2023 Market Forecast by SolidECN

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FTSE 100 Hits 7-Month High on Low Inflation​

Solid ECN – On Tuesday, the FTSE 100 experienced a notable increase, rising over 1.5% and reaching a seven-month peak near the 7750 mark. This jump came after the release of inflation data that was lower than expected. The data led to widespread conjecture that the Bank of England might start reducing interest rates as early as March 2023, possibly cutting them by a total of 143 basis points.

The sectors most responsive to interest rate changes were the biggest gainers. Homebuilders saw a 3.6% increase, real estate climbed by 1.4%, and real estate investment trusts (REITs) went up by 1.6%. Additionally, there were significant gains in other areas, with energy stocks growing by 2.5% and banks by 2.1%.

 

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Canadian Dollar Peaks Amid Inflation Concerns

Solid ECN – In December, the Canadian dollar reached its highest level since early August, surpassing 1.335 against the USD. This strengthening is a result of persistent inflation within the Canadian economy, which has reignited expectations for a more aggressive monetary policy from the Bank of Canada. Contrary to market anticipations of a slowdown to 2.9%, headline inflation remained steady at 3.1% in November. Moreover, the trimmed-mean core rate, a key measure of inflation, exceeded forecasts by reaching 3.5%.

These figures support the central bank’s earlier predictions that inflation in Canada is likely to stay high for some time. This situation calls for an extended period of tight monetary policy, possibly including additional interest rate increases. In contrast, the Federal Reserve in the United States has signaled a more cautious approach, with policymakers indicating expected rate cuts totaling 75 basis points for the next year. This difference in policy stances has further amplified the Canadian dollar's rise in value compared to the US dollar.

 

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Fed's Rate Cut Speculation Keeps Gold Near $2,040

On Wednesday, gold's price remained steady at about $2,040 per ounce. This stability is close to the highest it's been in more than two weeks. Despite comments from US Federal Reserve officials, expectations for interest rate reductions next year haven't changed much. Atlanta Fed President Raphael Bostic, echoing other US policymakers, mentioned on Tuesday that there's no immediate need to lower US interest rates, considering the economy's current robustness.

However, the market still anticipates a high likelihood, roughly 75%, of an interest rate cut by March. Looking forward, investors are waiting for the Fed's preferred core PCE price index, set to be released later this week, for more direction. In other news, the Bank of Japan has decided to maintain its very accommodative monetary policy and hasn't hinted at any changes for the coming year. Similarly, the People’s Bank of China kept its key lending rates steady, resisting the push to relax monetary policy further despite a struggling economic recovery.

 

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EURUSD Trades Below $1.1

Solid ECN – The EURUSD currency pair is currently trading at less than $1.1. The participants are forecasting a potential dip in the Euro zone interest rates. Francois Villeroy de Galhau from France hinted on Tuesday that a rate cut might be on the horizon next year. The goal would be stabilizing inflation at 2% no later than 2025.

However, Yannis Stournaras of Greece has a more conservative approach, insisting that inflation should be kept under 3% by the middle of the following year before considering a reduction in borrowing costs. Despite inflation falling to 2.4% in November, economic analysts are predicting a possible surge in the latter part of the year.

 

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Offshore Yuan Slips to 7.15

Solid ECN – The offshore yuan dropped to around 7.15 per dollar, moving down from its six-month high. This happened because China's central bank did not change its main lending rates, even though there was pressure to loosen monetary policy due to a weak economic recovery.

The People’s Bank of China kept its one-year rate at 3.45% and its five-year rate at 4.2%, as many had expected. Now, markets are looking forward to possible rate cuts next year and maybe a lower reserve requirement ratio to keep enough money in circulation. Experts believe that China’s low inflation and slow economic growth justify this expectation. However, the yuan is still strong because the US Federal Reserve might start to cut interest rates next year. Also, the Bank of Japan has not said anything about changing its policies in 2024.

