Daily Market Report

[FOREX.com]

AUD/USD, ASX 200 continue to go their separate ways: Asian Open Nov 28th 2023​

Two milestones were set on Monday for two key Australian markets, which saw AUD/USD close above its 200-day average for the first time in four months and the ASX 200 close below 7,000.

By : Matt Simpson, Market Analyst

Market Summary:​

• Another set of positive bond auctions in the US and the general pushback against hawkish Fed comments (alongside bets they may cut sooner) continued to weigh on bond yields and support Wall Street.
• Whilst the S& 500 and Nasdaq traded slightly lower on the day, they traded in tight ranges and are effectively holding on to gains near their respective cycle highs after a strong rally into them. Yet they are clearly lacking a suitable catalyst to drive them materially in either direction as trading volumes replenish after the long weekend in the US.
• The 5-year to the 30-year yields declined over -9 basis points on Monday, which saw the US dollar retain its place as the weakest forex major.
• AUD/USD closed above its 200-day average for the first time in four months, helped by a weaker US dollar but potentially also supported by a fresh face at the RBA.
• The RBA are to appoint the BOE’s Andrew Hauser as their deputy governor as soon as their December 5th meeting, which will fill the role Michelle Bullock left when she took over as governor two months ago. Australian Treasurer Jim Chalmers sees Hauser as the right person to strike the “right balance between providing deep central banking experience and offering a fresh, global perspective to the work of the RBA”.
• Michelle Bullock speaks at 12:18 AEDT / 01:18 GMT. I doubt she’ll veer too much from her hawkish script she’s read in recent speeches, which leaves little room for surprise unless she slips up with a dovish comment.
• Crude oil prices retraced for a third day, yet they continue to struggle to break and hold beneath the 200-week EMA. And as volatility was lower and left a doji on the daily chart, I continue to suspect we’re watching a base unfold and crude oil is due a bounce towards $80.

Events in focus (AEDT):​

• 10:30 – Japanese CPI
• 10:50 – Japan’s foreign investment in bonds and stocks
• 11:30 – Australian retail sales
• 12:18 – RBA governor bullocks speaks
• 14:20 – BOE Ramsden speaks
• 16:00 – Japan’s core CPI (BOJ)
• 18:00 – German consumer confidence (GfK)

ASX 200 at a glance:​

• The ASX 200 posted its worst day in 20 on Monday, as US yields originally gaped higher and weak China data weighed on sentiment for APAC stocks
• The ASX cash market reached my 7,000 target, and closed just beneath it at the low of the day
• With momentum now fully realigned with the bearish trendline from the August high, and Wall Street indices precariously perched near their own cycle highs, I suspect there could be further downside for the local market (especially if RBA governor Bullock delivers a more hawkish speech than expected)
• The 6950 low is now in focus for bears, who could seek to fade into retracements within yesterday’s range or a break of yesterday’s low.
• Tae note that RSI (14) has also curled lower with prices and is now below 50 to show negative momentum, and a 61.8% Fibonacci ratio sits near the 6900 handle which comes into focus with a break beneath 6950.

AUD/USD technical analysis (chart):​

The weaker US dollar and hawkish RBA comments have continued to allow AUD/USD to rise. But are bullish bets now getting ‘long in the tooth’ over the near term? RSI (2) is overbought and RSI (14) is getting close, although with a lack of bearish divergence on the RSI 14 is suggests there could be further upside overall, even if we are treated to a minor pullback over the near-term.

Yesterday’s low found support at its 200-day EMA and the day closed above its 200-day average, so I suspect any pullbacks towards these key levels may be bought by bulls. And that means we’d likely need to see a break beneath yesterday’s low before we could expect a sizeable pullback.

Ultimately, I am suspicious of capturing runaway bullish moves around these levels. Therefore, I would prefer to seek bullish setups above 0.6567 on a ‘per day’ basis and seek a more sizeable bullish bet if we are at some point treated to a decent retracement.

View the full economic calendar


-- Written by Matt Simpson

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

AUD/USD hits resistance pre-CPI as USD/JPY, USD/CNH probe support: Asian Open Nov 29th 2023​

With USD/CNH and USD/JPY probing key support levels, we may require a break of them for AUD/USD to stand a chance of continuing its strong rally (which met strong resistance on Tuesday). Unless of course Australia is treated to an uncomfortably hot inflation report today, which could fan fears of another RBA hike.

