2023 Market Forecast by SolidECN

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AUDUSD Analysis​

We are examining the AUD/USD chart on the 1-hour timeframe, where the current price is 0.6592. The uptrend that began in the middle of January appears weak, and the Awesome Oscillator supports this theory by clinging to the signal line in today's trading session. For the uptrend to continue, the bulls must maintain the market above the cloud and the 50% Fibonacci level. If the price holds above this mentioned level, the bulls may target the 0.6639 resistance.

Conversely, the bearish scenario appears more robust than the bullish one. The continuation of the downtrend is likely, but for this to occur, the bears must break below the 50% Fibonacci support level.​

 

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EUR/JPY Analysis: Consolidation Phase​

Solid ECN – The EUR/JPY price is 161.0 at the time of writing during Monday's trading session. The pair's uptrend eased after reaching as high as the 161.86 resistance level. Interestingly, the pair could hold above the 160.66 support and resisted losing more value. Should this level be breached, the consolidation phase would continue to the lower band of the Envelopes indicator.

The divergence in the Awesome Oscillator supports the scenario where the consolidation phase could extend further.

Conversely, for the bullish trend to resume, the buyers must breach the 161.86 hurdle.​

 

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Geopolitics and Economics: Unraveling Oil Price Trends​

Solid ECN – West Texas Intermediate (WTI) crude oil futures were trading under $75 per barrel this Tuesday. This rate is close to the peak levels observed in the past four weeks, influenced significantly by recent military actions. The joint strikes by United States and United Kingdom forces on Houthi-controlled areas in Yemen have heightened concerns about potential escalations in the region, which may interrupt oil supplies. Additionally, oil prices saw a 2% surge on Monday, propelled by news of Ukrainian drone strikes targeting energy infrastructures along Russia's Baltic coastline.

However, there are counterbalancing factors in the oil market. The resumption of oil production at Libya's largest oilfield and indications of increased output, particularly from countries outside the Organization of the Petroleum Exporting Countries (OPEC), have exerted downward pressure on oil prices.

On the demand front, the International Energy Agency (IEA) has updated its forecast for oil demand growth in 2024. The new estimate shows an increase of 1.24 million barrels per day, an upward revision of 180,000 barrels per day. This adjustment is attributed to expectations of enhanced economic growth and the reduced prices of crude oil in the last quarter. Concurrently, OPEC has held steady in its prediction, anticipating a demand growth of 2.25 million barrels per day in 2024, with a robust projection of 1.85 million barrels per day in 2025.​

 

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GBPUSD Trend Analysis and Predictions for January 23, 2024​

Solid ECN – The GBPUSD has bounced back from the 78.6% Fibonacci retracement level and is currently trading around 1.272. The pair continues to trend within the bullish channel, but the stochastic oscillator indicates a potential correction phase may be on the horizon. The 61.8% Fibonacci level is providing support for the current bullish trend. As long as this level holds, the bulls are aiming for a high of 1.278. If the ADX line rises above 40, this could signal a continuation of the uptrend.

However, if the price drops below the 61.8% Fibonacci support level, we could see a consolidation extending to the 38.2% support level.​

 

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USDJPY Maintains Bullish Trend Amid Market Fluctuations​

Solid ECN – The USDJPY pair is hovering around 148.16 in today's trading session. The market fluctuates between a resistance level of 148.82 and a support level of 146.97. Notably, the bears could not break through the bullish flag, suggesting that the uptrend will continue. However, the first challenge for the bulls is the resistance at 148.8. The road to further gains will be paved if this level is broken.

The bullish outlook for the USDJPY remains intact as long as the pair stays above the 50% Fibonacci support level.​

 

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Japanese Yen's Upward Surge and BOJ's Monetary Policy Speculation

Solid ECN – The Japanese yen surged beyond 148 per dollar, diverging from its recent near two-month lows, spurred by Bank of Japan (BOJ) Governor Kazuo Ueda's recent statements that reignited speculation about a potential shift in the nation's monetary policy. Ueda emphasized the probability of steadily achieving the 2% inflation target through wage increases rose steadily. Furthermore, he suggested possibly reassessing the central bank's extensive stimulus program if this upward trend persists. Despite these comments, the BOJ adhered to its anticipated ultra-loose monetary policy during its initial meeting of the year. The bank maintained the key short-term interest rate at -0.1% and upheld the 1% upper limit on the 10-year Japanese government bond yield.

