Currency Pairs Market Analysis

[Solid ECN]

Australian Dollar Rises Amid Cooling Inflation

Solid ECN – The Australian dollar climbed to nearly $0.67, recovering from its four-week low. This rise occurred despite new data indicating a slowdown in inflation. In November, Australia's CPI grew by 4.3% compared to last year, less than October's 4.9% increase and the smallest since January 2022. The figure was also lower than the anticipated 4.4%.

Given the services sector's robustness, this suggests the Reserve Bank of Australia might not raise interest rates. The market doesn't expect the central bank to increase rates beyond the existing 4.35%. Also, the likelihood of a rate cut in May has decreased to about 36%.​

 

[Solid ECN]

New Zealand Dollar Balances as Rate Cut Expectations Grow

Solid ECN – The New Zealand dollar has stabilized at $0.624 after recent ups and downs. This comes as the US dollar weakens, with many expecting the Federal Reserve to cut interest rates several times this year. US consumer inflation expectations for the short term hit a near three-year low in December, hinting at a softer approach to monetary policy.

In New Zealand, markets anticipate four rate cuts from their central bank this year, possibly starting in May. The central bank's head noted the unexpected slowdown in growth, increasing chances of an earlier rate cut. In November, New Zealand's cash rate remained at 5.5%, narrowly avoiding a hike.​

 

[Solid ECN]

GBPUSD Tests Ichimoku Cloud, Eyes Rise

The GBPUSD currency pair has tested the Ichimoku cloud in today's trading session. The pair is currency trading at 1.2721 while the awesome oscillator bars turned green. The RSI indicator stayed above 50, another signal for the bullish trend's resumption.

If the bulls can maintain the price above the cloud, the price will likely rise. But the first hurdle is 1.2776. Should this level be breached, the following target can be 1.2826.

The bullish scenario is invalid if the bears close below the cloud. In this case, the lower band of the bullish flag would be the next resistance.​

 

[Solid ECN]

USDJPY Above Ichimoku Cloud, Bulls Eye Gain

The USDJPY currency pair trades above the Ichimoku cloud, signaling a bullish trend. Various technical indicators further support this positive outlook. The ADX line, an indicator of trend strength, is above 40, indicating a solid upward trend. The awesome oscillator bars are green, and the RSI indicator is positioned above its median line, aligning with the bullish sentiment.

Bullish traders in the USDJPY market are likely setting their sights on the 61.8% Fibonacci resistance level—the lower band of the bullish flag and the Ichimoku cloud support this bullish scenario. The bullish trend remains valid and intact as long as the currency pair maintains its position above the cloud.​

 

[Solid ECN]

Gold: Bearish Channel and Fibonacci

Solid ECN – The XAUUSD currently ranges between 61.8% and 38.2% Fibonacci levels. Interestingly, the Average Directional Index (ADX) lines hover below the 20 level, indicating market uncertainty. Despite this, gold continues to trade within the bearish channel. As a result, we can consider the current market trend as bearish.

Given this outlook, we might expect the bears to exert more pressure. This could lead to a continued decline towards the lower band of the bearish flag. However, this scenario would be invalidated if the gold price closes above the 38.2% Fibonacci resistance.​

 

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EURUSD Bullish Trend Analysis and Fibonacci Resistance Levels

Solid ECN – The EURUSD currency pair has crossed above the bearish flag and is now testing the Ichimoku cloud. The ADX green line has crossed above the 20 level, signaling the emergence of a bullish trend. If the EURUSD remains above the blue trendline, the next target could be the 23.6% Fibonacci resistance.

The 50% Fibonacci level supports the bullish scenario. The uptrend analysis should be invalidated if the price declines below this resistance level.​

 

[Solid ECN]

USDCNH Tests Support; Bulls vs. Bears in Market Tug

Solid ECN – The USDCNH pair is testing the 7.1631 support level on the 4-hour chart. Meanwhile, the Stochastic oscillator is gradually stepping outside the oversold area, signaling a potential change in momentum. If the bulls maintain the price above this support, we can reasonably expect the USDCNH price to experience a new bullish wave.

Consequently, the market might surge to the 7.1898 area in such a scenario.

