official Market Update by Solidecn.com

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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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NZX 50’s Remarkable Climb: A Four-Month High

Solid ECN –The NZX 50, New Zealand’s benchmark index, experienced a significant surge, gaining 90.25 points or 0.77% to close at 11,768.68 last Thursday. This marked the fourth consecutive session of growth, pushing the index to its highest point in over four months. This upward trend was observed amidst a relatively calm trading environment as the holiday season approached, with most sectors witnessing gains.

The positive sentiment was largely driven by the recent global stock market rally, with expectations of interest rate cuts in 2024 by major central banks, including the US Federal Reserve. Additionally, there is growing optimism that the Reserve Bank of New Zealand (RBNZ), known for its hawkish stance, might adopt a more dovish approach in the coming year. This could potentially involve a significant rate cut aimed at stimulating the sluggish economy, a move that could occur earlier than the central bank’s late 2025 projection.

In China, New Zealand’s primary trading partner, the two largest cities, Beijing and Shanghai, have recently lowered downpayment ratios and relaxed some housing qualifications for lower mortgages. This move has had a positive impact on the NZX 50.

Among the companies listed on the NZX 50, Restaurant Brands NZ saw a substantial increase of 5.3%, while Seeka Ltd. rose by 3.7%. Other notable performers included Delegat Group Ltd., Gentrack Group Ltd., and Winton Land Ltd., which gained 3.2%, 2.6%, and 1.9% respectively.

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US Stock Futures Analysis: Steady End to Strong Year

Solid ECN Blog – US stock futures remained stable on Thursday, as investors reflected on a year marked by robust gains in equities. The previous trading day saw the Dow increase by 0.3%, while the Nasdaq Composite rose slightly by 0.16%. The S&P 500 also saw a modest gain of 0.14%, approaching record levels. In this upward trend, eight out of the 11 S&P sectors closed higher, with real estate, healthcare, and consumer staples leading the charge.

The market's upward momentum is largely driven by the anticipation that the Federal Reserve will reduce interest rates next year. Bit Digital, an American bitcoin mining company, experienced an 18.6% surge in its shares. This followed its announcement to double its mining operations by 2024. Coherus BioSciences also enjoyed a significant 23.4% jump in its stock value after receiving US FDA approval for its new drug delivery device to fight infections.

Looking forward, both the Dow and S&P 500 are set to conclude the year with substantial gains, over 13% and 24% respectively. Meanwhile, the Nasdaq Composite has impressively rallied by 44.3% this year. This steady performance in US stock futures analysis reflects a year of consistent growth in the stock market.
 

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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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Canadian Dollar Peaks on Inflation, BoC Outlook

Solid ECN – The Canadian dollar rose past 1.33 against the USD in December, reaching its highest level since early August. This increase is due to ongoing high inflation in Canada, leading to expectations that the Bank of Canada might take a more aggressive approach in its monetary policy. In November, the main inflation rate was at 3.1%, higher than the expected 2.9%. The closely watched core rate, which removes certain items, was at 3.5%, also higher than predicted.

This data supports the central bank's concern about continuing high inflation, suggesting they might keep their strict monetary policy and possibly raise interest rates. This is different from the more cautious approach of the Federal Reserve, which helped the Canadian dollar gain value against the US dollar.

Early reports for November show that Canada's economy grew compared to the previous month. However, updated figures for October indicate the economy didn't grow much, which is in line with the Bank of Canada's predictions for the economy.

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Russia Manufacturing Growth at Near 7-Year High

Solid ECN – The S&P Global Russia Manufacturing PMI rose to 54.6 in December 2023, up from 53.8 in November. This increase marks the sector's quickest expansion since January 2017, driven by continued improvements in output and new order growth. The rate of job creation accelerated, reaching its highest point in three months. Additionally, backlogs of work decreased for the second consecutive month. Purchasing activity grew at a substantial rate, the second-strongest since August 2006.

In terms of pricing, input cost inflation slowed to a six-month low. This was due to increased supplier prices and unfavorable exchange rate movements. However, output cost inflation remained relatively stable and was among the weakest in the past six months. Finally, business sentiment weakened, falling to a three-month low.

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Silver Near 38.2% Fibonacci: Signs of Market Reversal

Silver is currently trading near the 38.2% Fibonacci support level. On the XAGUSD 4-hour chart, a hammer candlestick pattern has emerged. The Stochastic oscillator is signaling that the market is oversold. In conclusion, if the silver price manages to stay above the Fibonacci support level, it's likely that the uptrend will continue. If this happens, the bullish target could be the 61.8% Fibonacci resistance level.

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EURUSD Plunges: AO Divergence & Impact

The EURUSD currency pair experienced a sharp decline from 1.11394 in today's trading session, as previously hinted by the awesome oscillator's divergence.

