2023 Market Forecast by Solid ECN

Malaysian Palm Oil Market Overview​

In recent trading, Malaysian palm oil futures were seen hovering around 3,900 MYR per ton. This movement indicates an effort to bounce back from the recent decline in prices, which had dropped to a low of 3,886 MYR. The potential recovery is spurred by positive signs in export figures.

Export Trends​

Data from AmSpec Agri Malaysia, an independent inspection company, reveals that between November 1 and 25, there was a 7.2% increase in the export of Malaysian palm oil products, reaching 1.15 million tons compared to 1.08 million tons in the period from October 1 to 25. Similarly, Intertek Testing Services, another cargo surveyor, reported a 13.6% increase in exports during the same time frame, with figures rising to 1.26 million tons from 1.11 million tons.

Factors Influencing Market Dynamics​

However, the upward trend in palm oil futures is being restrained by several factors. Notably, there's a decline in competing Dalian oil prices, and there are concerns about upcoming economic activity data from China for October. The uncertainty surrounding China's economic indicators and the impending rainy season are causing market caution.

Moreover, the Indian market, a significant buyer of Malaysian palm oil, is reducing its orders for December and January. This decrease in demand is attributed to the rising cost of palm oil and the negative profit margins faced by refiners, who have recently made substantial imports.​
 

Turkish Lira Hits Record Low Despite Aggressive Rate Hikes​

The Turkish lira remains stagnant at an all-time low, sitting at 28.9 against the US dollar. This comes even after Turkey's central bank made an unexpected move, raising interest rates significantly by 500 basis points in its latest November meeting. This decision surpassed investors' expectations, who had predicted a rise of only 250 basis points.

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Trend of Depreciation​

In the last three months, the Turkish lira has been on a steady decline, setting new daily lows. The average daily loss has been slightly over 0.1%. This pattern suggests a controlled devaluation, likely orchestrated by the central bank. To manage this situation, the bank has implemented stricter reserve requirements for the lira. This step is aimed at pulling liquidity from the interbank market, thereby increasing local interest rates and aligning them more closely with the costs of borrowing lira internationally.

A Steep Drop in Value​

Since the beginning of 2023, the Turkish lira has seen a dramatic depreciation, losing over 50% of its value when compared to the US dollar. This significant drop highlights the ongoing economic challenges faced by Turkey.​
 

AUDUSD Bullish Trend: A Closer Look at the Rising Tide​

The current trading session has witnessed a significant rise in the AUDUSD's value. Notably, the Australian dollar (AUD) has broken above the crucial 50% Fibonacci retracement level, a move that aligns with the top edge of the bullish flag pattern on the daily chart.

As the Relative Strength Index (RSI) edges closer to overbought conditions, the AUDUSD pair might be gearing up for a phase of range-bound trading, especially above the 65.8% resistance level. Given the heightened demand driving up the AUDUSD price, now may not be the best time for investors to take on long positions.

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A Word of Caution for Retail Investors

Retail traders should approach with caution. A prudent strategy would be to wait for the AUDUSD pair to dip back to the midpoint of the bullish flag pattern. This area, coinciding with the 38.2% Fibonacci level, presents a potentially favorable entry point for those looking to buy.​
 
GBPJPY: A Strong Bullish Momentum

During the most recent trading session, the GBPJPY pair maintained its upward trajectory, achieving a significant milestone by surpassing the median line of its bullish flag pattern. This development strongly highlights a continued positive trend for GBPJPY, signaling a robust bullish momentum.

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With this upward movement, the focus for traders is now set on the GBPJPY pair reaching the upper boundary of the bullish flag. This target is the next critical point for the ongoing bullish trend.

The prevailing trend for GBPJPY can be described as distinctly bullish, especially as the pair remains actively trading within the boundaries of the bullish flag. This trend is expected to persist as long as the pair continues its movements within this pattern.​
 

Natural Gas Futures Hit 12-Week Low: Factors Behind the Fall​

US natural gas futures have witnessed a significant drop, falling more than 5% towards $2.7/MMBtu, the lowest in twelve weeks. This decrease is attributed to factors such as high storage levels, record production, and a decrease in demand.