On the flip side, should the bears successfully breach the support, the decline would likely extend to the 38.2% Fibonacci support level.​

 

[Solid ECN]

Gold Dips as Dollar Rises on US Data

Solid ECN – Gold's price fell to under $2,030 per ounce on Thursday. This drop happened as the US dollar got more robust. Good US economic news reduced expectations for more accessible money policies in March. Inflation rates were higher than expected. Yearly inflation increased to 3.4% in December, up from 3.1% in November. Also, fewer people filed for unemployment last week than expected. Only 202,000 filed, less than the 210,000 predicted. This shows the job market is still strong.​

 

[Solid ECN]

UK Manufacturing Growth Rises in November 2023

Solid ECN – In November 2023, the UK's manufacturing production increased by 0.4%. This was a change after four months of falling numbers. The growth almost matched the predictions of a 0.3% increase. The most significant boost to the yearly rate was from essential pharmaceuticals and preparations. Their production grew 4.8%, a recovery from a 3.4% drop in October.

Another significant growth was in food, beverages, and tobacco. This sector saw a rise of 1.4%, compared to only 0.1% in the previous month. Looking at the yearly data, manufacturing output grew by 1.3%. This improved from October's 0.2% but fell short of the expected 1.7%.​

 

[Solid ECN]

XAUUSD Technical Analysis

Solid ECN – The gold price increased to $2,037 in Friday's trading session. The yellow metal is testing the upper band of the bearish flag. Concurrently, the ADX line is stepping above the 20 level, and the RSI indicator flips above the median line. As a result, the technical indicators are bullish while the pair remains within the bearish flag.

Furthermore, the 38.2% Fibonacci level acts as a hurdle that might block further price increases in the currency pair. Should this level be breached, the bullish momentum would then eye the 23.65 Fibonacci resistance.

On the flip side, if the bears maintain the price inside the flag, the downtrend, which began in late December, will likely experience a new wave. The 78.6% Fibonacci level could become the next bearish target in this scenario.​

 

[Solid ECN]

Oil Prices Rise Amid Global Tensions

Solid ECN – WTI crude futures experienced an upward trend, reaching nearly $73 per barrel at the start of the week. This marked the third consecutive session of gains, primarily influenced by military actions in the Red Sea region. US and UK forces conducted air and sea operations aimed at halting Houthi rebels in Yemen, who were reportedly targeting maritime vessels. These developments heightened concerns over potential disruptions in oil supplies. Several tankers altered their courses last Friday in response to the military strikes.

The Houthi group issued a warning on Sunday, promising a robust and decisive reaction against the United States. Libya's oil and gas sectors also faced threats of closure at two more facilities following the recent shutdown of the Sharara field, which reduced 300,000 barrels of oil per day from the market. Concurrently, the surge in oil production from non-OPEC nations, notably the United States, and the ongoing uncertainties surrounding China's crude oil demand continue to exert pressure on global oil prices.​

 

[Solid ECN]

AUDUSD Analysis

Solid ECN – In the 4-hour chart, the AUDUSD currency pair oscillates within a downward channel. The RSI indicator is below 50, suggesting the downward trend may persist. If the downward channel remains intact, we could see a further decrease in the currency pair, potentially reaching the channel's lower boundary.

However, there's a chance for an upward breakout from the downward flag, as indicated by the divergence in the awesome oscillator. This divergence could signal a potential trend shift. Nevertheless, as long as the AUDUSD price remains within the flag, the downward technical analysis remains applicable.​

 

[Solid ECN]

GBPUSD Analysis

Solid ECN – The GBPUSD currency pair trades within the bullish flag's lines, while the awesome oscillator indicator signals divergence in the daily chart.

The resistance that stopped the price from rising further is the 1.2827 mark. If the divergence signal comes into play, we can expect the GBPUSD price to fall and initially target the 38.2% Fibonacci support—the lower band of the envelopes indicator and the Ichimoku cloud further back up this support level.

Conversely, the bulls must break above the 1.2827 resistance for the uptrend to continue.​

 

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USDCHF: Switzerland's Inflation and Monetary Strategies

Solid ECN – The Swiss franc has been stable since the beginning of the year, hovering around 0.85 against the US dollar. This stability is close to its 12-year peak of 0.83, achieved on December 29th. The Swiss National Bank (SNB) has implemented various support measures, leading to this steadiness. Market analysts believe the SNB might maintain its strict monetary policy for an extended time.

In December, Switzerland experienced an unexpected rise in inflation, reaching 1.7%. This rate is still within the SNB's expected range. However, it exceeded what many experts had predicted. This increase mirrors the inflation trends in countries using the Euro, Switzerland's primary trading partners. As a result, the SNB might need to raise interest rates. This move would support the Swiss franc and reduce the impact of imported inflation.