Currently, the pair is testing the 23.6% Fibonacci level at 1.10403. Intriguingly, the RSI indicator is hovering near the median line and could dip below if selling pressure persists. The December 22 high at 1.1041 and the lower line of the bullish flag are jointly reinforcing the bullish trend. As long as the price stays above this level, the uptrend is likely to continue.

Conversely, a break below the bullish flag could signal further declines, with the next target being the 50% Fibonacci retracement level.
 

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Pound Climbs to $1.28: BOE vs Fed Cuts in 2024

Solid ECN – The British pound rose to $1.28 at the end of 2023, touching its highest level since late July and poised for a gain of near 6% for the year, as investors anticipate that the Federal Reserve will slash borrowing costs more rapidly than the Bank of England. Recent data revealing an unexpected drop in US PCE prices has significantly bolstered the probability of Fed rate reductions as early as March, with an outlook of more than 150 basis points of cuts over the upcoming year. 

At the same time, the most recent UK CPI report disclosed a slowdown in inflation to 3.8% in November, marking its lowest level since September 2021 and falling below the anticipated 4.4%. This development has prompted heavy speculation among traders regarding potential interest rate cuts by the Bank of England in 2024, despite BOE Governor Andrew Bailey's insistence on maintaining higher rates for an extended period.

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Istanbul's Manufacturing PMI Sees Slight Rise in December 2023

Solid ECN – In December 2023, the Istanbul Chamber of Industry Turkey Manufacturing PMI slightly increased to 47.4 from 47.2 the previous month. This change indicates a minor improvement in the manufacturing sector's health. However, it still represents the sixth consecutive month of contraction. Tough market conditions, both domestically and internationally, caused a slowdown in new orders and decreased production.

In terms of prices, December saw another rise in input costs. This increase was driven by a weaker currency, higher wages, and increased raw material prices. Yet, the inflation rate slowed down for the fifth month in a row. On the other hand, output prices saw their sharpest increase since August.

Purchasing activities were reduced significantly, the most in four months. Consequently, input stock levels also dropped. Regarding employment, it remained stable in December, breaking a two-month trend of decline.

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AUDUSD - RBA's Cautious Approach in Rate Cut Scenario

The Australian dollar rose, reaching over $0.68. It's close to a five-and-a-half month high. This happened as people think the US Federal Reserve will lower interest rates soon, possibly in March. This expectation weakened the US dollar but helped other currencies.

Also, a report showed that China's manufacturing grew more than expected in December. This news influenced investors.

In Australia, investors are looking at what the Reserve Bank of Australia (RBA) might do next. Experts think the RBA will be slower to reduce rates compared to other countries. This is because it didn't raise rates as much as others. So, any rate cuts might be smaller or happen later.

Inflation in Australia is sticking around longer than in other places. RBA Governor Michele Bullock mentioned that the inflation problem is mainly local and due to increased demand. The market believes the RBA won't cut rates until the end of 2024.

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2024 Starts with a Dip: U.S. Stock Futures Decline After Strong 2023

As 2024 begins, U.S. stock futures are experiencing a slight decline, marking a pause following a robust 2023 that witnessed substantial double-digit growth across the three main indices. Currently, investors are diligently evaluating the economic landscape and monetary policy expectations, especially in anticipation of the forthcoming FOMC minutes and the crucial jobs report due later this week.

The S&P 500 futures have dropped by 0.5%, while the Dow Jones is facing a reduction of approximately 110 points, and the Nasdaq 100 is also on a downward trajectory, decreasing by 0.7%. In the realm of corporate news, Tesla has seen its stock dip by about 1% in premarket trading. Market participants are keenly waiting for the company's announcement of its annual production and delivery figures, set to be released later today.

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US Dollar, China Data Influence Copper Market

Solid ECN – In January, copper futures dipped below $3.9 per pound, moving away from the five-month peak of $3.95 reached on December 27th. This decrease is a result of the US dollar's resurgence and some profit-taking activities by commodity trading companies. 

The rebound of the US dollar, as traders evaluate the Federal Reserve's potential policy changes this year, has made copper, which is priced in this currency, more expensive for importers, leading to a drop in prices. Additionally, the demand from major Asian customers, particularly China, is under scrutiny. 

The conflicting signals from China's official manufacturing PMI and the broader Caixin data have created uncertainty about the future copper demand in the country. Despite a modest rise in copper prices last year, market experts have been accumulating long positions in copper, anticipating that supply might not meet the strong future demand driven by the global push for electrification.

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NZX 50 Dips Amid Global Market Jitters

Solid ECN – On Wednesday, the NZX 50 fell by 40.36 points, a 0.34% drop, ending at 11,730.14. This followed a slight downturn in US futures after a tough start to the year on Wall Street, especially in tech stocks. Ahead of key US job data and the nonfarm payrolls report, traders seemed less hopeful about interest rate cuts from the Federal Reserve. 

