2023 Market Forecast by Solid ECN

European Stocks Steady as Investors Await Key Data

European stock markets showed little change on Tuesday, pausing after their recent strong performance which saw key indexes reach four-month highs. The STOXX 50 and the broader STOXX 600 both experienced a minor decline of 0.1% during morning trading. Investors are closely watching a range of economic data, including final PMI figures, Eurozone producer prices, and US job openings set to be announced later in the day.

In corporate news across Europe, several developments are drawing attention. Brenntag, the German chemical distributor, is hosting its investor day. Barclays is in the spotlight after Qatar Holding sold around £510 million of its shares at a 1.4% discount compared to Monday's closing price. Additionally, SSP Group, known for operating eateries, has resumed paying out its annual dividend. Meanwhile, pub group Marston's reported a 28% increase in annual profit, lower than expected, although its Christmas bookings have already surpassed last year's numbers.​
 
AUDUSD Pair in a Downward Trend: What are the Key Levels to Watch?

At the moment, the AUDUSD pair is facing a significant drop of almost 0.63% on a daily basis and is approaching the support levels that are determined by the lowest points of the last day of November.

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If the pair breaks below this structure, it may encounter the next support level at the 200-day exponential moving average (golden curve), which also coincides with the 61.8% Fibo retracement of the upward movement that started in October 2023. On the other hand, the main resistance level could be the local highs near the 50% Fibo retracement.​
 
EURUSD Continues Downtrend After Consolidation

The EURUSD pair keeps falling in today's market after a brief pause near the 38.2% mark of the Fibonacci retracement. The ADX indicator shows that the market is in a strong trend, as it stays above the 40 line. Therefore, we expect the EURUSD value to face more downward pressure and reach the next support at the 50% Fibo level.

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How OPEC+ Cuts and Middle East Conflict Affect Oil Prices

Solid ECN – Oil prices continue to go down to $72.3 per barrel on Tuesday, the lowest since five months ago. This is because people are not sure if the OPEC+ group can reduce the oil supply enough and they are worried about the lower demand for energy due to weaker data in big economies.

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Last week, some OPEC+ members, such as Saudi Arabia, UAE, and Kuwait, said they would cut more oil supply by 2.2 million barrels per day, but some members have not agreed yet. Saudi Arabia’s energy minister also told Bloomberg on Monday that the OPEC+ group might keep cutting the oil supply after the first quarter if needed. However, traders are still nervous about the rising conflict in the Middle East, especially the increased fighting in Gaza over the weekend.​
 
How China’s Banks Support the Yuan Against Moody’s Outlook

The yuan stays the same even though Moody’s lowers China’s credit outlook. The USDCNH did not change much at around 7.15 per dollar, because big state-owned banks in China sold dollars, balancing out Moody’s move to lower China’s credit outlook.

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Chinese banks swapped yuan for US dollars in the onshore market and then sold those dollars in the spot market. This action helped keep the yuan steady and reduce the worries caused by Moody’s about slower economic growth and possible risks in China’s property sector. Also, a survey showed that China’s services activity increased the most in three months in November.​
 
Bearish Bets on EUR/NZD: The 1.7487 Support in Focus

The EUR/NZD currency pair experienced a rebound from the 1.7487 support level. This upward momentum was anticipated by the stochastic oscillator, which indicated an oversold condition as the pair dipped. The support area at 1.7487 has been a significant obstacle for bearish trends since May 2023.

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However, today the pair struggled to break above the 23.6% Fibonacci retracement level. Should the bulls fail to maintain the price above this crucial mark, the resilience of the 1.7487 support level may be tested.

The current market forecast remains bearish, with the potential for a breach of the 1.7487 support if the price continues to linger below the 23.6% Fibonacci retracement level.

