2023 Market Forecast by SolidECN

[SOLIDECN]

Canadian Dollar Climbs as Bank of Canada Holds Firm on Rates​

The Canadian dollar has seen further appreciation, crossing the 1.35 mark against the USD. This uptick follows the Bank of Canada's decision to keep interest rates at their 22-year peak, along with a somewhat hawkish outlook. The bank held its key overnight rate at 5%, and even suggested the possibility of another rate hike. This comes amidst ongoing worries about inflation, even though there's been a recognition of both economic slowdown and a general easing of prices.

Recently, Canada reported a decline in its inflation rate to 3.1% in October, the lowest in four months, while the core rate fell to a 28-month low of 2.7%. At the same time, the economy saw an unexpected contraction at an annualized rate of 1.1% in the third quarter. This situation has led investors to speculate on the possibility of a rate cut as soon as March. However, Governor Tiff Macklem has clarified that the Bank of Canada is not currently considering any easing measures, as inflation still significantly exceeds the target.​

 

[SOLIDECN]

Turkish Central Bank's Bold Moves Amidst Lira's Fall

The Turkish lira has been on a downward trajectory, now reaching nearly 29 units against the US dollar. This decline persists even as the central bank of Turkey continues to implement what they call 'intentional devaluation,' a strategy that hasn't changed despite increasing interest rates. To manage this situation, the bank has tightened reserve requirements for the lira. This move is aimed at reducing the amount of money available in the interbank market. As a result, local interest rates have risen, aligning more closely with the cost of borrowing lira internationally.

Over the last three months, the currency's value has been consistently dropping, setting new lows almost every day. On average, the lira loses just over 0.1% daily, which has led to a staggering 50% decrease since the beginning of the year. In a surprising turn, the central bank, during its latest meeting on November 23rd, raised the benchmark one-week repo rate by 500 basis points, reaching 40%. This increase exceeded market expectations, which predicted a rise of only 250 basis points. This decision signals the bank's intensified effort to curb the ongoing inflation trend.​

 

[SOLIDECN]

Dollar Stays Strong as Job Market Data Looms

On Thursday, the dollar index maintained its position above 104, with investors taking a cautious approach. They are waiting for the upcoming monthly jobs report, which is anticipated to offer new insights into the current state of the US labor market. The report, due on Friday, is expected to reveal an increase in employment by 170,000 in November. Additionally, it's predicted that the unemployment rate will stay at a 22-month peak of 3.9%, and wage growth might slow down to 4%, marking the lowest since June 2021.

Recent data presents a mixed picture. Wednesday's figures suggested a slowdown in the US labor market, with the ADP report showing fewer job additions in November than anticipated, and labor costs in the third quarter being lower than expected. Despite these indications of a cooling labor market, the dollar has stayed near its highest levels in almost three weeks. This resilience is partly due to traders increasing their bets on rate cuts by other central banks. Currently, the market is pricing in about an 85% likelihood of the European Central Bank cutting rates in March 2024.​

 

[SOLIDECN]

Gold Technical Analysis

Gold has been stabilizing its price above the Ichimoku cloud as expected. The pair is currently trading in a narrow range between $2,009 and $2,039. The direction and magnitude of the next breakout are crucial for the future trend.

If the XAUUSD price breaks above the upper boundary of the range, the bulls will have a clear path to the 23.6% resistance level at $2,078.

On the other hand, if the price falls below the lower boundary of the range, the bears will try to push it back into the Ichimoku cloud and test the support level at $1,984. The market sentiment and the global economic outlook will likely influence the price movement of gold in the coming days.​

 

[SOLIDECN]

EURUSD Dips Slightly, Future Projections Indicate Decrease

On Friday, December 8, the EURUSD pair saw a slight decline, dropping by 0.0008 or 0.07%, to close at 1.0784. This was a marginal decrease from its previous trading session's level of 1.0792.

Analysts and global macro models from Solid ECN Security are projecting that the Euro to US Dollar exchange rate, commonly referred to as EUR/USD, will hover around 1.07 by the end of the current quarter. As we look ahead, our forecasts extend to 12 months, where we anticipate the exchange rate might further decrease to around 1.04.​

 

[SOLIDECN]

Chinese Yuan Expected to Strengthen in Coming Months

On Friday, December 8, there was a slight uptick in the USDCNY, with the rate increasing by 0.0062 or 0.09%, ending the day at 7.169. This rise was a small change from its previous closing of 7.163 in the last trading session.

