2023 Market Forecast by SolidECN

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Euro Hits Low as ECB Rate Cut Looms; Recession Fears Rise​

Solid ECN - The euro has recently fallen to its lowest point since December 12th, dipping close to $1.08. This decline is partly attributed to expectations of a rate reduction by the European Central Bank (ECB), potentially by 25 basis points as early as April. Upcoming GDP figures are likely to indicate a recession in the Eurozone for the final quarter of 2023, and a decrease in the inflation rate is expected for January. ECB officials, including de Guindos, Centeno, and Kazimir, have hinted at a probable interest rate cut shortly.

However, they have not provided specifics about the timing or conditions that would prompt such a decision. Recently, the ECB maintained its historically high-interest rates. President Lagarde noted it was too soon to consider rate cuts for the Eurozone while acknowledging that the economic growth outlook remains predominantly negative.​

 

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Stable GBP Awaits BoE Meeting; Rate Cut Odds Surge​

Solid ECN - The British currency has found stability above $1.27 as market participants anticipate the Bank of England's initial policy meeting of 2024, scheduled for later this week. Current market consensus indicates that the bank rate is unlikely to change. However, investors will pay close attention to how the committee members cast their votes and the details of the statement that follows. During their last meeting in December, three members favored raising the rate by 25 basis points, hinting at the possibility of future policy tightening.

Yet, recent economic indicators, including lower-than-expected inflation and declining wage growth, hint at a potential shift in the central bank's next steps, possibly toward reducing borrowing costs. Current market predictions suggest a 42% chance of a rate reduction in May, with the likelihood increasing to 74% by June.​

 

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Australian Dollar Rises to $0.66 Amid Anticipation of GDP Report.​

The value of the Australian dollar has increased to approximately $0.66, offsetting its recent downturn. This change occurs as market participants eagerly anticipate Australia's GDP report for the fourth quarter, a significant precursor to the Reserve Bank of Australia's meeting scheduled for February 5th. Recent statistics indicate a larger-than-anticipated drop in Australian retail sales for December, attributed to consumers accelerating their holiday shopping to November, motivated by Black Friday sales.

Concurrently, the Australian dollar faces ongoing challenges. Strong economic figures from the US and assertive comments from its central bank officials have heightened the anticipation that the Federal Reserve may maintain its current interest rate stance in the near term. Additionally, despite new economic measures in China, Australia's primary trading partner, the Australian currency has struggled to maintain momentum. This is partly because the Australian dollar is often seen as a direct indicator of the Chinese yuan's performance.​

 

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NZDUSD Nears Key Fibonacci Levels, Bearish Trend Intact​

The NZDUSD pair trades around 0.611, corresponding to the 23.6% Fibonacci support level, and is inside the Ichimoku cloud. The RSI indicator has returned from the 80 level, which can indicate that the downtrend is likely to continue. The 38.2% Fibonacci resistance level further supports the bearish trend.

If the NZDUSD price remains below this level, the next target could be the recent lower lows at 0.60618, followed by the lower band of the bearish flag.​

 

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Gold Prices Hold Steady at $2,030 Amid Fed Rate Decision Anticipation.​

On Wednesday, gold prices hovered at approximately $2,030 per ounce, maintaining a consistent trading pattern as market participants awaited the US Federal Reserve's decision on monetary policy. Expectations are high that the Fed will keep current interest rates. Key attention is on Fed Chair Jerome Powell's upcoming comments for indications of possible rate cuts within the year.

Nevertheless, more robust than anticipated, recent US economic data has lessened enthusiasm for potential rate reductions, exerting pressure on gold prices. Current market predictions indicate a below 50% likelihood of a Fed rate cut in March, a decrease from the 73% probability noted at the beginning of the year, as per CME's FedWatch Tool. Additionally, investors are exercising caution due to escalating geopolitical tensions in the Middle East, especially after a recent lethal drone strike on US forces near the Jordan-Syria border.​

 

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Silver Prices Hold Steady Around $23 Amid Geopolitical Tensions.​

Solid ECN - Silver values have remained stable, hovering around $23 per ounce. This stability comes as investors maintain a cautious approach in anticipation of the upcoming Federal Reserve meeting and significant economic reports from the United States, including the crucial employment data. Market participants are keenly observing for indications of a slowdown in the job market and a potential shift towards a more dovish stance by Federal Reserve officials, following signs of easing in core PCE inflation, which suggests a reduction in inflationary pressures.