Contrasting with Switzerland's approach, there's growing speculation that the US Federal Reserve might cut interest rates sooner than anticipated. The SNB's strategy also includes selling foreign exchange. Recent data revealed that their reserves dropped to the lowest level in over seven years.​

 

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Indian Bond Yields Hit 4-Month Low: A Closer Look.

Solid ECN – In January, something notable happened in India's financial market. The yield on the 10-year Indian government bond dropped to 7.15%. This was its lowest point in almost four months. What caused this decline? A mix of positive economic trends and encouraging corporate news played a significant role.

First, let's look at the broader picture. Indian government securities (G-Secs) with a one-year maturity period saw a significant boost. This happened when Bloomberg suggested adding Indian bonds to its index for emerging market local currencies. JPMorgan had already taken a similar step by including Indian bonds in its emerging market debt index. These inclusions are crucial. They make foreign investors more interested in Indian sovereign bonds. When foreign demand goes up, bond yields typically go down.

Now, let's dive into the details. Core inflation is a crucial indicator of economic health. In December, reports from private banks revealed a substantial slowdown in core inflation. This slowdown sparked optimism. Many started anticipating that the Reserve Bank of India (RBI) might cut interest rates within the year. It's important to note that overall headline inflation, as the official statistics office reported, had increased.

Despite this mixed inflation scenario, the RBI seems set to maintain its current policy stance. It's likely to continue the 'Withdrawal of Accommodation' policy in the upcoming meetings. This policy involves gradually reducing monetary support to the economy. While this move might limit the upswing in bond prices, the overall outlook remains cautiously optimistic.​

 

[Solid ECN]

UK's Producer Price Shift in December 2023

Solid ECN – In December 2023, the UK saw a slight uptick in factory gate prices for domestically produced goods, marking a year-on-year increase of 0.1%. This change indicates a rebound from the previous month's revised 0.1% decrease and is a notable variance from the anticipated 0.4% growth projected by market analysts. This shift in the producer price index (PPI) is primarily attributed to the rise in prices for various outputs, which contributed the most significant upward push of 0.60 percentage points. Notably, these outputs saw an annual price jump of 2.7%, starkly contrasting their stagnant growth in November.

Further breaking down these changes, significant price increases were observed in specific sectors. Food products, for instance, witnessed a substantial rise of 1.8% in December, compared to no change in the previous month. Similarly, the prices for essential metals saw a considerable jump, reaching 2.7% growth compared to a mere 0.1% in November.

However, these increases were somewhat balanced by continued price drops in other sectors. The prices for coke and refined petroleum products maintained a downward trend, falling by 9.2%, which was even steeper than the 8.2% decrease observed earlier. Likewise, the chemical and pharmaceutical sectors experienced a significant contraction, with prices dropping by 12.8%, a more pronounced decline than the 0.7% fall in the previous period.

On a month-to-month basis, December's output producer prices declined by 0.6%, exceeding market expectations of a 0.2% fall. This decrease marked a change from the stagnant prices observed in the preceding period.

To understand these dynamics, it's essential to consider the broader economic context. The PPI is a critical economic indicator, reflecting the average change over time in the selling prices received by domestic producers for their output. These prices influence the cost of goods sold to consumers and can have ripple effects throughout the economy, affecting inflation, purchasing power, and overall economic health.

As investors and policymakers analyze these figures, it's essential to consider the complex interplay of various sectors and their impact on the economy. The fluctuating prices in key areas like food, metals, and petroleum products can signal changes in supply and demand, production costs, and broader market trends.​

 

[Solid ECN]

EURUSD Pair Falls Amid Mixed ECB Rate Views

Solid ECN – The euro recently dipped below the $1.09 mark, reaching its lowest since mid-December. This decline is primarily attributed to the strengthening of the US dollar as investors reevaluate their expectations regarding interest rate cuts. Critical discussions at the Davos conference shed light on the varied perspectives of European Central Bank (ECB) officials regarding monetary policy and interest rates amidst ongoing high inflation.