 

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Gold Nears $2,040 Amid Rate Cut Hopes​

Solid ECN – Gold climbed to near $2,040 per ounce on Thursday. It recovered from earlier losses, driven by strong beliefs that the US Federal Reserve will reduce interest rates next year. Also, a big drop in stocks created a demand for safe investments like gold.

Even though Federal Reserve officials opposed the idea of many rate cuts next year, the market still thinks there's a 70% chance of a rate cut in March. Investors are now waiting for US economic growth data on Thursday and the core personal consumption expenditures (PCE) index on Friday for more clues. In the UK, inflation in November fell to its lowest in over two years, suggesting a possible worldwide trend of rate cuts. In other news, the Bank of Japan kept its very relaxed monetary policy, and the People’s Bank of China did not change its main lending rates.

 

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Ibovespa Hits Record High​

Solid ECN – On Thursday, the Ibovespa index climbed 0.8%. It reached over 131,800, a new high. This rise followed a loss in the previous session. The upbeat mood in Wall Street influenced this. Investors think the Federal Reserve will soon lower interest rates. This hope caused a drop in future interest rate expectations in Brazil. It also supports a positive view of Brazil's central bank. This mood is good for stocks in emerging markets.

Vale, a big company, saw its shares rise almost 3%. This was due to higher iron ore prices. In other news, Braskem, despite a police probe into its mining in Maceio, saw its shares go up.​

 

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AUDUSD: Buy or Wait?​

Solid ECN – The AUDUSD's rise is still going strong, moving near the top of its bullish trend. Yet, in today's market, the pair approached the 78.6% Fibonacci level, with the RSI near 70. This means the pair isn't overvalued despite the ongoing uptrend.

For those with smaller budgets, buying now may not be the best move. It's better to wait for a slight price drop. If the price dips below 78.6%, it could fall to the support zone between 0.6681 and 0.6676, a better buy-in point for those bullish on AUDUSD.

However, buying the Australian dollar now isn't advisable, strong trend or not. The market looks overbought, and AUDUSD is likely to lose some value. A smarter strategy is to wait for a drop before joining the upward trend.

With its upward momentum, the pair might reach its June 2023 high.​

 

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USDJPY's Sharp Decline​

Solid ECN – The USDJPY pair saw a sharp drop after hitting the Ichimoku cloud. It's now trading below a resistance level formed by the cloud. A closer look at the USDJPY 4-hour chart shows the price falling within a channel. The pair is currently at the 78.6% Fibonacci support level.

Given the technical indicators, it seems this support might break, continuing the bearish trend.

 

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EURJPY Tests Key Support​

Solid ECN – The EURJPY pair has retreated from its high of 158.63 and is currently testing the Ichimoku cloud for support. There's a possibility that this pullback from recent gains could extend to the cloud's lower edge, coinciding with the bullish flag's lower line. The technical indicators present a mixed picture. The Awesome Oscillator is close to the signal line, and the RSI hovers around 50.

Our outlook for the pair remains bullish, conditioned on the bullish flag pattern holding. If this scenario plays out, the pair's value could climb to the flag's upper band.

 

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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.

 

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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.​

 

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Decoding Divergence: A Deep Dive into Gold Chart Patterns

Solid ECN – Upon first glance at the Gold chart, we notice the awesome oscillator bars signaling divergence. However, it appears that the divergence signal led to the consolidation phase. As a result, the XAUUSD price is currently ranging above $2,045. The ADX’s style line in black is retreating below the 40 level, indicating that the market’s momentum may slow down. Consequently, the gold price might remain within a narrow range until the holidays end.

The lower line of the bullish flag serves as support. If the bottom line is breached, the gold price could dip to the resistance area of the Ichimoku cloud. However, as long as the price continues to range inside the channel, the market maintains its bullish stance. In this scenario, the next target could be the 61.8% Fibonacci resistance, followed by the $2,090 mark.​

 

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Franc Soars Past USD: SNB's Role in Surge​

The Swiss franc has risen past 0.87 per USD, marking its strongest level since late July. This appreciation is partly due to the US dollar's temporary weakness and consistent support from the Swiss National Bank. The dovish outlook presented by Federal Reserve members in their recent meeting has led to increased expectations of rate cuts by the US central bank next year, putting pressure on the greenback. Meanwhile, the Swiss National Bank has been actively bolstering the franc by selling foreign currency reserves.

