official Market Update by Solidecn.com

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AUDUSD Stays Bullish Above Key Support

Solid ECN – In the realm of technical analysis, the AUDUSD currency pair has impressively established itself above a key support zone, which spans a tight range from 1.6678 to 1.6690.

Turning to the indicators, the Relative Strength Index (RSI) is inching closer to the overbought threshold, indicating a strong buying interest. Simultaneously, the Awesome Oscillator and the Average Directional Index (ADX) both point towards a sustained bullish momentum. While the rising RSI does hint at a possible consolidation phase, the bullish trajectory appears likely to aim for the upper boundary of the bullish channel. This bullish sentiment is further reinforced by the 61.8% Fibonacci retracement level. As the AUDUSD pair continues trading above this level, the bullish forces are expected to maintain their dominance.

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Canada's New Home Prices Dip in November 2023

In November 2023, Canada witnessed a 0.2% month-over-month decrease in new home prices, slightly exceeding the market's forecast of a 0.1% reduction. This decline follows a steady reading in October. A notable change was seen across 25 of the 27 census metropolitan areas, where costs either decreased or remained stable. Sherbrooke experienced the most substantial drop in prices, falling by 1.2%, with St. John's and Hamilton closely following, each recording a 1.0% decrease. These significant reductions are primarily linked to less robust market conditions.

Conversely, new home prices in Trois-Rivières and St. Catharines-Niagara bucked the trend, rising by 0.5% and 0.3% respectively. These increases can be attributed to the escalating costs of construction in these areas. On an annual basis, the cost of new homes in Canada in November 2023 marked a decrease of 0.9%, continuing a downward trajectory that has persisted since November 2019.

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NZDUSD Rises, Bullish Trend Foreseen

Solid ECN – The NZDUSD pair recently achieved a notable uptick, reaching the highs of the previous week, closely aligned with the proximity of the Ichimoku cloud. A glance at the 4-hour chart reveals that the ADX lines linger below the 20 mark. This positioning indicates that the NZDUSD has been experiencing a range-bound movement in today's trading, marked by a discernible lack of momentum.

Looking at the RSI indicator, it maintains a position above 50, and the Awesome Oscillator bars present in green, signaling a positive trend. Taking these technical indicators into account, along with the overall market trajectory, it seems probable that the NZDUSD's value might escalate, potentially targeting the upper limit of the bullish flag.

Supporting this bullish stance are the Ichimoku cloud and the lower band of the bullish flag. The bullish forecast for the NZDUSD remains valid as long as it continues to trade above these levels.
 

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USDJPY Forecast: A Turnaround Imminent?

Solid ECN – Since mid-November, the USDJPY currency pair has demonstrated a bearish trend, effectively establishing its position beneath the Ichimoku Cloud. Presently, it's encountering the 38.2% Fibonacci resistance, while simultaneously, the RSI indicator is exiting the oversold zone. Adding to this analysis, the Awesome Oscillator is signaling a divergence, hinting at either a consolidation phase or an imminent trend reversal for the pair.

Given these technical indicators and the current market movements, a consolidation phase seems likely for USDJPY. This could lead to a rise in its value, potentially surpassing the 38.2% Fibonacci level. Bolstering this analysis is the 50% Fibonacci support level. However, should the price fall below the critical support at 140.76, this bullish scenario would be effectively invalidated.

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Dollar Climbs Back, Awaits Inflation Data

The value of the dollar has seen an uptick, currently hovering around 102.5 this Tuesday. This rise comes after a dip below 102 just last week. The shift in momentum is partly due to comments from officials at the US Federal Reserve, who have been hinting that expectations for a decrease in interest rates might be a bit hasty. 

Among the voices urging caution were Chicago's Austan Goolsbee and Cleveland's Loretta Mester, adding to similar sentiments previously expressed by John Williams from New York. Across the Atlantic, the European Central Bank and the Bank of England have held their rates steady, committing to higher rates in the fight against inflation. Market participants are now keenly awaiting the US PCE inflation figures, hoping for a clearer picture of inflation trends.

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Shanghai Index Stabilizes Amid New Financial Rules

Tuesday witnessed minimal movement in China's stock market, with the Shanghai Composite index closing almost flat at 2,932.39. This came as a contrast to the previous four days of falling figures. Market players were busy analyzing new rules for non-banking financial companies in China, set to be implemented from May 1, 2024. However, the calm of the day didn't lift the index much, as it hovered near its lowest point in 13 months, indicating investors' cautious approach. This cautiousness stems from the upcoming decision on loan prime rates by China's central bank, the PBoC, due on Wednesday, and mixed reports of economic activities in China for November, driven by low demand and ongoing policy challenges.

Over in the US, the stock market futures remained mostly unchanged. Investors were holding their breath for the upcoming US Personal Consumption Expenditures (PCE) index release, a critical measure of inflation monitored by the Federal Reserve, expected to impact future monetary policy.

