2023 Market Forecast by Solid ECN

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German index breaks above 16 000 pts for the first time in 15 months​

New week on the global financial markets began in upbeat moods with indices from Asia-Pacific, especially China, trading higher today. European futures also traded higher throughout the Asian session but have caught an additional bid after opening of the European cash session. German DAX (DE30) is trading 0.5% higher and trades above the 16,000 pts mark for the first time in 15-months! The next resistance zone in-line is marked with all-time highs in the area ranging below 16,300 pts mark - less than 2% above current market price.

 

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CHNCOMP​

Indices from Asia-Pacific gained during the first trading session of a new week. Chinese indices were top-performers with CHNComp gaining over 3% and CH50cash adding 2.4%. Hong Kong shares also performed well with HKComp adding over 2%. There were no specific news behind the jump. However, there was data from China on new home prices for March released over the weekend. While on an annual basis prices were 0.8% YoY lower, month-over-month data showed a 0.5% MoM increase, This was the third monthly increase in a row and the fastest pace of price growth in 21 months. It could be a hint that demand and overall situation in the Chinese property market may be improving.

Indices from China may also see some moves during the next Asian session as some top-tier economic reports from the country are scheduled for release. Monthly activity data for March (industrial production, retail sales and urban investments) as well as Q1 GDP report will be released at 3:00 am BST. Economists expect improvement in monthly readings for March, especially in retail sales and industrial production. Also, Q1 GDP growth is seen reaching 2.2% QoQ, after a lack of growth (0.0% QoQ) in Q4 2022. On an annual basis, Chinese GDP is expected to have grown by 4% YoY in Q1 2023.

Taking a look at CHNComp chart at D1 interval, we can see that the index is making another attempt at breaking above the resistance zone marked with 23.6% retracement in the 7,120 pts area. From a technical point of view, a break above could trigger an upward move towards the 7,850 pts area - above a year-to-date high from late January.​

 

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Alphabet price dips after Samsung deal concerns!

Alphabet Inc. (Googl.US) stock price declines nearly 4% due to the concerns raised by the potential loss of revenue from Samsung. Googl.US price is currently trading at $105.

According to the news that came out this morning, Google's employees reportedly panicked after discovering that Samsung Electronics is considering replacing Google Search with Microsoft's Bing AI as the default search engine on its devices. This change would practically mean the end of a 12 year partnership with Google.

This switch could potentially lower an estimated $3 billion in annual revenue for Google. Despite Google’s deal with Samsung being significantly less valuable than the deal with Apple, the similar contract with Apple is up for renewal this year. This contract is tied to an estimated $20 billion. Apple will likely keep a close eye on Samsung’s negotiations with Google, which could potentially allow Apple to strengthen its bargaining power with both contractors.

Google is now racing to build an all-new search engine powered by AI and upgrading the existing one with new features as competitors like Bing are posing a serious threat to the tech giant’s search business. Despite negotiations still ongoing, Google developers are working on a brand new set of features named "Magi" for the upcoming search engine. Google sees a significant risk related to the rise of AI-powered competitors like recently demonstrated ChatGPT by OpenAI.

(Googl.US) Stock price action is currently trading in rising consolidation channel with 200d SMA close to crossover 50d SMA signaling trend reversal.​

 

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EURUSD

Bulls are losing momentum this session, while the euro against the dollar pulls back below the 1.10 level. The correction in the U.S indices is supporting the USD’s recovery, however, the pair is currently testing an important support zone. If the price stays above the uptrend line, the bullish scenario could resume again. However, if a breakout of this zone appears, then a further pullback cannot be excluded.

 

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Oil​

OIL.WTI is retreating by almost 2.5% today as a result of several factors. One is the US dollar, which has not been this strong for a long time as a result of rising yields. Another is the US reserve sales of over 1 million barrels last week. This is not much, but it shows that the US may want to stabilize the oil market. Perhaps the most important factor is Russia's powerful exports at levels last seen before the attack on Ukraine. Russia's exports are doing well, primarily to Asian countries, including India, from where fuel in turn flows to Europe in record volumes.

A massive bump in WTI oil. After a test of 80 USD, the upper limit of the upward gap can be expected to be tested.​

 

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AUDUSD

The Australian dollar is one of the best performing major currencies today. RBA minutes turned out to be neither dovish, nor hawkish. On one hand, the document showed that RBA members considered a rate hike before ultimately deciding on leaving rates unchanged. On the other hand, the document noted that the Bank should reassess whether there is still need to undertake additional tightening. AUD, however, caught a bid following release of better-than-expected GDP data from China. The Chinese economy grew at a pace of 4.5% YoY in Q1 2023, much faster than 4.0% YoY expected by economists. Moreover, retail sales data for March showed a 10.6% YoY jump - also better than the 8.0% YoY increase expected. Industrial production data for March missed estimates but showed higher growth than in February.