Looking ahead, based on the insights from global macro models and the expectations of analysts, the Chinese Yuan is projected to reach about 7.19 by the end of this quarter. Moving further into the future, predictions suggest that in a year's time, the Yuan could be trading around the 7.38 mark.​

 

[SOLIDECN]

GBPUSD Sees Slight Decline, Predicted to Lower Further

On Friday, December 8, the GBPUSD experienced a modest decrease, dropping 0.0046 or 0.37% to close at 1.2544, down from 1.2590 in the previous trading session. This shift reflects a slight downward trend in the currency pair.

It is anticipated that the British Pound will trade around the 1.25 mark by the end of the current quarter. Extending the outlook further, over the next 12 months, the Pound is estimated to potentially trade at around 1.20.​

 

[SOLIDECN]

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.​

 

[SOLIDECN]

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.
​

 

[SOLIDECN]

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.​

 

[SOLIDECN]

Analyzing the Recent Drop in Offshore Yuan Against the Dollar

The offshore yuan has recently experienced a notable decline, reaching around 7.20 against the US dollar. This represents its lowest level in three weeks. The primary reason for this drop is the ongoing deflationary pressures in China, indicating that the country's economy is grappling with reduced domestic demand.

Economic Data and Its Implications

Recent statistics released over the weekend have highlighted this economic challenge. Consumer prices in China fell by 0.5% year-on-year in November, a more significant decrease than October's 0.2% drop and below the expected 0.1% decline. Additionally, producer prices witnessed a 3% fall last month. This marks the 14th consecutive month of decline in the Producer Price Index (PPI) and is the most rapid drop since August.

These figures are critical as they reflect the purchasing trends and production costs within the economy. Persistent deflationary pressures can indicate an economic slowdown, as falling prices often lead to decreased consumer spending and business investment.

Future Economic Indicators and External Influences

Investors are now turning their attention to upcoming economic data and the loan prime rate decisions from China's central bank, which will provide further insights into the economic trajectory. Externally, the yuan is also feeling the impact of a globally strong US dollar. This strength is partly due to unexpectedly robust US jobs data, which suggests that the Federal Reserve might not reduce interest rates as soon as previously thought, in March 2024.

Impact on the Economy

This situation presents a mixed bag for China's economy. On one hand, a weaker yuan can make Chinese exports more competitive on the global market. However, persistent deflation and reduced domestic demand can hinder economic growth and stability. Moreover, the interplay between domestic economic challenges and external pressures like the strong US dollar creates a complex environment for monetary policy decisions.​

 

[SOLIDECN]

Economic Forces Behind the Fluctuating Canadian Dollar

The Canadian dollar has seen a decline in value, reaching around 1.36 against the US dollar. This trend emerges as the strengthening of the US dollar counterbalances the positive effects of recovering oil prices.

Impact of US Economic Data

The US dollar's strength was bolstered by a jobs report that surpassed expectations. This robust jobs data gives the Federal Reserve room to possibly delay any cuts in interest rates, which in turn supports the value of the US dollar. When the US dollar strengthens, it often leads to a relative depreciation of other currencies, like the Canadian dollar in this case.

Recovery in Oil Prices

Concurrently, there's been a slight uptick in oil prices towards the end of the week. As a major oil exporter, Canada's economy and the value of its currency, often referred to as the "loonie," are influenced by changes in oil prices. The recent recovery in oil prices can potentially boost foreign exchange inflows into Canada, offering some support to the Canadian dollar.

Bank of Canada's Stance

On the domestic front, the Bank of Canada has indicated a leaning towards increasing interest rates in the future. Governor Tiff Macklem has pointed out that the current economic climate, especially with inflation running significantly above the desired level, does not warrant loosening monetary policies.

Economic Implications

The interplay between the Canadian dollar's value, oil prices, and monetary policy decisions is a complex one. A weaker Canadian dollar can make Canadian exports more competitive, potentially boosting sectors like manufacturing. However, it also means higher costs for imports, which could contribute to inflationary pressures.