In the realm of corporate developments, Shenzhen L&A Design witnessed a remarkable 20% jump, reaching a two-year peak. This followed news of its subsidiary, Altron Engine Data Services, planning to invest CNY 435 million in new computing servers. Other significant market shifts included CSSC Science & Tech rising by 5.6% and Kangxin New Materials gaining 3.3%. In contrast, Jiangsu Boxin Investing and Citychamp Dartong Co experienced drops of 7.2% and 2.3%, respectively. Source. 

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Swiss Franc Climbs High, Supported by SNB

The Swiss franc has risen past 0.87 against the USD, reaching its highest level since the end of July. This surge is partly due to a temporary dip in the dollar's strength and ongoing support from the Swiss National Bank. Recent dovish comments from Federal Reserve officials hinting at potential rate cuts next year have put pressure on the US dollar. 

Meanwhile, the Swiss National Bank has been actively supporting the franc by selling off its foreign currency reserves. This strategy helps to mitigate the impact of fluctuating commodity prices and keeps import inflation in check, a crucial tool in combating high price growth in Europe. Latest reports show that the Swiss National Bank's foreign exchange reserves have decreased for the sixth consecutive month, hitting a seven-year low in November. On the policy side, the central bank maintained its key interest rate last week and indicated that, despite a slowdown in the country's Consumer Price Index (CPI), inflation risks are still present.

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Rand Dips as Dollar Stabilizes

Solid ECN – The South African rand is currently trading at about 18.6 against the US dollar, a slight decline from its recent one-month peak of 18.3. This change comes as the dollar finds stability, influenced by several Federal Reserve policymakers who expressed hawkish views. These officials are challenging the extent of the interest rate cuts that the markets were expecting for next year.

In South Africa, the Reserve Bank decided to maintain its main lending rate at 8.25% for the third consecutive meeting on November 23rd, a rate that hasn't been this high in 14 years. The bank continues to highlight ongoing inflationary risks. Notably, the annual inflation rate in South Africa decreased to 5.5% in November 2023. This is a drop from the five-month peak of 5.9% seen in October and brings it nearer to the central bank's target range of 3% to 6%.

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Hungary's Central Bank Cuts Rates Amid Slowing Inflation

During its December 2023 meeting, Hungary's central bank lowered its key base rate by 75 basis points to 10.75%, aligning with what analysts had predicted. This decision was made as inflation shows signs of slowing down. Similarly, rates for collateralized loans and overnight deposits were decreased to 11.75% and 9.75%, respectively. However, the central bank is standing firm against government calls for deeper rate cuts aimed at stimulating the economy.

In November, the country saw a 7.9% year-on-year rise in consumer prices, the smallest since January 2022, yet still well above the central bank's target midpoint of 3%. The bank predicts a steady reduction in inflation, expecting it to fall to about 7% by the end of 2023, and to re-enter the target range by 2025. Looking forward, policymakers are likely to continue their current approach to rate cuts, mindful of the potential risks of an economic slump in Hungary.

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BoJ's Steady Policy Boosts Tokyo Stocks

Solid ECN – On Tuesday, the Nikkei 225 index rose by 1.4%, reaching 33,219, its highest point in two weeks. The broader TOPIX index also saw an increase, finishing 0.7% higher at 2,334. These gains followed the Bank of Japan's decision to maintain its ultra-easy monetary policy, with a commitment to keeping interest rates low. The bank, however, did not provide any clues about potential changes to this policy in the next year.

Most sectors ended the day lower, except for basic materials, which remained relatively unchanged. Real estate emerged as the standout sector, leading the gains, followed by technology and non-cyclical industries. Among individual companies, Tokyo Electron saw a significant increase of 3.7%, with Fast Retailing and Recruit Holdings both gaining 2.2%.

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Rising Consumer Confidence in the Netherlands

Solid ECN – In the Netherlands, December 2023 marked a noticeable uptick in consumer confidence, reaching its peak since January 2022. The confidence indicator improved to -29, up from -33 the previous month. This positive change reflects an enhanced outlook on the overall economic situation. 

Specifically, people felt more optimistic when considering the past year (-62 compared to -66) and the year ahead (-19 compared to -28). Moreover, there's a growing readiness among consumers to spend, evident from the rise in their willingness to buy (-21 compared to -24). Importantly, perceptions about financial prospects for the coming year turned positive, moving to 2 from -1. Finally, households viewed the current period as slightly more favorable for major purchases, with the sentiment improving to -40 from -42.

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Gold's Rise and Resistance: Fibonacci Analysis

FxNews – In the daily XAUUSD chart, gold recently rebounded from the 50% Fibonacci support level. Now, the metal is trading over the 38.2% Fibonacci support, approaching the resistance zone between $2,047 and $2,057.