By : Matt Simpson, Market Analyst

Market Summary:​

• Two of the more hawkish Fed members last year are now on board with holding rates steady, assuming the progress on taming inflation does not stall.
• Inflation is on track to return to the Fed’s 2% target and 4th quarter projections point to a further cooling of CPI according to Christopher Waller and, Whilst Michelle Bowman remains on board with further hikes if need be, she stopped short of backing one in December.
• Bond yields broke lower and the US dollar was again the weakest FX major, heling gold rise to $2040.
• US consumer confidence rose for the first month in four, although “the Expectations Index remains below 80 for a third consecutive month—a level that historically signals a recession within the next year”, according to the Conference Board.
• Whilst most agree that the ECB are most definitely done with hiking rates, ECB’s Nagel said it is premature to talk about cutting them.
• Australian retail sales contracted by -0.2% in October, although it has to be taken with a pinch of salt because consumers likely held off purchases due to the Black Friday sales these figures do not capture (which leaves the potential for a hot print in next month’s report).
• RBA governor Michelle bullock said that the RBA’s policy is “restrictive” and dampening demand, although demand remains strong enough for businesses to maintain profit margins and services inflation was sticker than hoped.
• USD/CNH is probing its 200-day average – a break beneath which could pave the way for another bout of strength for AUD and JPY against the US dollar
• Crude oil snapped a 3-day losing streak and formed a 3-bar bullish reversal around the $75 / 2023 support zone, which adds to my suspicion that oil is preparing for a countertrend bounce. Of course, tomorrow’s OPEC meeting is a risk event that could just as easily make or break that bias.

Events in focus (AEDT):​

Australian CPI is today’s main event, although it may take a particularly hot set of numbers for the RBA to feel inclined to pull the hiking trigger in December instead of waiting for the more robust quarterly report in late January.



RBA cash rate futures imply just a 10% chance of a 25bp increase to 4.6% on December 5th, and with market-based inflation expectations pulling back nicely then we may find that today’s inflation report points towards a hold until at least February.



The RBNZ also announce their interest decision, although no change is expected and for rates to remain at 5.5%.

• 11:30 – Australian monthly CPI report, construction work done
• 12:00 – RBZ interest rate decision (no change expected)
• 12:30 – BoJ Board Member Adachi Speaks
• 13:00 – RBNZ press conference

ASX 200 at a glance:​

• The ASX 200 was quick to invalidate yesterday’s bearish bias with it mostly erasing the prior day’s losses just after the open
• 65.5% of ASX 200 stock advanced, 27% declined and 7.5% were unchanged
• With SPI futures rising overnight and demand for the ASX below 7,000, the bearish bias has been placed on the back burner until we see a material move lower on Wall Street indices.

USD/CNH, USD/JPY, AUD/USD technical analysis (daily chart):​

Precisely one week ago, we were watching USD/CNH and USD/JPY probe key support levels, where a break likely meant strength for APAC currencies. Whilst AUD/USD continued to rise over the past week, USD/JPY and USD/CNH held their respective support levels. But for AUD/USD to stand any chance of a sustainable break above yesterday’s high, we may need to see the US dollar break lower against the yen and yuan.

AUD/USD technical analysis (30-minute chart):​

The bullish trend on AUD/USD’s 30-minute chart is more than apparent, with prices bouncing along the 10-bar EMA and moving averages fanning out on their bullish sequence. Yet as I mentioned in yesterday’s report, traders may want to seek their setups on a ‘per day’ basis given the strong move already seen. And with CPI data potentially being a non-driver, it may require a bearish breakout on USD/CNH and USD/JPY to expect any bullish breakout on AUD/USD today. Still, that doesn’t mean it won’t try.



What has caught my eye is the momentum shift perfectly at the Q3 open and just beneath a bearish trendline. And if USD/CNH and USD/JPY manage to hold support, bears may want to consider fading into rallies towards yesterday’s high for a countertrend move over the near term.



Alternatively, bulls could wait for suitable evidence a swing low has formed around support levels such as 0.6630 or 0.6600 – 0.6610.

