3:00 pm BST), ADP employment report (Wednesday, 1:15 pm BST) and services ISM (Wednesday, 3:00 pm BST).

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US100​

Solid earnings reports from Meta Platforms, Microsoft and Alphabet helped lift sentiment towards the tech sector this week. Apple, the final of the 5 US mega-tech companies, will report earnings next week on Thursday after the close of the Wall Street session. Earnings reports from two semiconductor companies - Advanced Micro Devices (Tuesday, after market close) and Qualcomm (Wednesday, after market close) - may provide additional fuel for moves on Nasdaq-100 index (US100).​

 

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EURUSD​

• The EURUSD is in a tight bull channel. However, it is collecting much strong bear closes.​
• The odds are that the channel up from the May low is converting into a trading range.​
• The bears need to get closes below the moving average to begin to convince traders that they are taking control.​
• Overall, the market will probably begin to test prior higher lows from the channel up that began on March 24th and convert into a trading range. Traders should expect more sideways trading.​

 

[SOLIDECN]

EURUSD​

EURUSD saw a fairly dramatic reversal late in 2022 when it turned out that the energy crisis in Europe was softer than feared. The pair was trading close to 0.95 at the end of September but has rallied all the way to 1.10 since then. Could it be primed for a larger correction?

When looking at the D1 interval one can spot a nearly completed 5- wave structure. The current wave runs along the upwards corridor and while we saw 2023 highs last week, the pair currently tests the lower limit of the channel. A breakout lower could therefore result not just in profit taking but possibly in a larger ABC corrective structure. One should be vigilant for a larger move amid reduced volatility during the Labour Day.

A breakout lower – should it occur – could be a warning signal for other markets as well as the EURUSD rally accompanied gains on other risk-on markets, especially European equities. With DE30 at the highest since January 2022 and not too far off ATH the stakes are high. Should the pair break lower out of the channel, a larger corrective structure could be initiated.​

 

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EURUSD in Breakout Mode​

• The EURUSD continues to go sideways in a tight trading range holding above the moving average (blue line).​
• The market is still Always In Long. However, the past five trading days have had a lot of overlapping bars. This increases the risk of more trading range price action.​
• The bulls want the tight bull channel to continue up, and the bears want a downside breakout and test of prior lower highs, such as April 17th.​
• The bears need to get a close below the moving average. Without it, traders will continue to buy at the moving average, betting it will act as support.​
• At the moment, the odds are that the bull channel that began in March will convert into a trading range and test prior lower highs. However, without a downside breakout, the market will probably have to go sideways and develop more selling pressure.​

 

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AUDUSD​

Looking at the chart, the AUDUSD rate started to rise rapidly after 6:00 am. So far, no contrary signals have appeared, so further upward movement of AUD cannot be ruled out. Volatility on the Australian dollar may still appear during the Lowe Philip speech the Governor of the Reserve Bank of Australia - at 1:20 pm.

However, looking at the hourly chart, it is worth noting two geometries. The first one (blue) was already tested after 8:30 am, after which the rate set new local highs. It seems that even a correction of several dozen pips would not threaten the upward trend for now. The key intraday support is the level of 0.6668, where the lower limit of the 1:1 structure and the earlier local peak are located.

 

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GBPCHF All set to fall​

GBPCHF is currently at 1.1198 in a range and looking for a breakout of slope support. We are in the start of a channel, and we are looking for a continuation to the 1.000 Fibo at 1.1149 with a further target the ATR target at the 1.1125 area.

Watch the USDX for direction. The average daily true range (ATR) for the pair is 69 pips per day and it’s 180 day average is 82 pips per day. USDX is currently moving up but at a range top-watch for it to short.​

 

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Gold confirms the breach​

Gold prices confirmed breaching the symmetrical triangle’s resistance line and settled with a daily close above it, to resume the main bullish track and head towards achieving positive targets that start by testing the recently recorded high at 2048.70, supported by moving above the EMA50.

Therefore, we are waiting for more expected rise in the upcoming sessions, and the price needs to hold above 1992.20 to guarantee the continuation of the bullish wave, as breaking this level will press on the price to return to the correctional bearish trend again and open the way to visit 1957.30 areas on the near term basis.​

 

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USDCAD​

Despite natural gas price sideways fluctuation between 1.950 support and 2.500 resistance, the major indicators provide the negative momentum again, to increase the chances of renewing the negative attempts in the near term and medium term period.

Succeeding to break 1.950 support line will open the way to form new bearish waves to target the historical support at 1.4800 followed by reaching the psychological support at 1.​

 

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Gold - Chart of the Day​

GOLD managed to break the key resistance at 2010.5$ during yesterday's session, and left the local consolidation, which was related to the rebound on EURUSD. Earlier, the price of this precious metal reacted several times to the support at $1972, which resulted from the lower limit of the 1:1 structure. According to the Overbalance methodology, the upward trend is in force, and breaking the aforementioned resistance at 2010.5$, may open the way for an attack on the recent highs at 2048$. This evening, due to the FOMC decision, volatility on the USD should be elevated, and consequently we should see bigger movements on gold as well.