Delving deeper with the 4-hour chart, we get a clearer picture of gold's market movements. Here, buyers are striving to keep the price over the 38.2% Fibonacci mark. This bullish trend is backed by various technical indicators. For instance, the RSI indicator is consistently above 50, a good sign for buyers. Moreover, the Awesome Oscillator shows green bars, signaling upward momentum. If this trend continues and the current level holds, we anticipate gold might reach the 61.8% Fibonacci resistance.

Conversely, if gold's price falls beneath its current support, this would challenge the current bullish perspective, potentially leading to a decline in its value.

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UK Gilt Yield Hits 8-Month Low Amid Rate Cut Hopes

Solid ECN – In the UK, the 10-year Gilt yield has dropped to 3.5%, marking an eight-month low, driven by expectations of interest rate cuts in 2024. UK inflation has also decreased to 3.8%, the lowest since September 2021, beating the expected 4.4%. The core inflation rate fell to 5.1%, a low not seen since January 2022, and significantly under the 5.6% forecast. 

This has led traders to heavily speculate on the Bank of England reducing interest rates, with predictions of a total cut of 143 basis points. The initial rate cut is expected in March, followed by potentially five more quarter-point reductions, and a 70% likelihood of a sixth cut. In the meantime, the markets are also anticipating a 75 basis point rate cut from the Federal Reserve in 2024.

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Rising Aussie Dollar: A Five-Month High

Solid ECN – The Australian dollar has maintained a strong position, staying around $0.675, which is its highest level in nearly five months. This strength is largely due to the dovish (less aggressive) monetary policies of the US Federal Reserve and the Bank of Japan. These policies have put pressure on the US dollar and the yen, in turn boosting other major currencies, including the Australian dollar, commonly referred to as the Aussie.

Furthermore, the Aussie has been positively influenced by an increase in commodity prices. This rise in prices can be attributed to supply disruptions caused by attacks in the Red Sea. Additionally, the possibility of lower interest rates has also played a role in enhancing the overall demand outlook, thus supporting the Australian dollar's value.

Domestically, the situation is also noteworthy. The latest meeting minutes from the Reserve Bank of Australia (RBA) revealed that the central bank had contemplated raising interest rates for a second consecutive month in December. However, the RBA opted to wait for more data before making such a decision, as there were promising signs regarding inflation.

The RBA has also observed that aggregate demand within Australia has slowed more rapidly than they had anticipated. This slowing of demand is coupled with an observation of an accelerating pace of disinflation (a slowing down in the rate of inflation) in other parts of the world. These factors together contribute to the complex economic landscape that the RBA and the Australian dollar are currently navigating.

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Nikkei 225 and Topix Index Surge on BOJ's Policy

Solid ECN – On Wednesday, Japan's Nikkei 225 Index saw a significant rise of 1.37%, closing at 33,676, while the broader Topix Index increased by 0.67% to 2,349. This growth continued from the previous session, spurred by the Bank of Japan's decision to maintain its ultra-loose monetary policy. The central bank also avoided any hints of potential changes in the coming year. Governor Kazuo Ueda, in his press conference, emphasized a dovish stance, stating the bank's readiness to implement further easing measures if needed.

Additionally, Japanese stocks were buoyed by positive developments on Wall Street, where optimism grew around the expectation that the US Federal Reserve might begin reducing interest rates next year. This optimism was reflected across almost all sectors in the Japanese market, with notable increases in shares of major companies. Kawasaki Kisen saw a rise of 5.6%, Nippon Yusen surged by 32%, Fast Retailing increased by 3.9%, Shin-Etsu Chemical went up by 4.1%, and Nippon Steel grew by 1.6%.

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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

Solid ECN – 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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ASX 200 Dips Slightly, Reflecting Wall Street Sell-Off

Solid ECN – The S&P/ASX 200 Index experienced a slight drop of 0.45%, ending the day at 7,504 on Thursday. This downturn came after the index reached its highest point in over ten months, mirroring a sudden decline in Wall Street due to profit-taking after a significant surge that took US markets to new highs. Caution prevailed among investors as they awaited important economic reports from the US, including GDP and inflation figures, which might affect the Federal Reserve's financial strategy. 

In Australia, the Reserve Bank's recent meeting notes revealed a debate over raising interest rates for another month in December. However, the decision was to wait for more information, as there were some positive signs regarding inflation. The drop in the index was mainly due to the downward movement in sectors like mining, finance, and consumer goods. Significant losses were seen in companies like Allkem (down 5.6%), Pilbara Minerals (down 3.4%), Commonwealth Bank (down 0.4%), Macquarie Group (down 0.9%), Aristocrat Leisure (down 2.3%), and Woolworths Group (down 0.4%).

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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.