View the full economic calendar


-- Written by Matt Simpson

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

AUD/USD, gold stall around key levels ahead of US inflation: Asian Open Nov 30th 2023​

The US PCE inflation report is arguably the event of the week, and with traders having vigorously sold the US dollar ahead of it I am left wondering if it is a case of ‘sell the rumour, buy the fact’ – especially if it comes on hot. And with AUD/USD and gold stalling around key levels on Wednesday, the potential for mean reversion seems apparent.

By : Matt Simpson, Market Analyst

Market Summary:​

• US growth expanded at its fastest pace in nearly two years, with the 2nd estimate of annualised GDP being upgraded to 5.2% from 4.9%. GDP sales was up to 3.7% from 3.5%, although consumer spending was downgraded to 3.6% from 4%.
• Inflation was also downgraded with core PCE at 2.3% from 2.4% and PE now 2.8% from 2.9%.
• US bond prices are on track for their best month since 2008 which saw yield continue to decline, as hopes of a Fed pivot continue to be priced in with Fed Fund futures now implying a 48.4% chance of a cut in May.
• The US OIS (overnight index) curve was broadly lower with the 1-year OIS fast approaching 5% on expectations of a Fed cut.
• Despite lower yields, Wall Street failed to hold on to earlier gains and fell for arguable oversold levels, which suggests APAC equity markets may also be in for a weak session.
• Gold briefly tapped $2050 before retracing during a low volatility session, which to me suggests bulls are losing their grip and may want to be cautious around thee highs if trading on lower timeframes. Given its close proximity to record high, a retracement from here wouldn’t come as a surprise – especially if US inflation data is not as soft as liked.
• Whilst the US dollar was weaker during the Asian session, EUR/USD met resistance at its 200-week EMA and soft inflation data from Germany sent EUR/USD slightly lower for the day / DXY higher
• EUR/USD initially rose to a 16-week high during yesterday’s Asian session but met resistance at its 200-week EMA, then closed the day with a small bearish hammer after German inflation came in softer than expected
• Billionaire fund manager Bill Ackman appeared to be talking his book again earlier this week by saying he suspects Fed could arrive as soon as Q2 (lower rates are usually beneficial for bond prices, which he hinted he was long on a few weeks ago)
• The RBNZ held their cash rate at 5.5% as expected, although their statement was deemed hawkish with reference to inflation being “too high” in the first paragraph, sending NZD pairs broadly higher.
• The hawkish RBNZ statement and softer AU inflation report saw AUD/NZD fall to a 6-week low during its worst day in eight months
• AUD/USD also reversed almost perfectly at trend resistance after a false break above the Q3 open. And a hot US PCE report could see some more mean reversion kick in for AUD/USD.

Events in focus (AEDT):​

• 10:50 – Japan’s industrial production, retail sales, foreign investment in bonds and stocks
• 11:00 – New Zaland’s business confidence (ANZ)
• 11:30 – Australian building approvals, housing credit, building capex
• 12:00 – South Korea interest rate decision
• 12:30 – BOJ member Nakamura speaks
• 12:30 – China’s manufacturing, services, composite PMIs (NBS)
• 16:00 – Japan’s construction orders, household confidence, housing starts
• 18:00 – UK house price index, German retail sales
• 21:00 – Euro CPI
• 00:30 – US PCE inflation, jobless claims

AUD/USD technical analysis (chart):​

I’ve been conscious of the potential for the rally on AUD/USD to lose steam, given it has risen over 6% since the late October low. So that fact we have seen a 2-bar bearish reversal around trend resistance and the Q3 open price after RSI had tapped oversold has piqued my bearish interest. At a minimum I suspect some mean reversion back to its 200-EMA around 0.6570 could be on the cards, so any low volatility moves higher within yesterday’s range could be an opportunity for bears to fade into, while prices remains beneath yesterday’s high.

Gold technical analysis (chart):​

Gold has done a decent jo of keeping me on the sideline, as I incorrectly thought it may have had a pullback from the 1985 – 2000 area before its next leg higher. Instead, it broke higher. However, now we have seen a false break of $2050 with a small bearish hammer, alongside an overbought RSI with a bearish divergence – I now see a higher chance of some mean reversion. Although it likely requires a hot CPI report from the US.

