2023 Market Forecast by SolidECN

[SOLIDECN]

GBPUSD​

GBPUSD pair’s decline halted at the 1.2675 level, where it found solid support. It then began to rise and attempt to recover on an intraday basis, which suggests that it is heading towards building a new bullish wave. The targets of this wave begin with testing the broken support of the main bullish channel that has now turned into resistance at 1.2815. It is worth noting that breaching this level will push the price back to the mentioned channel and achieve additional gains that reach 1.2900 areas.

Therefore, we expect to witness more bullish bias in the upcoming sessions, supported by the technical indicators’ positivity. It is important to consider that breaking 1.2675 will stop the bullish wave and push the price to achieve bearish correction on an intraday and short-term basis.​

 

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USDJPY​

Summary of Opinions from Bank of Japan's June meeting was released overnight and while the document is often overlooked by investors, this time it deserves some attention. The document noted that while the Bank expects CPI inflation to moderate towards the middle of the current fiscal year (Q4 2023), it does not expect it to slow below 2% target. Bank of Japan said that inflationary pressures in the economy increased as employment and income situations improved and tourism demand recovered. Moreover, it was noted that one BoJ member called for an early revision of the yield curve control programme. While it is still a minority, it hints that a change in attitude may be taking place and it may be more evident at BoJ's next meeting (27-28 July, 2023).

Japanese yen gained on those news and is the best performing G10 currency now. Taking a look at USDJPY chart at D1 interval, we can see that a recent rally on the pair slowed after reaching the upper limit of the upward channel. Recent gains on the pair have been quite quick and steep therefore one cannot rule out some profit taking. However, should pullback deepen and the pair break back below 142.00 price zone, it may hint that a larger correction is underway. In such a scenario, 138.25 support zone will be on watch. On the other hand, should it turn out to be just a brief pause in the upward move and bulls regain control, a 144.00 swing level should be seen as the first potential resistance.​

 

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EURUSD​

EURUSD pair has been hovering around the EMA50 since morning. As long as the price remains above 1.0860, our bullish overview will remain valid for today. We are waiting to test 1.0940 initially. It is worth noting that breaching this level will push the price to 1.1075 as the next main station. However, breaking 1.0860 will stop the bullish trend and push the price to turn to decline.

The expected trading range for today is between 1.0850 support and 1.1000 resistance.​

 

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USDCHF

USDCHF pair returns to test the key resistance 0.8959 (fibo 0.236) after the decline that it witnessed yesterday, noticing that AO loses its positive momentum clearly, waiting to motivate the price to resume the expected bearish trend for the upcoming period, which targets 0.8909 followed by 0.8820 levels mainly.

The EMA50 supports the suggested bearish wave, which will remain valid conditioned by the price stability below 0.8965 – 0.8980 levels.​

 

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NZDUSD

The NZDUSD currency pair is currently exhibiting positive trading patterns and is attempting to surpass the 50-day exponential moving average (EMA50), which has been providing significant resistance against price movements. We anticipate further upward movement in order to achieve our positive targets, which begin at 0.6220 and extend to 0.6290. Notably, we have observed two bullish engulfing candlestick patterns on the 4-hour time frame, which serve to confirm the strength of the current bullish trend.

Overall, we expect the bullish trend scenario to remain valid and active, provided that the price does not break below 0.6140 and hold with a daily close below this level.​

 

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EURUSD

During her inaugural speech at the ongoing central banking conference in Sintra, Portugal, President Lagarde announced that the ECB will raise interest rates at its next meeting in July. The banker indicated that inflationary pressures in the services sector would be a key theme for further rate hikes (a drop in sentiment in this sector/services inflationary pressures could encourage the ECB to ease monetary decisions).

Inflation in EMU remains high all the time, and the second inflationary wave is only now starting to materialize. The banker also sees a growing impact of higher wages on inflation.