Concerns grew as China's uncertain economic future cast a shadow, affecting its main trading partners like New Zealand. Recent data showed a decline in China's manufacturing for December, though some private surveys suggested a slight positive trend in the sector. The NZX 50 was impacted by sectors like manufacturing, transport, consumer services, and non-durables. Notably, Restaurant Brands NZ dropped 4.5%, Scales Corp. 2.9%, Auckland Intl. 2.7%, A2 Milk Co. 2.4%, and Meridian Energy Ltd. 1.8%.

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Euro Slides Below $1.1 Amid Economic Data and Rate Cut Speculations

At the beginning of 2024, the euro fell below $1.1. This drop came after reaching a high of $1.1139 on December 28th. Investors are now focusing on upcoming European inflation data and the US jobs report due later this week. Additionally, recent PMI data showed that Eurozone factory activity shrank for the 18th month in a row in December. 

As for monetary policy, there's an 80% chance the Fed will start reducing interest rates in March. Over the year, cuts could total more than 150 basis points. Meanwhile, the European Central Bank might also cut rates, but likely slower than the Fed, even as ECB policymakers aim for a tougher stance.

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Kiwi Dollar Drops, RBNZ Rate Cuts Loom on Horizon

Recently, the New Zealand dollar has been struggling, staying below $0.628. This is the lowest it's been in about two weeks. The reason behind this is the US dollar's strong recovery, which has led investors to rethink their previous expectations of significant interest rate cuts by the Federal Reserve within the year. 

Additionally, there's been a shift towards a more cautious approach in the market, resulting in a drop in both stocks and commodities. Contrarily, US Treasury yields have been on the rise. Within New Zealand, the market is anticipating four rate cuts from the Reserve Bank of New Zealand (RBNZ) this year, with the first one possibly happening as early as May. The RBNZ’s head recently acknowledged the unexpected downturn in recent growth figures, increasing speculation about an earlier cash rate cut. Back in November, the RBNZ held the cash rate at 5.5%, narrowly avoiding a rate hike.

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Yen Slides as Dollar Strengthens

Solid ECN – The Japanese yen has recently fallen to around 142 against the dollar, moving away from its five-month high. This change comes as the dollar gains strength and investors reduce their expectations for major interest rate cuts by the Federal Reserve this year. However, trading activity in Japan has been thin due to ongoing holiday celebrations. 

At the same time, the country is dealing with the aftermath of a significant earthquake that hit its central region on New Year’s Day. Adding to the economic landscape, recent statements from Bank of Japan Governor Kazuo Ueda have sparked discussions about a potential shift away from Japan's negative interest rates policy. Last month, Ueda noted an increasing likelihood of Japan's economy emerging from its prolonged low-inflation state and reaching its inflation target. He mentioned that if the positive cycle of wages and prices strengthens enough to sustainably achieve the 2% inflation target, the Bank of Japan might consider altering its monetary policy.

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Swiss Franc's Shift: Balancing SNB and Fed Rate Outlooks

After reaching a 12-year peak of 0.841 on the last trading day of 2023, the Swiss franc has recently weakened to 0.85 against the USD. This shift occurred amid a recovery in the DXY index. Last year, the franc saw an 8.5% appreciation against the dollar, largely due to differing interest rate policies between the Swiss National Bank (SNB) and the Federal Reserve. 

Recent dovish statements from Fed officials, coupled with new data indicating a slowdown in US inflation, have put pressure on the dollar. In Switzerland, despite a slowdown in inflation, the SNB has maintained a cautious stance, suggesting that higher interest rates are still necessary. Inflation in Switzerland was 1.4% in November. The central bank anticipates it will approach their 2% target by mid-2024. This forecast leads investors to believe that the SNB might delay rate cuts, especially compared to the Fed's timeline. The persistent high-interest rate expectations for the SNB also drove the franc to unprecedented levels against the Euro, the currency of its neighboring countries.

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Canadian Dollar Weakens, Awaits Key Labor Market Data

The Canadian dollar recently fell beyond 1.33 against the USD, moving away from its five-month high of 1.32 achieved on December 26th. This decline is largely due to a resurgence of the US dollar, disappointing domestic economic indicators, and a decrease in foreign currency inflows. 

Canada's manufacturing sector experienced its most significant contraction since the 2020 pandemic downturn, posing challenges for the central bank's efforts to control inflation through tighter monetary policy. Additionally, the easing concerns over global oil demand have impacted foreign exchange inflows, negatively affecting the Canadian dollar's strength. Investors are now looking forward to the upcoming labor market data, expected on Friday, to gain insights into potential future directions for monetary policy.