The $1990 – $2000 will likely provide solid support given the amount of trading activity, although I’m not yet convinced we’ll see it retrace so far unless inflation points the wrong way. Overall, my bias is for a retest and eventual break above the record highs, but an initial pullback seems plausible.

View the full economic calendar


-- Written by Matt Simpson


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

Gold eyes record high, ASX probes resistance: Asian Open Dec 4th 2023​

Gold took full advantage of lower yields on Friday to accelerate into its record high, leaving the question as to whether it can break above this key milestone or present us with a desirable pullback first. The ASX 200 is also considering a break above its 200-day MA.

By : Matt Simpson, Market Analyst

Market Summary:​

• US bond yields continued to plunge on Friday, with the yield curve from the y-year and higher falling double digits in basis points terms. The 2-year fell nearly -40bp last week alone.
• ISM manufacturing contracted faster than expected, which was taken as another sigh that the US economy is slowing and the Fed need to cut in 2024.
• Wall Street rallied on Friday which saw the S&P 500 close just -1 points beneath its July high and the Dow Jones close back above 36k for the first time since January
• NZD and JPY were the strongest forex majors last week, thanks to the RBNZ’s hawkish statement and bets that the Fed will cut sooner than later which sent USD/JPY to an 11-week low
• Gold prices were on fire on Friday, which rose at their fastest daily pace in seven week, their best week in seven and posted its highest daily close on record. It now trades less than $10 from its record high set in April.
• Crude oil fell for a second consecutive day on Friday and fell for a sixth week, after it countertrend bounce stopped just shy of my $80 target before reversing. Traders were sceptical of the proposed OPEC cuts, as not all members are expected to comply and larger cuts may have been expected than the -2.2 million barrels per day presented. A move to $70 may not be on the cards unless OPEC come out swinging.

Events in focus (AEDT):​

• 08:45 – New Zealand terms of trade
• 10:50 – BOJ monetary base y/y
• 11:00 – Australian inflation gauge (Westpac-Melbourne Institute)
• 11:30 – Australian job advertisements (ANZ), business inventories, company profits, home loans, RBA chart pack, retail sales (revised)

ASX 200 at a glance:​

• The ASX 200 rose nearly 0.5% last week after finding support around 7,000
• 7 of its 11 sectors rose, led by info tech and healthcare
• Whilst a hanging man candle formed on the ASX cash market on Friday, the strong rally on Wall Street and SPI 200 futures after the official close point towards a strong open for the cash market today
• The daily chart shows a potential inverted head and shoulders pattern, although personally I prefer to see such reversal patterns following an more established bearish trend (as this pattern accounts for nearly half of the entire decline)
• Still, the ASX saw a daily close above 7100 and the 200-day EMA on Friday and RSI (14) is confirming the rally higher
• However, 7138.5 resistance and the 200-day MA are looming, which may stimmy any early rally today – which has us on guard for at least a slight pullback
• But if bond yields continue to decline, it likely paints a bullish picture for APAC stocks and could see the ASX 200 break higher and head towards the highs around 7300

Gold technical analysis (daily chart):​

I’ll admit to be a little taken back by the ferocity of gold’s rally, but with bonds continuing to drive sentiment and yields plunging, there seemed little place else for gold to go except up last week. Gold posted a solid rally on Friday into milestone highs, closing at a record high on the daily chart but just beneath the actual record high set in April. This makes it a bit of a tricky market to enter around current levels.



If bulls were to take a punt around current levels in anticipation of a breakout today or later this week, there is a real risk of a shakeout and reversal – simply due to the importance of these highs. A more cautious approach could include seeing if prices pull back and form a swing low at a more favourable price, or wait to see if any breakout above the ATH is then turned into support before reconsidering longs.

View the full economic calendar


-- Written by Matt Simpson


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

Gold rally wounded by bearish reversal but not beyond repair. Dec 5th 2023​

In the history of major key reversals in markets, surely the move in gold we’ve just witnessed is right up there. It was brutal, turning what was initially interpreted as a significant bullish move to record highs into a moment that may have done lasting damage for the bullion price.