Taking a look at AUDUSD chart at D1 interval, we can see that the pair bounced off an important mix of support today - an intersection of 50- and 200-session moving average (orange circle). Demand side reaction to this technical support hints that another upward impulse may be about to start. In such a scenario, resistance zone in the 0.6780 area, marked with 38.2% retracement of October 2022 - January 2023 upward move may be the next target for the bulls.​

 

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EURUSD​

Statements by the CEOs of major US banks today sounded 'disinflationary' today. CEO of Bank of America, Moynihan indicated that inflation rates in the US are falling and BofA's CEO, Bortwhick conveyed that the bank is seeing lower mortgage demand. Both of these comments look rather unfavorable for the 'greenback' and may suggest that the Fed will reconsider a possible rate hike in May. But James Bullard, the St.Louis Fed chair known for his hawkish stance, spoke on the situation in the US economy - his comments strengthened the dollar. Nevertheless, EURUSD is rebounding and trying to face a key short-term resistance level.
​

Fed Bullard​

• Forecasts of a recession in the US ignore the strength of the labor market, and savings from the pandemic still have to be used after all, boosting demand;​
• With little tangible progress on inflation, interest rates must continue to rise;​
• The risk of banking stress causing widespread problems seems to have diminished, but we are still watching the situation closely;​
• The Fed should avoid giving extensive decision guidance at its next meeting and keep all options on the table as possible;​
• I still see an appropriately restrictive interest rate of 5.50%-5.75%. We are leaning toward keeping the rate longer until inflation is brought under control.​

EURUSD is trying to stop the declines. However, the short-term resistance line in the form of the SMA200 on the M15 interval may prove crucial. The US Congress is scheduled to vote on the debt ceiling bill next week.​

 

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GBPUSD Gained after higher than expected UK CPI reading!​

• UK CPI (M/M) Mar: 0.8% (est 0.5%; prev 1.1%)​
• UK CPI (Y/Y) Mar: 10.1% (est 9.8%; prev 10.4%)​
• UK CPI Core (M/M) Mar: 0.9% (est 0.6%; prev 1.2%)​
• UK CPI Core (Y/Y) Mar: 6.2% (est 6.0%; prev 6.2%)​

Details of today's inflation report. High UK inflation is largely driven by food prices. This is likely to prompt the BoE to make another 25bp hike.

Details of today's inflation report. High UK inflation is largely driven by food prices. This is likely to prompt the BoE to make another 25bp hike.​

 

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EURGBP​

The British pound is the best performing currency in the broad FX market at the moment. The EURGBP pair is trading close to 0.35% down today, triggered by a strong UK CPI reading. The UK's March CPI inflation reading came in at 10.1% YoY against a forecast of 9.8% and the previous reading of 10.4%. Core inflation continued unabated and came out at 6.2% against an expected fall to 6.0%. It had previously been 6.2%.

As reported by Reuters, the decline in price pressures in the UK economy is disappointing, raising the prospect of another interest rate hike in the UK. The swaps market is currently pricing in an 80% chance of a 25 basis point hike at a future BoE meeting. Let's remember that the UK has the highest inflation rates among Western European countries and is the only one struggling with double-digit inflation.

UK Finance Minister Jeremy Hunt said Wednesday's data confirms why the government must continue its efforts to bring inflation down.

The EURGBP pair lost ground sharply after raising the odds of the BoE continuing its interest rate hike cycle. The currency pair has drifted below support levels set by exponential moving averages, so a further reaction to these levels could be a key factor creating further movement in the pair.​

 

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NATGAS

US natural gas prices (NATGAS) are plunging today. NATGAS is down over 5% on the day. There is no specific news supporting the move and today's plunge in natural gas prices can be driven by overall increase in risk aversion and strengthening of US dollar, that is putting pressure on commodity prices. In fact, new 8-14 day weather forecasts from NOAA point to below-average temperatures over the larger area of the United States than forecasts from earlier this week. However, as US heating season is over already and we are entering a period when even below-average temperatures do not require heating (as average temperatures are higher), impact of weather forecasts is not as big as it used to.

Taking a look at NATGAS chart at H1 interval, we can see that price dropped to the $2.22 area, where a short-term support zone can be found. This area is marked with previous price reaction as well as the 38.2% retracement of a recent upward impulse. A break below would pave the way for a test of the next support in-line - $2.15 zone. However, it looks like the first attempt at breaking below turned out to be a failure and an attempt to launch a recovery move off the $2.22 area can be spotted at press time. In case the recovery run lasts, the first target for bulls will be the $2.30 price zone, which was broken earlier today.​