The decision should not come as a surprise because the market has long been considering the scenario of a 25 basis point hike and keeping the option of another hike in June. Nevertheless, investors will focus on the Fed announcement and the further trajectory of monetary policy. The key question is whether any interest rate cuts are being considered this year.​

 

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Gold​

Gold prices rallied upwards sharply by today’s open, as the prices are affected by the FOMC rate hike, to surpass our waited target at 2048.70 and record new historical high at 2080, to hint the continuation of the bullish trend domination on the short term and medium term basis, but we notice that the price declines quickly to settle below 2048.70, which makes us prefer to stay aside until the price confirms its situation according to this level followed by detecting its next destination clearly.

The contradiction between the technical indicators provides another reason for neutrality, as stochastic shows clear negative signals now, while the EMA50 provides the continuous positive support to the price. Note that breaching 2048.7 and holding above it will lead the price to resume the bullish wave and achieve positive targets that reach 2098, while consolidating below it will press on the price to achieve intraday bearish corrections that target testing 2017 areas initially.​

 

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GBPUSD touches the target​

The GBPUSD pair continued to rise yesterday to succeed touching 1.2580 level, noticing that the price begins today with new rise to attempt to confirm breaching this level, to continue suggesting the bullish trend for the upcoming period, reminding you that our next station is located at 1.2650.

The bullish channels continue to organize the suggested bullish wave, which gets continuous support by the EMA50, noting that holding above 1.2510 is important to achieve the waited targets, as breaking it will press on the price to achieve some intraday bearish correction before turning back to rise again.​

 

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EURUSD​

The EURUSD pair faces negative pressure to trade around 1.10 now, affected by stochastic negativity, which gathers the positive momentum gradually, waiting to motivate the price to resume the expected bullish wave for today, which its targets begin by breaching 1.10961 to open the way to head towards 1.1150 as a next station.

Holding above 1.0991 represents initial condition to continue the expected rise, as breaking it will press on the price to achieve additional decline that targets testing 1.0945 areas before any new positive attempt.​

 

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DE 30 Vulnerable to further losses​

The DAX futures / DE30 is pulling back from the yearly high this week and testing the previous week's low.

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W1 chart​

The horizontal trend line at 15,816 points seems to be holding. This offers the chance for a recovery - as in the past two weeks. A break to the downside could in turn mean targeting the breakout level at 15,698 points - then later the interim high at 15,463 points.

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M15 chart​

The sell-off has been stopped. However, this does not change the downward trend structure. As long as the DAX does not have higher highs and higher lows above the moving averages and a change in direction is confirmed by a crossover, the index is vulnerable to further losses.

 

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USDCAD​

As is usually the case for the first Friday of a new month, traders will be offered jobs data from the United States and Canada. Both reports will be released at 1:30 pm BST today, meaning that USDCAD is likely to experience a jump in short-term volatility around that hour.

Of course, the US report will draw more attention. The NFP report for April is expected to show an employment gain of 180k as well as an uptick in the unemployment rate to 3.6%. Wages are expected to increase 0.3% MoM but on an annual basis wage growth is seen staying unchanged at 4.2% YoY. Labour market data has been quite solid as of late and yet it did not discourage Fed from hinting that a pause in rate hike cycle is coming at the next meeting in June. Having said that, the impact of potential NFP beat today may be more short-term and won't alter rate expectations. When it comes to Canadian data, employment is expected to have increased by 21.5k jobs in April while the unemployment rate also ticked higher, from 5.0 to 5.1%.

Taking a look at USDCAD chart at D1 interval, we can see that the pair has been trading sideways recently. An attempt to break above the 1.3675 resistance zone was made at the turn of April and May but bulls failed to push the pair above it. Pair started to pull back and is now testing and support zone ranging around 1.35 handle and marked with 200-session moving average (purple line), previous price reactions as well as 23.6% retracement of the upward move launched in June 2021.​

 

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EURUSD leans on the moving average

EURUSD pair tested the EMA50 that formed good support at 1.1010 and kept its stability above it, to start today positively and attempts to resume the main bullish trend, noticing that stochastic provides clear positive signals now, waiting to motive the price to provide more positive trades in the upcoming sessions, waiting to breach 1.1075 to confirm rallying towards 1.1150 as a next target.

Therefore, we will continue to suggest the bullish trend on the intraday and short term basis, noting that breaking 1.1010 will stop the positive scenario and put the price under additional negative pressure to head towards visiting 1.0945 level before any new attempt to rise.​

 

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EURJPY​

Beginning of a new week on the markets has been calm so far. Worse than expected German industrial production reading for March did not have much impact on EUR or European indices. German industrial output dropped 3.4% MoM, missing -1.3% MoM estimate quite significantly. One more piece of data from Europe will be released today - Sentix index for May at 9:30 pm BST. However, it is unlikely to trigger major moves on the EUR market as well. Speech from ECB Lane at 3:00 pm BST may trigger some short-term volatility. We also had release of Bank of Japan minutes during the Asian session but it turned out to be a non-event as it related to early-March meeting which was still chaired by Kuroda.

Taking a look at EURJPY at D1 interval, we can see that the pair has managed to halt recent correction at 147.50 support zone and is now trying to recover back to recent highs in the 151.00 area. A move above 149.00 mark was made today. Should the upward move continue and the pair breaks above the 151.00 area, a test of the upper limit of the upward channel, currently in the 153.20 area, cannot be ruled out in the near-term.​