In the meantime, silver's status as a reliable safe-haven investment is reinforced by increasing geopolitical uncertainties in the Middle East. Recent events include the death of three American military personnel in northeastern Jordan, resulting from a drone strike, as well as ongoing assaults on commercial shipping in the Red Sea, which continue to keep the markets vigilant.​

 

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WTI Oil Prices Fluctuate Amid Fed Decision​

Solid ECN - On Wednesday, West Texas Intermediate (WTI) crude oil futures decreased, settling near $77.5 a barrel. This decline partly reversed the gains from the prior session and mirrored the downturn in other volatile investments, as a cautious mood prevailed in the marketplace. Market participants were also cautiously anticipating the U.S. Federal Reserve's upcoming monetary policy announcement, with recent economic indicators diminishing expectations for reductions in interest rates.

Additionally, recent data revealed a continued contraction in Chinese manufacturing for the fourth consecutive month in January, pointing to persistent weak demand from the world's leading oil importer. Despite these factors, crude oil prices received some support due to concerns over escalating geopolitical tensions in the Middle East. This follows a recent lethal drone strike on American forces near the Jordan-Syria border. President Joe Biden of the United States acknowledged that the decision to respond to the incident was made. However, he withheld specifics to prevent a broader conflict in the region.​

 

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US Gas Futures Hit 9-Month Low: Why?​

Solid ECN - The value of US natural gas futures has dropped to a nine-month low, falling under $2.1/MMBtu. This decrease is attributed to diminished demand and an upsurge in supply. The demand for heating is projected to decline further due to the forecast of above-average temperatures lasting until February 7th. In the meantime, gas production is on a recovery path following disruptions caused by a recent Arctic storm.

Current data indicates that gas storage levels are 5.2% above the typical seasonal average. Concurrently, it’s anticipated that US LNG feed gas won’t reach its peak levels until mid-February when the Freeport LNG export facility in Texas is expected to be fully operational again.​

 

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Dollar Index Stays Strong as Fed Dims March Rate Cut Hopes​

Solid ECN - The dollar index remained stable above 103.5 on Thursday, staying close to its highest point in seven weeks following comments from Federal Reserve Chair Jerome Powell that diminished expectations for an interest rate decrease in March. During the Fed's press briefing, Powell indicated that lowering rates in March did not align with the central bank's primary scenario and emphasized the importance of keeping rates steady until there's significant evidence that inflation is on a downward path to the 2% goal.

The Fed's likelihood of a rate reduction in March has decreased sharply to 38% from 89% just a month earlier. Investors are now paying attention to the upcoming weekly unemployment claims, the ISM PMI data on Thursday, and the eagerly awaited monthly employment report on Friday. While the dollar gained strength against most major currencies, it saw a decline against the Japanese yen. This shift was primarily due to concerns surrounding New York Community Bancorp, a regional bank in the U.S., which led investors to seek more secure assets.​

 

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Oil Prices Rebound Amid Stronger Demand Outlook​

Solid ECN - On Thursday, WTI crude oil prices climbed above $76 for each barrel, making up for some of the previous day's losses, influenced by a brighter demand forecast. Fatih Birol, the head of the IEA, recently predicted that in 2024, global oil demand would grow by 2 million barrels daily, a significant increase from the earlier estimate of 1.24 million barrels per day.

The likelihood of interest rate reductions is significant in economies, and several economic boost measures in China, the leading oil importer, further enhanced this outlook. Additionally, concerns about the Houthi attacks on shipping in the Red Sea and the potential for a direct clash between the US and Iran, which could interrupt worldwide oil trade, continued to add a premium to oil prices. In contrast, official data revealed a surprising increase in US crude oil stocks by 1.234 million barrels last week, contrary to market predictions of a 0.217 million barrel decrease.​

 

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Silver Prices Dip to $22.6 Amid Altered Fed Rate Outlook​

Silver prices fell to approximately $22.6 per ounce following investor expectations that the Federal Reserve would not lower interest rates in March. This sentiment arose after Fed Chair Powell indicated that monetary policy easing early in the spring was improbable. However, Powell's decision to stop suggesting further rate hikes led investors to anticipate 140 basis points in Fed rate cuts for the year, an increase from the previously estimated 130 basis points—the decline in the U.S.