This strategy helps mitigate the impact of volatile commodity prices and curbs import inflation, making it one of the central bank's primary tools to combat the high price growth currently seen in Europe. Recent data shows that foreign exchange reserves held by the SNB decreased for the sixth consecutive month, reaching a seven-year low in November. Regarding monetary policy, the central bank kept its key interest rate unchanged last week. It also noted that, despite a slowdown in the country’s Consumer Price Index, inflationary risks are still present.

 

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USDCNH RSI Uncertainty, Bullish Outlook Remains​

The USDCNH currency pair is currently hovering near the Ichimoku Kinko Hyo, while the RSI indicator presents a level of uncertainty. Despite mixed signals from technical indicators, the market is trending upwards. The bullish channel, which began in mid-November 2023, supports this current trend. The bulls are now eyeing the 7.1577 to 7.1637 resistance zone. If USDCNH can demonstrate strength above the cloud, the price is expected to rise to the upper band of the bullish flag.

On the other hand, the lower band of the flag underpins the bullish scenario. However, if this level is breached downwards, the above scenario should be accordingly invalidated. In such a case, the price could drop to 7.1117, and potentially even to 7.09669.

 

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Silver Price Dips, Trend Reversal Looming?​

In today’s trading, the price of Silver dipped to the Ichimoku cloud. The divergence in the awesome oscillator hints at a possible trend reversal or the start of price consolidation. The current bullish trend is supported by the 38.2% Fibonacci retracement level. If the bears push the price below this level, we could see the Silver price decline extend to 23.6%.

On the other hand, if the awesome oscillator bars gain momentum above the signal level and the RSI indicator moves above the median line, we might see the bullish wave continue. In this scenario, the price could rise to test the 61.8% support level again. Keep an eye on these indicators for potential market movements!

 

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US Oil Trades Near $80.5, Bulls Eye 50% Fibonacci​

Solid ECN – US oil is currently trading at around $80.5 per barrel. The upward momentum has eased near the 38.2% Fibonacci level, yet the bulls have successfully maintained the oil price above the simple moving average.

Notably, there is one bearish signal: the divergence in the Awesome Oscillator. Consequently, we can anticipate the price potentially dipping to the lower band of the bullish flag, with the 38.2% level acting as resistance.

 

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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.​

 

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Swiss Franc Hits Record High Against USD & Euro​

The Swiss franc strengthened past 0.85 against the USD in late December, marking its highest level since August 2011. It is poised to register an 8.5% increase against the dollar this year, influenced by differing interest rate outlooks from the Swiss National Bank (SNB) and the Federal Reserve. The Fed's latest meeting revealed dovish projections, further amplified by new data indicating a slowdown in US inflation, which put pressure on the greenback.

In Switzerland, despite a slowdown in inflation, the SNB has noted that the potential for price growth to increase justifies maintaining higher interest rates for now. Inflation in Switzerland was last reported at 1.4% in November. However, the central bank anticipates a rise towards its 2% target in the second and third quarters of 2024. This forecast leads investors to expect that any reductions in interest rates by the SNB will likely occur well after the Fed's similar actions.

The sustained prospect of higher interest rates from the SNB has also propelled the franc to a record high against the Euro, the currency used in neighboring countries.​

 

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USDCAD Dips Below Key Fibonacci, Bearish Trend​

The USDCAD currency pair has fallen below the 78.6% Fibonacci retracement level, indicating strong bearish (downward) sentiment.

Both the RSI and Stochastic oscillator indicators suggest the market is oversold. This means the USDCAD price could start to slowly rise to retest the broken bearish trendline. As long as the price stays below this level, the trend remains bearish, aiming for the 1.3089 resistance level.​