Joachim Nagel, an ECB official, expressed at Davos that it is premature to consider reducing interest rates given the current inflationary pressures. Echoing this sentiment, Robert Holzmann from Austria suggested that rate cuts in 2024 seem highly unlikely. In contrast, France's Francois Villeroy de Galhau took a slightly different stance. While he agreed that the ECB is not in a position to declare victory over inflation yet, he hinted that a rate cut could be on the cards later in the year. Adding to these diverse viewpoints, Finnish policymaker Tuomas Valimaki advocated a more cautious approach, recommending patience and advising against premature policy actions.​

 

[Solid ECN]

Canadian Dollar Weakens Amid Inflation Surge

Solid ECN – In January, the Canadian dollar experienced a notable depreciation, crossing the 1.345 mark against the US dollar. This movement marked its weakest position in over a month, primarily influenced by the strengthening of the US dollar. This shift in currency value comes amidst anticipations and speculations regarding policy decisions from the Bank of Canada (BoC) and the Federal Reserve in the United States.

Investors are displaying a sense of uncertainty, particularly about the timing of the Federal Reserve's expected reduction in interest rates. This uncertainty is coupled with the recent developments in Canada's domestic economic indicators, especially regarding inflation. Contrary to some expectations of monetary policy easing by the BoC, current inflation data has added complexity to the situation. In December, Canada's headline inflation rate rose to 3.4%, up from 3.1% in the previous month. This increase marks the first Consumer Price Index (CPI) acceleration in four months, indicating persistent inflationary pressures.

Moreover, the trimmed-mean core gauge, a measure closely monitored for its reflection of underlying inflation trends, unexpectedly surged to a four-month high of 3.7%. This data is particularly significant as it contrasts with the BoC's earlier statements. The BoC had indicated a desire to see a substantial slowing in its preferred core inflation measures before considering any rate cuts. This recent uptick in inflation measures suggests that the central bank might not be able to ease monetary policy as quickly as some market participants had hoped.​

 

[Solid ECN]

Peso Weakens Amid Banxico Policy Outlook

The Mexican peso recently experienced a notable depreciation, crossing the 17.15 per USD threshold, a level not seen in the past month. This weakening of the peso is primarily a result of the strengthening of the U.S. dollar, which has been influenced by market speculations regarding the future monetary policy of the Bank of Mexico (Banxico). This situation reflects the broader economic trends and monetary policy decisions impacting currency values.

A significant factor contributing to the peso's decline is the latest industrial production data from Mexico. November saw a 1% contraction in industrial output compared to the previous month, marking the first decrease in nine months and the most rapid decline over two years. This industrial production downturn indicates the challenges posed by Banxico's record-high interest rates, which are currently at 11.25%. These high rates, while aimed at controlling inflation, seem to be exerting considerable pressure on the country's economic activity.

Some policymakers within Banxico have suggested that these conditions might warrant loosening financial conditions in the upcoming quarters. This perspective stems from the need to balance the tight monetary policy with the demands of sustaining economic growth.

Simultaneously, the strength of the U.S. dollar is being fueled by shifts in investor expectations regarding the Federal Reserve's monetary policy. Initially, there was anticipation of early easing by the Fed, but recent developments have led to a reevaluation of these expectations. Furthermore, ongoing geopolitical conflicts have increased the demand for safe-haven assets like the U.S. dollar, which traditionally benefits in times of global uncertainty.​

 

[Solid ECN]

WTI Crude Rises Amid Middle East Tensions & Demand Outlook

Solid ECN – WTI (West Texas Intermediate) crude oil futures recently experienced a noticeable uptrend, stabilizing around $74 per barrel by the end of the week. This upward movement in oil prices can be attributed to several key factors, including escalating tensions in the Middle East and a positive shift in global oil demand projections.

The Middle East, a pivotal region in global oil dynamics, witnessed an intensification of conflicts that significantly impacted the oil market. The United States increased its military actions against Houthi targets in Yemen, responding to the group's repeated assaults on maritime shipping. These geopolitical developments directly influence oil prices due to the region's crucial role in global oil supply.

In the United States, recent data from the Energy Information Administration (EIA) revealed a substantial decrease in crude inventories. The report indicated a drop of approximately 2.5 million barrels last week, surpassing the forecasted reduction of 313,000 barrels. This decline in oil stockpiles is a strong indicator of tightening supply conditions, which can contribute to rising oil prices.

On the demand front, the International Energy Agency (IEA) revised its 2024 oil demand growth forecast upward to 1.24 million barrels per day, an increase of 180,000 barrels per day. This adjustment is attributed to anticipated improvements in economic growth and the impact of lower crude prices in the fourth quarter. Likewise, the Organization of the Petroleum Exporting Countries (OPEC) maintained its optimistic forecast for oil demand growth in 2024 at 2.25 million barrels per day. It projected a significant growth of 1.85 million barrels per day in 2025.​