BOJ's Stance Amid Economic Indicators and Policy Considerations

Amidst the yen's appreciation backdrop and BOJ's monetary policy speculation, the central bank affirmed its commitment to its existing economic framework. Despite the encouraging signs in the private sector, which witnessed a four-month high in January due to robust growth in the services sector, the BOJ opted to sustain its ultra-loose policies. Governor Ueda's acknowledgment of the potential success of the inflation target through wage increases indicated cautious optimism. The central bank's decision to maintain the status quo suggests a careful approach committed to reevaluating policies should the current economic trajectory persist.

Economic Resilience Evidenced by Exports and Sectoral Performance

Adding to the yen's upward trajectory, recent economic data showcased Japan's financial resilience. The country's exports outperformed expectations in December, contributing to the overall positive sentiment. Simultaneously, the private sector exhibited strength, reaching a four-month high in January, primarily fueled by robust growth in the services sector. This combination of factors indicates a more resilient economic landscape, providing a context for the BOJ's cautious optimism. As Japan navigates its financial challenges, the central bank's monitoring and willingness to adapt its policies underscore the importance of staying attuned to evolving economic indicators and policy considerations.​

 

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Silver Prices React to Market Sentiments​

Solid ECN – Silver prices have recently experienced fluctuations in response to various market factors. After hitting a low point of slightly above $22 per ounce on January 22nd, the precious metal has shown signs of resilience. A significant contributing factor to this trend has been the behavior of the US dollar, which has remained relatively subdued. Investors have adopted a cautious "wait-and-see" approach in anticipation of the European Central Bank's (ECB) upcoming meeting and the release of crucial US economic data later in the week.​

Evaluating Key Economic Indicators​

To gain a deeper understanding of the silver market's dynamics, it is essential to examine the upcoming economic data releases that investors are closely monitoring. One of the pivotal reports on the horizon is the advance GDP estimate, which provides insights into the overall health and growth prospects of the US economy. Additionally, the Purchasing Managers' Index (PMI) report will be scrutinized for indications of economic activity and sentiment in the manufacturing sector. Another crucial data point is the Personal Consumption Expenditures (PCE), which can offer valuable clues regarding consumer spending trends. Investors are particularly interested in these indicators as they seek to gauge the potential timing of the Federal Reserve's (Fed) monetary policy decisions.​

Fed Rate Expectations and Their Impact​

The Federal Reserve's monetary policy decisions have a substantial influence on silver prices. Lowering interest rates is a strategy that the Fed may employ to stimulate economic growth, and this action tends to reduce the opportunity cost of holding non-interest-bearing assets like silver. However, it is worth noting that market sentiment regarding the likelihood of a Fed rate reduction has shifted recently. According to CME's FedWatch Tool, there has been a significant decrease in the perceived probability of a rate cut in March, falling from 81% a week ago to less than 50%. This shift in expectations is an important factor that investors are considering when evaluating the future prospects of silver prices. Additionally, on the global front, the Bank of Japan's decision to maintain its ultra-easy monetary settings and revise down its inflation forecast for 2024 due to declining oil prices adds another layer of complexity to the overall market sentiment and its impact on silver prices.​

 

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EURJPY Analysis​

The EURJPY pair declined to 23.6% Fibonacci support in today’s trading session. The price is currently at 160.3, while the RSI and awesome oscillator indicators are pointing toward the continuation of the consolidation phase. However, for the decline to continue, the bears must prevail over the 23.6% Fibonacci support level, which the Ichimoku cloud has empowered.

The overall trend of EURJPY is bullish unless the price falls and stabilizes below the 160.2 support. In this case, the consolidation phase that began in the middle of January would extend deep into the Ichimoku cloud in conjunction with the 38.2% Fibonacci support.​

 

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Euro Rises as Eurozone Downturn Eases, ECB Meeting Looms​

The euro experienced a modest increase, trading at $1.09, as market participants analyzed new data showing a marginal reduction in the Eurozone's decline in business activity this month. This analysis comes ahead of the upcoming meeting of the European Central Bank. Recent findings from the PMI survey indicate the slightest contraction in the bloc's private sector since July of the previous year. This is marked by a slowing down in manufacturing sector downturns, although the services sector saw a further decline.

The data points to a continued, albeit not as severe, contraction in the Eurozone's economy since 2013, discounting the initial months of the pandemic. During Thursday's meeting, the European Central Bank anticipates keeping interest rates at their current peak. Investors are keenly waiting for President Lagarde's press conference for further clues about when interest rate reductions might occur this year.​

 

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Australian Dollar Weakens Amid US Economic Strength​

Solid ECN – The Australian dollar has declined to approximately $0.657, approaching its lowest value in two months. This weakening trend is primarily influenced by the strengthening of the US dollar, fueled by robust American business activity data. Such data has increased speculation that the US Federal Reserve might not lower interest rates early this year. Despite China's commitment to bolster its capital markets and the People's Bank of China's unexpected decision to reduce the reserve ratio for banks to stimulate the world's second-largest economy, the Aussie dollar has not seen significant support.