By : David Scutt Market Analyst

• Gold suffered one of the ugliest daily reversals you’ll see on Monday
• Despite the bearish move, it has found buying at uptrend support and has since stabilised
• Gold seems particularly sensitive to moves in the US dollar right now

In the history of major key reversals in markets, surely the move in gold we’ve just witnessed is right up there. It was brutal, turning what was initially interpreted as a significant bullish move to record highs into a moment that may have done lasting damage for the bullion price. A lot will come down to the near-term price action, something that may exacerbate or limit the scarring from what occurred.

A key reversal for the ages​

Just look at the size of the move on the daily chart. There are bearish candles and then there was yesterday, seeing gold reverse at speed through the zone of prior record highs like a hot knife through butter. Extraordinary. The inability to find buying support at this major level only underscores just how bearish the move was, with the initial upside surge likely reflecting stop-loss buying triggered during low volume early Asian trade. It comes across as blow-off top that may prove hard to shake for bulls unless the price action can become more constructive, and quickly.

While it doesn’t come across as a meaningful level on the charts at first glance, gold found buying on a dip below uptrend support at the peak of downswing, managing to reclaim the level into the close. In early trade on Tuesday, an attempt to extend the bounce has faltered, suggesting the price action around this level could be important for the longer-term trajectory.

A downside break would bring a test of former horizontal support at $2005 into play. $1985 is the next downside target with a far more significant test found around $1945-50, a zone including horizontal support and the 50 and 200-day moving averages. Should uptrend support hold, you’d imagine any upward momentum would be limited in light of Monday’s abrupt reversal.

US real yields trending lower despite modest bounce​

Despite the reversal in the US dollar and US bond yields on Monday, benchmark real US bond yields have only ticked up modestly, sitting less than 5 basis points above where they started the week. More importantly, there’s no sign of a meaningful reversal in inflation-adjusted yields yet, providing a more palatable macro backdrop than what the price action would imply. It spears the USD is far greater influence right now, making gyrations in short-dated US yields – which reflect the Fed funds rate outlook – potentially significant for bullion near-term. On that front, looking at the US data calendar, US services PMI and US jobs data later in the week loom large in the absence of Fed speakers.

-- Written by David Scutt

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

AUD/USD falls post RBA, crude oil ears eye $70: Asian Open Dec 6th 2023​

AUD/USD continued lower for a second day after momentum turned at a key resistance level. But if seasonality remains true, it could be on for a better performance in the second half of the month. And whilst crude oil touched a 5-month low, we're on guard for a technical bounce before its next leg lower towards $70.

By : Matt Simpson, Market Analyst

Market Summary:​

Mixed data from the US resulted in a mixed response from markets on Tuesday, with softer job openings contrasting with an expansive services industry. JOLTS job openings softened to a 31-month low yet it seemed to be overshadowed by the ISM services report, given traders rejoiced by pricing in Fed cuts in July when JOLTS originally fell to a 2-year low.

ISM services expanded at a slightly higher pace, new orders were higher than expected and prices paid (while slightly softer) remain at a 'healthy' 58.3, just below its long-term average.

This won't sway the Fed into action next week, but neither does it build a case that services inflation is dead. And that helped the US dollar index extend its countertrend move to a 9-day high.

Were it not for the fact that traders are now jumping on to the #ECB pivot hype, the US dollar index (which is ~57% weighted to the euro) would be trading much higher.

• US bond yields continued to move lower as bond investors continued to step back into the market to support bond prices.
• AUD/USD was the weakest forex major as it retreated for a second to a 7-day low, after the RBA held interest rates and their statement was once again interpreted as dovish.
• This makes it the third bearish response following a supposedly dovish statement, yet the prior two were followed up with hawkish minutes. Will history repeat on December 19th?
• Gold also fell for a second day, but volatility was less than a quarter of Monday’s prominent bearish outside day and it remains above $2000. But the volatile false break to a record high likely means gold bugs remain a little shell-shocked, and I wouldn’t be too surprised to see low volatility trade occur in the lower range of the past two days over the near-term.
• EUR/USD continued to weaken on bets that the ECB are also approaching a potential policy pivot, sending the euro back beneath 1.08 to a 3-week low