The Bank of Canada's potential interest rate hike can be seen as a response to control inflation. Higher interest rates can cool down an overheated economy, but they also run the risk of slowing down economic growth.​

 

[SOLIDECN]

Analyzing the Recent Depreciation of the Mexican Peso

The Mexican peso has recently experienced a decline in value, now trading beyond the 17.4 mark against the US dollar. This level is close to the lowest it has been since the early days of November. This trend appears to be a reaction to the latest signs of disinflation in Mexico, which is influencing market expectations about the monetary policy stance of the Banco de México (Banxico), Mexico's central bank.

A closer look at the economic data reveals some shifts. Mexico's Producer Price Index (PPI), which measures the average changes in prices received by domestic producers for their output, increased by 1.20% year-on-year in November. This rate is a tad lower than the 1.30% seen in the previous month. Moreover, there was a month-over-month change, moving from a 0.5% increase in October to a 0.4% decrease in November.

In terms of core inflation, which is often used as a gauge for underlying long-term inflation trends in an economy, the numbers came in at 5.3% for November. This figure is lower than expected and represents a slowdown from the 5.5% recorded in the previous month.

Banxico's Response

These developments are in line with recent comments from Banxico's Governor Victoria Rodriguez Ceja and Deputy Governor Jonathan Heath. They have indicated that the central bank might ease its policies if the trend of disinflation continues, which could lessen the support for the Mexican peso.

Market Anticipation and Outlook

Traders and investors are now keenly awaiting the upcoming policy decisions from both the Federal Reserve and Banxico. The general expectation is that both will keep borrowing costs restrictive. However, there is some uncertainty regarding the tone and approach the officials will take moving forward.​

 

[SOLIDECN]

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.​

 

[SOLIDECN]

GBPUSD

The GBPUSD pair is currently trading below the Ichimoku cloud, indicating a potential continuation of the downtrend. If the bears manage to close and stabilize the price below the red bullish trendline, currently at 1.2539, this would further confirm the bearish momentum. In such a scenario, we could expect the downtrend to extend towards the 38.2% Fibonacci support level.

 

[SOLIDECN]

AUDUSD Rises, But Faces Ichimoku Cloud Challenge

Solid ECN – The AUDUSD currency pair has recently broken above its bearish channel. Accompanying this shift, the Awesome Oscillator is moving above the signal line, while the RSI (Relative Strength Index) remains above the median line. These indicators collectively suggest a bullish trend. However, it's important to note that the pair is still trading below the Ichimoku cloud.

For the uptrend to gain momentum, it's crucial for the bulls to secure and maintain the price above the Ichimoku cloud. Conversely, if the AUDUSD price falls below the 23.6% support level, it could signal a continuation of the downtrend.​

 

[SOLIDECN]

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.

 

[SOLIDECN]

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.

 

[SOLIDECN]

GBPUSD's Challenge with the Ichimoku Cloud: A Bearish Outlook

Solid ECN Blog – The GBPUSD currency pair recently faced a setback, unable to break through the Ichimoku cloud. Following this, it dropped back under the 23.6% Fibonacci level. When we look at the technical indicators, there's a clear signal. The Relative Strength Index (RSI) is lingering below 50. Meanwhile, the Average Directional Index (ADX) suggests a weak trend, though its bearish line is rising above 20. Additionally, the Awesome Oscillator's bars have switched to red, indicating a bearish trend. These indicators collectively point in one direction: they suggest that the downtrend for GBPUSD is likely to continue.

What's Next for GBPUSD?
As long as GBPUSD remains below the Ichimoku cloud, we can expect the bearish trend to persist. The first target for this downward trend would be the 38.2% Fibonacci support level.

On the other hand, if the pair manages to rise above the Ichimoku cloud, it would invalidate the current bearish scenario.​

 

[SOLIDECN]

Understanding the Bearish Signals in the AUDUSD Marke

Soldi ECN – The AUDUSD currency pair is currently trading below the Ichimoku cloud, indicating a potential shift from a bullish to a bearish trend. However, the pair has not yet fallen below the November high of 0.6525. This resistance led to a surge in the AUDUSD price, causing it to test the cloud for the second time this month. Presently, the pair is fluctuating within a bearish flag pattern, suggesting that a breach below the 0.6525 support level is probable. If this occurs, the next target for the bears could be the 161.8% Fibonacci support, followed by the lower band of the trading channel.

On the other hand, as long as the AUDUSD pair remains below the Ichimoku cloud, the overall trend is considered bearish. This suggests that traders should be cautious, as the market could continue to follow a downward trajectory.​