In Australia, recent data reveals a mixed economic picture. The private sector activity in the country witnessed a rise to its highest in four months during January, with manufacturing showing growth. However, the services sector experienced contraction for the fourth consecutive month. Prime Minister Anthony Albanese also indicated plans to discuss potential modifications to the proposed tax reductions for higher-income individuals with legislators.​

 

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NZ Dollar Stabilizes at $0.61 as Q4 Inflation Aligns with Forecasts.​

Solid ECN – The value of the New Zealand dollar remained stable at approximately $0.61, reflecting a tepid market response to the latest inflation data for the country. The inflation figures for the fourth quarter showed a 0.5% increase every quarter, a deceleration from the 1.8% rise witnessed in the previous quarter, aligning with market expectations. The year-over-year inflation rate dipped to 4.7% in the fourth quarter, down from 5.6% in the third quarter, marking the lowest rate since mid-2021.

Market participants are now turning their attention to an upcoming speech by Paul Conway, the Chief Economist at the Reserve Bank of New Zealand, who is anticipated to challenge the current dovish market sentiment. Additionally, the New Zealand currency continues to face challenges due to the robust performance of the US dollar as market speculation around early interest rate reductions by the Federal Reserve this year recedes.​

 

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Yen Strengthens Beyond 148 Against Dollar as BOJ's Ueda Hints at Policy Shift​

Solid ECN – The value of the Japanese yen surged past 148 against the US dollar, rebounding from its near two-month low. This change follows recent comments from Bank of Japan Governor Kazuo Ueda, which ignited discussions about a potential alJapan'sn in Japan's financial strategy. Ueda noted an increasing possibility of consistently meeting the 2% inflation goal alongside wage increases. He mentioned that the central bank might reassess its extensive stimulus measures if this trend persists.

However, in its first session of the year, the Bank of Japan decided to continue its highly accommodative monetary stance, as was anticipated. The BOJ left its primary short-term interest rate unchanged at -0.1% and maintained the 10-year Japanese government bond yield cap at 1%. In other economic news, Japan witnessed a surge in private sector activities, reaching a four-month peak in January, primarily driven by a strong service sector performance. Additionally, the nation recorded a higher-than-expected increase in exports during December.​

 

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China Cuts Reserve Ratio, Stabilizes Yuan at 7.17​

The value of the offshore yuan has stabilized at approximately 7.17 against the dollar. This follows investor evaluations of the repercussions of China's unexpected decision to reduce the reserve requirement ratio.

The People's Bank of China declared this change on Wednesday, planning to lower the ratio by 50 basis points next month. This strategy aims to revitalize China's faltering economy and is anticipated to inject around 1 trillion yuan of long-term capital. Recent gains in the yuan and predictions of interest rate reductions by other leading central banks this year allowed the PBOC to modify its monetary policy. Additionally, Premier Li Qiang led a cabinet meeting earlier this week, where authorities discussed adopting more vigorous and efficient strategies to bolster market assurance.​

 

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DAX Hits New Peak, ECB Holds Rates​

The DAX index in Frankfurt concluded the day marginally higher, setting a new record at 16,912. This uptick occurred as European stocks received a boost in the afternoon, spurred by signs of moderating inflation and robust economic growth in the United States, which heightened their appeal. Concurrently, the European Central Bank maintained its key interest rates at their current historic highs, affirming its resolve to keep borrowing costs elevated for as long as needed to control inflation.

Regarding economic indicators, German business sentiment took an unexpected downturn in January, with the business climate index dropping to its lowest point since May 2020. On the corporate front, SAP saw its shares climb significantly, continuing the upward trend following its recent earnings announcement. Additionally, Adidas experienced a notable increase in its share value, rising by more than 5%.​

 

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EUR/USD Dips to 1.0816, Historic Highs and Euro Inception Insights

Solid ECN – On Friday, January 26, the Euro to US Dollar (EURUSD) trading pair declined, falling by 0.0030 or 0.28%, closing at 1.0816 compared to 1.0846 at the end of the previous session. Looking back, the EUR/USD exchange rate recorded its highest value at 1.87 in July 1973. It's important to note that the euro was officially introduced as a form of currency on January 1, 1999. Despite this, it is possible to generate synthetic historical data that extends further back by calculating a weighted average of the currencies that preceded the euro.​

 

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Pound Strengthens Amid Positive PMI Data and BOE Rate Speculations

The UK pound surged to $1.28 versus the US dollar and hit a near five-month peak against the euro, bolstered by unexpectedly robust PMI figures. These statistics could influence the Bank of England to adopt a gradual approach to reducing borrowing rates. Recent PMI surveys indicated a significant expansion in Britain's private sector, the most notable in seven months. This expansion was driven mainly by the service sector, which experienced its fastest growth since May.