The EURUSD pair has rallied during today's session and is approaching the resistance levels marked last week.​

 

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EURUSD​

The EURUSD rate reached the zone where very strong supply has been triggered in recent months. We can also see that each time as we approached 1.10 the bears eventually took control. The key support on the Eurodollar is at 1.073 where we see the SMA200 on the D1 interval and the 23.6 Fibonacci retracement of the upward wave from the autumn, last year. A drop below the SMA100 (black line) at 1.084 could indicate an imminent test of these levels. Another key level set by the Fibo and price reactions is 1.05 where we see the 38.2 abolition. If sellers take control, we may see an RGR-like formation on the chart - a downward scenario, could reverse the medium-term trend.

 

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EURUSD

Spanish CPI report for June was released today at 8:00 am BST. Report was expected to show a slowdown in headline measure from 3.2 to 1.7% YoY. However, actual report showed a slowdown to just 1.9% YoY. On a monthly basis, inflation reached 0.6% MoM while market expected 0.3% MoM. EUR moved higher following the release and climbed back above 1.09. This further support euro after state-level data from Germany that was already released also showed an upside surprise. Data for whole Germany will be released at 1:00 pm BST today.

EURUSD jumped above 1.09 mark after higher-than-expected CPI reading from Spain.​

 

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USDCHF Under the Negative Pressure​

The USDCHF currency pair has recently experienced a significant amount of negative pressure. This has resulted in the pair breaking through the 0.8965 level and settling below it. This downward movement suggests that the pair may continue to decline, with potential targets being the 0.8900 and 0.8800 levels, which are considered to be key negative stations.

As a result of these developments, a bearish bias is suggested for the USDCHF pair in today’s trading. However, it is important to note that if the pair breaches the 0.8980 level, this could halt the expected decline and instead push the price towards a new bullish correction. In this scenario, the next target for the pair would be the 0.9055 level.​

 

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EURUSD Faces Solid Support​

The EURUSD currency pair has recently experienced a clear upward bounce after it attacked the neckline of the double top pattern. This has resulted in the pair now testing the EMA50 level.

As a result, our overall outlook for the EURUSD pair remains bearish. Our targets for the pair begin with breaking through the 1.0860 – 1.0840 levels, which would open the way for further declines towards the 1.0795 and 1.0730 levels, which are considered to be key negative stations. However, it is important to keep in mind that if the pair breaches the 1.0940 level, this could halt the expected decline and instead lead to a rise in price.​

 

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USDJPY​

The Japanese Yen remains in a strong downtrend. The USDJPY currency pair is rising to a level of 144.6 points, despite open statements from Japanese policymakers about the possibility of currency intervention in the event of excessive currency depreciation. The last intervention by the Bank of Japan (BoJ) took place at the end of last year when USDJPY rose to a level above 150 points.

 

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Oil​

• Saudi Arabia and Russia's supply cut announcement fails to offset concerns over manufacturing activity slowdown worldwide​
• Deceleration in China, Eurozone, and the US manufacturing PMI data contribute to the downward pressure on WTI prices​

Despite the supply cut efforts by Saudi Arabia and Russia, WTI crude oil prices continue to face downward pressure due to concerns about a global economic slowdown. The slowdown in manufacturing activity worldwide, as evident from PMI data, has overshadowed the impact of the supply cuts. China's manufacturing PMI indicates a modest expansion but a continued deceleration, while the Eurozone and Germany are experiencing deceleration and a technical recession. The US manufacturing PMI suggests a slowing economy, which could have implications for the rate hike decisions of the US Federal Reserve. Additionally, Russia's plan to reduce exports to boost oil prices is overshadowed by China's slow reopening.

Amidst the deteriorating global manufacturing sector, the bearish sentiment for crude oil persists. Despite OPEC+ cuts and monetary stimulus from China, oil prices remain range-bound. The resistance at $73 has led to repeated rejections, maintaining a bearish bias. There is a possibility of testing the support level at $67.44 or further at $64, and a break below this level could trigger a significant downward movement towards the $57 level. Currently, the price is likely to test the $67.44 support, where buyers might enter the market. Otherwise, if buyers step in, the price may find support and potentially rally towards the $73 resistance zone.​

 

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AUDUSD​

Excluding April and the current July decision, the RBA has implemented 12 consecutive rate hikes since it commenced its monetary policy tightening in May 2022. However, the recent pause in rate increases is believed to be temporary, as both economists and markets anticipate that the central bank will raise rates further by at least 0.25 percentage points to 4.35% in the upcoming months before reaching the peak.