Treasury yields and financial difficulties faced by the regional bank New York Community Bancorp also bolstered the appeal of silver as a secure investment. Attention is now turning to upcoming economic indicators, including weekly jobless claims, the ISM PMI reports on Thursday, and the crucial monthly employment report on Friday. Additionally, the price of XRPUSD is now above the weekly pivot.​

 

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Oil Prices Steady Amid Middle East Peace Hopes​

Solid ECN - On Friday, WTI crude oil prices stabilized at about $74 per barrel, facing a roughly 5% drop over the week. This shift came as tensions in the Middle East appeared to calm, reducing fears of interruptions in oil supply. There were discussions about a possible ceasefire between Israel and Hamas, with Hamas examining the proposal.

The hope was that peace in Gaza might prevent further Houthi assaults on Red Sea shipping lanes, which have been affecting global trade and oil distribution. Despite these discussions, a Qatari official said no ceasefire had been reached. In the meantime, OPEC+ decided to continue with its existing production strategy, maintaining a reduction of 2.2 million barrels per day into the next quarter. On another note, the global oil demand is expected to rise by 2 million barrels per day in 2024, significantly above the earlier prediction of 1.24 million barrels per day, as per the Energy Information Administration (EIA).​

 

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Oil Prices Steady at $72 Amid Middle East Watch​

Solid ECN - WTI crude oil prices stabilized at just over $72 per barrel on Monday, recovering from a significant drop last week. This shift came as traders kept an eye on the situation in the Middle East. Oil prices had fallen by over 7% the previous week due to advancements in peace talks between Israel and Hamas, which reduced worries about potential supply issues.

Additionally, the decreasing likelihood of immediate interest rate reductions by the US Federal Reserve and ongoing concerns over China’s economic growth put pressure on the worldwide demand forecast. On another note, the US announced plans for more military actions against groups supported by Iran, heightening tensions in the Middle East. However, it clarified its intention to avoid escalating the conflict further.​

 

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Gold Prices Dip Amid Strong US Data​

Solid ECN - Gold prices dropped to around $2,030 per ounce on Monday, continuing the decline from the last session. This drop was influenced by robust US economic reports and clear indications from the Federal Reserve that there might not be immediate cuts in interest rates. Recent data on Friday indicated that the US job market grew significantly in January, with 353,000 new jobs added, a jump from the revised figure of 333,000 in December and much higher than the anticipated 180,000.

The Federal Reserve's Chair, Jerome Powell, in an interview with "60 Minutes" that aired on Sunday, committed to a cautious approach towards reducing interest rates this year. He emphasized the need for further proof that inflation consistently reaches the 2% target before making significant moves. Powell mentioned that any action by the Fed would likely be slower than what the markets are expecting. Following these developments, traders have scaled back their expectations for a rate cut in March to just 20%. They foresee a total reduction of about 137 basis points in interest rates for the year, less than the previously estimated 150 basis points.​

 

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Euro Hits Low Amid US Dollar Strength​

Solid ECN - The euro dropped to its lowest value since November 13th, at $1.075, because of a strong US dollar. People had less hope for the US Federal Reserve to start reducing interest rates soon after a strong US job report and cautious words from Jerome Powell, the Federal Reserve Chair, about lowering rates. Meanwhile, the European Central Bank (ECB) is expected to delay easing its monetary policies even though recent data shows the economy is not doing well.