In addition, recent economic reports showed a smaller-than-anticipated budget shortfall for Britain in December, potentially allowing for tax reductions in the upcoming March budget. However, other data pointed to the steepest drop in UK retail sales since January 2021 and a surprise uptick in inflation. With the Bank of England meeting on February 1st, interest rates are expected to maintain a 15-year peak of 5.25%. Compared to its European and American counterparts, the Bank is projected to delay rate cuts throughout the year.​

 

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Crude Oil Hits 2-Month High Amid Red Sea Attack.

On Monday, WTI crude oil futures surged to around $79 per barrel, marking a two-month peak. This uptick was largely driven by heightened concerns over potential supply disruptions following the Houthi group's assault on a Transfigura-managed fuel tanker in the Red Sea.

The incident, involving a missile strike near Yemen's coast last Friday, has led Transfigura to reevaluate the safety of continuing shipments through the Red Sea. Additionally, there's an anticipated decline in Russian refined oil exports due to repairs at several refineries due to recent drone strikes. On the demand front, robust economic figures from the US and new financial measures in China are boosting oil consumption prospects in these significant markets. While OPEC and its allies plan to convene virtually on February 1, it's not anticipated that they will make early decisions regarding their output policies.​

 

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NZ Dollar Stabilizes Amid Q4 Inflation Data, Eyes on RBNZ

Solid ECN - The New Zealand dollar stabilized at approximately $0.61, reflecting a calm market response to the country's latest inflation data, which aligned with expectations. In the final quarter, New Zealand's Consumer Price Index (CPI) experienced a modest increase of 0.5% over the quarter, a deceleration from the 1.8% rise noted in the previous quarter. This brought the year-on-year inflation rate down to 4.7% in the fourth quarter, marking the lowest point since mid-2021 and a decline from the 5.6% observed in the third quarter.

Market attention is now turning towards an upcoming speech by Paul Conway, the Chief Economist at the Reserve Bank of New Zealand, who is anticipated to counter predictions of a more accommodative monetary policy. In the meantime, the New Zealand dollar, often referred to as the Kiwi, faces challenges due to the strength of the US dollar, with market participants reevaluating their expectations for early interest rate reductions by the US Federal Reserve within the year.​

 

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Gold Price Surges Past $2,020 Amid Middle East Tensions​

Solid ECN - Gold's value climbed to over $2,020 per ounce on Monday, recovering some of its recent losses, driven by increased demand for this secure asset amidst escalating tensions in the Middle East. This surge was primarily attributed to the missile strike by Houthi rebels on a Transfigura-managed oil tanker near Yemen's coast and a drone assault on American troops in northeastern Jordan, resulting in the death of three US soldiers.

The investment community is cautiously awaiting the US Federal Reserve's upcoming monetary policy decision. It's primarily anticipated that the interest rates will remain unchanged. Still, keen attention is on Federal Reserve Chairman Jerome Powell's commentary post-meeting for hints about initiating a potential easing phase. Additionally, the impact of unexpectedly robust US economic figures and the Fed officials' firm stance has lessened the likelihood of a rate reduction in March. Market predictions now suggest a 48% probability of a rate cut in March, a notable drop from the 86% likelihood recorded at December's end, per the FedWatch Tool by CME.​

 

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Mexican Peso Recovers Amid Inflation Data and US Dollar Dip​

Solid ECN - The Mexican peso has shown resilience, approaching the 17.2 level against the US dollar, recovering from a low in late January. This upturn is mainly due to the latest inflation figures from Mexico and a dip in the US dollar's strength. Market players had initially hoped for a more lenient approach from Mexico's central bank (Banxico). Still, higher-than-forecasted inflation rates checked these expectations in mid-January, which registered at 4.9% against an anticipated 4.78%, which rose from December's 4.46%.

In contrast, the Mexican economy is showing signs of vulnerability under stringent monetary policies, with economic activities in November shrinking by 0.5% month-on-month, a more-than-expected decline, and an increase from the previous month's figures. Concurrently, the US dollar's support has waned due to diminished prospects of early interest rate reductions by the Federal Reserve in 2024, following encouraging preliminary data from S&P Global on manufacturing and service sectors.​