Conversely, if the EUR/NZD manages to surpass the 23.6% level, it could signify a temporary pause in the downtrend. In such a scenario, the price might aim for the 50% Fibonacci retracement level, indicating a possible shift in market dynamics.​
 
October 2023: A Challenging Month for German Factory Orders

In October 2023, Germany witnessed a noticeable decrease in factory orders, marking the first decline in three months. This drop was unexpected, especially since orders had slightly increased by 0.7% in September, and there were predictions of a modest 0.2% growth. However, the actual figures showed a significant 3.7% fall. This sudden decline points to ongoing instability in Germany's industrial sector.

A closer look at the data reveals that the most significant reduction was in the machinery and equipment sector, which plummeted by 13.5%. This was a major setback, as this sector is usually a strong contributor to industrial growth. Other areas like fabricated metal products, basic metals, electrical equipment, and the automotive industry also experienced downturns. These sectors are crucial for Germany's economy, and their decline can have broader implications.

Interestingly, not every sector faced a downfall. The transport equipment sector, for instance, saw a substantial increase of 20.2%. This surge was largely due to some large-scale orders, highlighting the variability in different industrial segments.

When examining the source of the orders, foreign demand showed a significant decrease of 7.6%. This drop was consistent across the board, with orders from the Euro Area and the rest of the world declining by 7.6% and 7.4%, respectively. However, domestic orders within Germany painted a different picture, registering a 2.4% increase. This suggests that the domestic market still has some resilience, even as international demand weakens.

Another interesting observation is that when excluding large-scale orders, there was actually a 0.7% increase in new orders in October. This indicates that the overall decline might be somewhat influenced by fluctuations in big-ticket orders.

To provide a broader perspective, it's useful to look at the three-month trend. Comparing the August to October 2023 period with the previous three months, there was a 4.6% decrease in new orders. This longer-term view offers a clearer picture of the industrial sector's health, beyond the monthly ups and downs.​
 
GBPUSD in the Ichimoku Cloud

The GBPUSD pair is currently ranging within the Ichimoku cloud, which has stabilized the price above the 23.6% Fibonacci level. For the bullish trend to continue, the pair must cross above the bearish flag.

Failure to do so could lead to a decline towards the 38.2% Fibonacci level, which is a significant event to watch out for.

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NZ Dollar Bounces Back: A Look at the Interest Rate Landscape

The New Zealand dollar has seen a slight uptick, reaching approximately $0.615. This recovery comes as a result of an improvement in risk sentiment, coupled with ongoing global evaluations of interest rate prospects. On the home front, the Reserve Bank of New Zealand (RBNZ) has maintained a steady interest rate for the fourth consecutive meeting in November, although it hasn’t ruled out the possibility of further tightening measures.

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Despite mounting pressure for a rate cut due to slowing inflation and lackluster economic data, the RBNZ has kept the cash rate at 5.5%, a peak not seen since December 2008. The central bank has also hinted at the potential need for another rate hike if inflation remains unyielding. This is largely due to concerns about sustained excess demand and continuous inflationary pressures, driven by high core inflation.​
 

Japanese Yen Climbs as US Fed Rate Cuts Anticipated

The Japanese yen has strengthened to about 147 per dollar, reaching its highest point in 12 weeks. This rise comes amid increasing expectations that the US Federal Reserve may end its current phase of monetary tightening and possibly start reducing interest rates next year. Concurrently, Bank of Japan (BOJ) board member Asahi Noguchi expressed over the weekend that Japan has not yet achieved inflation driven by wage increases. Instead, recent inflation rises have been cost-push driven. Noguchi believes it's too early to move away from the BOJ's highly accommodative monetary policy, echoing sentiments from other BOJ officials.

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In economic news, recent data indicated that Tokyo’s core inflation rate in November rose less than anticipated. However, it exceeded the BOJ’s 2% target for the 18th month in a row, signaling sustained inflationary pressure. Additionally, there's positive news from the manufacturing sector, where sentiment has improved significantly in December, especially in the auto industry, suggesting a robust recovery.​
 
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