Reports indicated that in December, the drop in prices manufacturers get for their products worsened in the Eurozone, and Germany saw a bigger-than-expected decrease in exports due to low demand worldwide. The Ifo Institute noted that a lack of manufacturing orders is increasingly problematic for Germany's economy. Market predictions for ECB rate cuts by the end of the year have decreased to about 125 basis points from 138 points last week.​

 

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Euro Hits Low Amid Dollar Strength and ECB Caution​

Solid ECN - The euro dropped to $1.075, its lowest since November 13th, as the US dollar grew more robust. This change came after the latest US jobs report showed strength, and the head of the US Federal Reserve, Jerome Powell, hinted at being careful about lowering interest rates. Meanwhile, the European Central Bank seems unable to ease its monetary policy, even with recent weak economic indicators.

Reports showed that in December, the drop in prices producers received in the Eurozone got worse, and Germany's exports decreased more than expected due to low worldwide demand. The Ifo Institute also mentioned that the lack of manufacturing orders is increasingly troubling for Germany's economy. Market predictions for the European Central Bank to cut rates by the end of the year have decreased to about 125 basis points from 138 basis points the previous week.​

 

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EURUSD Tests Support, Eyes Resistance​

Solid ECN - The EURUSD currency pair is testing the 1.07228 support after it crossed below the bearish flag. The pair’s value rose to 1.07619 in today’s trading session, which coincides with the broken channel that now acts as resistance. The awesome oscillator bars turned green, but the RSI indicator is still close to the 30 level. The pullback might extend to the Ichimoku cloud resistance area if the EURUSD bulls can close and stabilize the price above 1.07619.

On the flip side, a failure in the above scenario will lead the EURUSD price to decline further to the next support area, the 1.0658 mark.​

 

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Oil Prices Rise Amid Middle East Tensions​

Solid ECN - WTI crude oil prices increased to about $73 per barrel on Tuesday, continuing the previous day's gains. This rise was mainly due to growing concerns over potential disruptions to oil supplies from the Middle East, fueled by increasing tensions in the area. Notably, analysts have highlighted recent US airstrikes against militias supported by Iran, though US officials have clarified their intention to avoid a broader conflict in the region.

Despite these tensions, there has been no immediate impact on the oil supply, helping prices recover slightly after suffering significant losses last week. Specifically, oil prices dropped by over 7% last week, driven by advances in peace talks between Israel and Hamas, which diminished fears of supply disruptions from the Middle East. Additionally, reduced expectations for imminent cuts to interest rates by the US Federal Reserve and ongoing worries about China's economic recovery have further pressured the outlook for global oil demand.​

 

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Oil Prices Rise Amid Middle East Tensions, Down 7%​

Solid ECN - WTI crude oil prices climbed above $73.5 a barrel on Wednesday, marking a third consecutive session of gains due to concerns over potential supply interruptions in the Middle East. Market analysts believe the ongoing tensions in the region could lead to fears of supply shortages factoring into oil prices.

Despite the US responding with airstrikes on Iran-supported groups in Iraq, Syria, and Yemen and hinting at more to come, Iran appears to continue its support for these militias with weapons and intelligence. However, oil prices have fallen by about 7% since the end of January, influenced by progress in peace talks between Israel and Hamas, dwindling hopes for immediate cuts in US interest rates, and ongoing worries about China's economic rebound affecting global demand.​

 

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Stock Market Updates: Earnings Season Midpoint​

Solid ECN - US stock futures showed little movement on Wednesday, with investors looking closely at the latest earnings reports during the mid-point of the earnings season. After the market closed, Snap's shares dropped 32% because it did not meet revenue expectations and predicted weak future earnings. On the other hand, Ford's shares increased by 6% thanks to its quarterly earnings surpassing expectations and positive future earnings outlook. Enphase Energy also saw its shares rise by 12%, driven by forecasts of better demand shortly.

During Tuesday's regular trading, the Dow increased by 0.37%, the S&P 500 went up by 0.23%, and the Nasdaq Composite slightly rose by 0.07%. This was because nine out of eleven sectors in the S&P 500, especially materials, real estate, and healthcare, finished the day higher. This improvement was attributed to strong corporate earnings boosting investor mood despite the Federal Reserve's resistance to cutting interest rates. In other corporate news, Palantir Technologies experienced a significant surge of 30.8% after it projected profits higher than what was anticipated. Similarly, GE Healthcare's shares climbed 11.7% following positive earnings announcements.​