Storage and Production Factors​

The US Energy Information Administration (EIA) reported a lower-than-expected withdrawal from gas storage for the week ending November 17, at only 7 billion cubic feet (bcf). This figure is substantially less than the 60 bcf withdrawal during the same week last year and below the five-year average decline of 53 bcf. Currently, gas stockpiles in the US are about 7% above the typical level for this time of year.

Impact of Weather on Demand​

One key factor contributing to the surplus is the warmer-than-average winter weather, resulting in a reduced need for heating. Forecasts suggest a 4% decrease in heating degree days compared to the last 10-year average, leading to a 2% drop in space heating consumption from the five-year average. Additionally, average gas output in November has increased to 107.6 billion cubic feet per day (bcfd), up from the previous record of 104.2 bcfd in October.​
 
GBPUSD Soars: Overbought Signals Emerge

Today's trading session saw the GBPUSD climb sharply. The pair broke through the top boundary of its bullish trend, indicating strong buying interest. At the same time, the RSI indicator moved into an area typically considered overbought, while the Awesome Oscillator pointed towards a possible divergence. These signals hint at a potential downward adjustment in the GBPUSD's price in the next trading session. It's expected that the pair might give back a portion of its recent gains, possibly retesting the 23.6% Fibonacci level and then maybe the 38.2% level.

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Moreover, these levels could act as appealing entry points for buyers looking to capitalize on the uptrend, suggesting the bullish momentum may persist.​
 
The Yuan's Balancing Act: Stability Amidst Economic Shifts

The offshore yuan has recently found stability around 7.15 per dollar, maintaining its position near a four-month high. This stability is largely influenced by the People’s Bank of China's (PBOC) commitment to keeping the currency steady, as highlighted in their latest quarterly policy report. The PBOC has emphasized its dedication to correcting market trends that could potentially destabilize the yuan, addressing disruptive market behaviors, and preventing excessive fluctuations. This stance comes as the yuan has experienced a rally, partly due to the PBOC's strategy of setting strong midpoint rates, a move analysts see as a deliberate effort to bolster the currency.

Investors are now keenly awaiting new data on China's manufacturing activities, which could provide further insights into the yuan's trajectory. Additionally, recent statistics indicate a decline in industrial profits within China, though the rate of decrease has slowed, marking the least significant drop in almost a year.

These developments are creating opportunities for investors with a bullish outlook, offering them favorable prices to initiate new long positions, which could sustain the ongoing positive trend in the yuan’s value.​
 
GBPJPY Update: Bullish Flag Dynamics and Key Resistance Levels

The GBPJPY currency pair recently reached the R2 resistance level but then dropped back to the middle of its bullish flag pattern. This pattern indicates a generally upward trend, with R1 serving as a key support level. If the currency pair breaks above the R2 level, its next goal might be reaching R3, which is in line with the top edge of the flag.

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As long as the R1 level remains unbroken, it supports the upward trend. However, if this support level is breached, there's a chance that the GBPJPY pair could fall towards the lower boundary of the flag, a movement further backed by the monthly pivot point.​
 
A Shift in the Dollar: Weak Data Sparks Talk of Rate Cuts

On Tuesday, the dollar index stabilized at around 103.1, marking its lowest point in three months. It's poised to close November with a near 3% decline, the most significant monthly fall in a year. This downturn follows weak economic indicators, fueling speculation that the Federal Reserve might halt interest rate hikes and possibly reduce rates next year.

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Market predictions suggest a 25% likelihood of rate cuts by March 2024, increasing to 45% by May. Looking forward, investors are keenly awaiting the release of PCE prices, the Fed's preferred inflation measure, alongside personal income, spending data, and the ISM Manufacturing PMI for more clues. This week also features speeches from several Fed officials at different events. The dollar has weakened notably, especially against the yen and antipodean currencies.​
 
XRPUSD Update: Ripple Struggles Below Pivot, Targets 0.58

Ripple is currently experiencing a bearish trend, staying below the 0.609 pivot, which suggests a continuing downward movement. The upper band of the bullish flag is acting as resistance. As the price remains under R1, there's growing expectation that it might head towards S1 (0.58).

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If the price breaks through S1, sellers might then aim for the next level, S2.​
 
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