Following the announcement, the AUDUSD experienced a notable decline, reaching a key support level at 0.664. However, the price subsequently rebounded, returning to its previous level around 0.667. Currently, the AUDUSD is trading around this level. The next level of resistance is anticipated to be around 0.670.​

 

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GBPUSD​

UK economists at Goldman Sachs are predicting a 50 basis point increase in the Bank of England's interest rate during the August meeting, with a projected peak of 6% by November. The current interest rates are at 5.0%. The forecast for a further 100 basis point increase is based on continued strong inflationary pressure, wage growth, and a slower-than-expected response of outstanding mortgages to changes in interest rates.

Additionally, GBPUSD rates have been supported by speculation that the Federal Reserve (FED) may have to revise its hawkish policy due to lower-than-expected inflation readings. This shift in sentiment, combined with upcoming inflation and retail sales data in the UK, may lead to larger movements in the GBP/USD pair this week.​

 

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Dollar Slides ahead of Retail Sales Data​

The EURUSD continues to rise, mainly due to the weakness of the US dollar following the release of inflation data last week. EURUSD has reached the highest levels since before the Ukraine war and is testing very important resistance levels. Today, the market's attention will be focused on the publication of retail sales and industrial production from the US. Expectations point to a pretty solid report:

Moreover, the retail sales report will be the last important indication before next week's FOMC meeting (we will no longer hear comments from Fed bankers due to the closed period). At the moment, the money market is pricing that the FED will raise rates by 25 basis points on Wednesday 26 July with a 95% probability.
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EURUSD is testing the vicinity of an important resistance at the 61.8 Fibo retracement of the entire large downward wave started in 2021. A break of this level will mean a negation of the entire upward impulse of the dollar from almost the last 2 years. If retail sales surprise even more strongly than the consensus indicates, a correction to the range 1.1180-1.1200, where the upper limit of the upward trend channel is located, will be possible.​

 

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GBPUSD​

The GBPUSD pair goes below the psychological barrier of 1.3 and paves the way to the next important support levels set by the 200-week EMA (golden curve) and the abolition of the 61.8% Fibo of the February 2021 downtrend wave. It is worth bearing in mind, however, that the market does not seem to be unduly changing expectations for further rises, so the risk of a continuation of the ongoing upward wave is still there.

 

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USDJPY​

Next Friday (July 28), we await the BoJ's interest rate decision. However, this event does not seem to surprise the market, as earlier this week, BoJ Governor Kazuo Ueda communicated that the Bank would maintain its ultra-tight monetary policy

As Reuters reported, the BoJ was due to deliberate this month on changes to the operation of the YCC (yield curve control programme). When asked about this, Ueada said that as long as everything pointed to a return to the 2% inflation target, the BoJ would not change its monetary policy.

A weak yen may boost profits for Japanese exporters, but it raises the price of energy and other yen imports for businesses and consumers. Despite rising inflationary pressures, Japan is trying to stimulate the economy in the face of broad market uncertainty, Ueda added.

In the long term, however, this situation may change. The Japanese government today lowered its economic growth forecast for the current fiscal year and raised its inflation outlook. The proximity of these updates to the BoJ's next meeting raises heightened curiosity, but nevertheless the chances of actual monetary changes (if any) do not appear to be warranted anytime soon. In this regard, tomorrow's CPI data for June (00:30 am BST) may tell us a little more.​

• GDP growth forecast for 2023/24 at 1.3% (previously 1.5% in January)​
• Growth forecast for 2024/25 financial year at 1.2%​
• Inflation forecast for 2023/24 at 2.6% (previously 1.7%)​
• Inflation forecast for 2024/25 at 1.9%​

The USDJPY pair is currently testing the psychological 140 zone. In the short term, the most important support and resistance zones to watch will be the previously mentioned 140 zone and the 50-day EMA (blue curve) and the zone of recent local minima (green zone).​

 

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US100​

CFD contracts on the Nasdaq 100 (US100) reacted with a significant correction after yesterday's initial attempt to break above 16,000. The Nasdaq 100 index lost 2.3% at the close of trading on Thursday, marking the worst performance since the start of the year. This sharp decline is due to several factors. ⚡

Firstly, it's currently the quarterly earnings season, and not all reported results are satisfying investors. Tesla and Netflix published their earnings two days ago after the session, and the results were worse than expected, leading to nearly 10% drops in both companies during yesterday's session. These are companies valued at approximately $820 billion and $200 billion, respectively. Given these poor results, investors are also starting to worry about upcoming releases. Yesterday's session saw losses for Nvidia (-3.3%), Microsoft (-2.3%), Meta (-4.3%), and Alphabet (-2.3%).

Another factor could be the recently announced upcoming rebalancing of the Nasdaq index. The new weights are set to be implemented on July 24, which is next Monday. The new weights significantly reduce the share of the largest companies such as Apple, Meta, Alphabet, and Tesla. Therefore, all passive funds will also have to revise their equity portfolios, which carries significant short-term selling pressure on large companies and, conversely, on smaller ones buying pressure, making an opportunity for saavy investors. Currently, the six largest companies account for 50% of the Nasdaq 100's assets. Rebalancing the index will reduce these shares to 40% of the index portfolio.

Looking at the chart from a technical perspective, all the news coincided perfectly with the US100 approaching the upper limit of the upward channel. This strong reaction may indicate a short-term correction and a decline in indicators. It's possible that we may approach the lower limit in the short term.​

 

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EURUSD - Chart of the Day​

The current week is crucial for the EURUSD pair, considering today's preliminary readings of PMI indices in the US and the eurozone for July. Generally speaking, the estimated PMI data in the eurozone is expected to be weaker than in the US for both industry and services. In addition, investors' attention will also be focused this week on decisions by the ECB and the Fed, which will take place on Wednesday and Thursday, respectively. Currently, the market assumes the following decisions:
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• Fed - the market does not foresee a surprise and with a 99.8% probability, it will raise rates by 25 basis points.​
• ECB - at this moment, the market assumes that in the eurozone rates will be raised twice more by 25bp, however, the probability for the second hike of 25 bp is just over 50%.​

However, in both cases, the Powell and Lagarde's comments after the decision will be more significant. In the US, the latest labor market data are still strong, hence despite falling inflation, the tone of the conference may be perceived as neutral/hawkish. While in the EU, weakening data, including PMI, may weigh in favor of a more dovish message.

From a technical point of view, on the daily chart, EURUSD broke out of the consolidation area between 1.053 and 1.106 two weeks ago, and the rate went around 1.126. The breakout, however, was not long-lasting, and last week the price returned to the area of the upper limit at 1.112. The appreciation of the dollar occurred after stronger macro data, including from the labor market in the US. The dollar behaved stronger against most currencies. Key to maintaining the uptrend on EURUSD is defending the support area at 1.106. Otherwise, if the price returns to the consolidation area, EURUSD may retest the level of 1.10 or further 1.08.​

 

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Chart of the Day: USDCNH​

The theme of the morning session that generated the most market volatility was reports of further stimulus solutions to the Chinese economy. During a meeting of China's Politburo (i.e. an important part of the Chinese Communist Party's Politburo focused on the State's current political affairs), announcements were made that indicated a willingness to introduce solutions to improve the troubled property and debt markets. In the face of this news, China's real estate-focused corporate benchmark climbed 11%, posting its biggest one-day gain in eight months and bolstering sentiment around APAC markets and the yuan itself.

Moreover, the Chinese currency itself was boosted today by another factor, namely the PBoC's decisions to set the official reference rate for the USDCNH pair at 7.1406 (versus the expected 7.2044), which encouraged local banks to resell USD in the FX market and thus repurchase CNH.

As added by Morgan Stanley analysts, the euphoria around today's statements is mainly due to the words that came out of the Politurbo meetings. At the time, the establishment communicated that "real estate is for living, not for speculation", thus assuring the upcoming policy optimizations.

The USDCNH pair is trading close to 0.61% down today and is testing the support zone set by the 23.6% Fibo measure of the upward wave initiated in early 2022.​