Events in focus (AEDT):​

• 09:00 – Australian manufacturing, construction index (AIG)
• 10:50 – Japan’s Tankan index (Reuters)
• 11:30 – Australian GDP, capex, RBA chart pack
• 21:30 – BOE governor Bailey speaks
• 00:15 – US ADP employment change
• 02:00 – BOC cash rate decision (no change expected)

ASX 200 at a glance:​

• The ASX 200 formed a bearish outside day despite the supposed dovish RAB minutes
• 160 ASX stocks declined (or 80%) and 9 of its 11 sectors were lower, led by energy and material sectors
• This shows a lack of appetite for the ASX to break above hold above 7150, yet at the same time support around the 7000 – 7030 area suggests range-trading strategies and opportunities within a ‘per day’ basis are preferred until trends across global stock market indices become clearer

AUD/USD technical analysis (daily chart):​

So far I’m glad to see that AUD/USD is pulling back from the key resistance zone (Q3 open / bearish trendline) in line with the bias outlined in my

AUD monthly wrap report
. Tuesday’s low tested the high-volume node from the prior rally, although closing so close to the low suggests further downside – which brings the 0.6500 – 0.6520 support zone into focus. From here is seems to be down to how far the US dollar wants to bounce and if US indices hold around their highs as to how far the Aussie may pull back. Should we see the US dollar extend its countertrend move and indices retrace over the next week, the AUD/SD could break below 0.6500 towards 0.6450.

However, take note that the second half of December is usually bullish for US equities and appetite for risk in general, which is why I am favouring a swing low in AUD/USD to form ahead of an eventual breakout above 0.6700 by the end of month.

Crude oil technical analysis (daily chart):​

The daily trend structure on crude oil remains bearish and the target for $70 very much alive with WTI touching 5-month low. Yet its lack of bearish volatility on the day and weak attempt of breaking the cycle low suggests bears are losing steam. Without a fresh catalyst, I’m on guard for a minor technical bounce towards $75 before its bearish trend resumes towards the $70 target.

View the full economic calendar


-- Written by Matt Simpson


The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

Nasdaq 100 ready to retrace? AUD/NZD approaches a technical juncture. Dec 7th 2023​

We noted the tendency for US indices to begin a retracement on December 7th according to its seasonality, so it is interesting to note the 2-day bearish reversal on the Nasdaq on Wednesday. AUD/NZD is also on the watchlist for a potential long as it approaches a key area of support.

By : Matt Simpson, Market Analyst

Market Summary:​

• Further signs that US inflation is slowing showed up in cooler labour costs, which were reived to -1.3% q/q from 0.8%. ADP employment was also below expectations, adding just 103k jobs compared with 130k expected, and September’s figures were revised lower to 106k from 113k.
• This follows on from job openings which slowed to a 2.5-year low on Tuesday, as evidence for a soft landing – if not a recession – builds.
• The US dollar index was higher for a third day and closed marginally above its 200-day day EMA, as expectations for an ECB pivot (to cut rates) weighed on the euro and signs of a softer US economy sucked in safe-haven flows for the dollar.
• US economic data also weighed on Wall Street which saw a bearish engulfing day from on the S&P 500 and a 2-day bearish reversal pattern form on the Nasdaq 100. The question now is whether this is the beginning of a pullback we tend to see around this stage of the month, according to seasonality.
• The BOC held their cash rate at 5% as anticipated, although their statement removed their concern that inflationary risks are increasing. They retained a hawkish bias none the less, although admitted that their economy is no longer in excess demand.
• They’re more than likely done with hiking rates, but like many central banks they remain hesitant to declare their battle of inflation is over, having had their fingers burned by prematurely announcing a pause earlier in their tightening cycle (only to see inflation rise further).
• Australian GDP rose just 0.2% q/q, which adds to the calls that the RBA are done with hiking interest rates.
• Concerns over future demand due to a weaker economy and disappointment with the latest OPEC cuts continued to weigh on crude oil, which saw WTI close beneath $70 for the first time in nearly six months
• GBP/USD was lower for a third day, after the BOE said that interest rates are “likely to remain at these levels for an extended period”, pouring cold water on any further hikes in the foreseeable future.

Events in focus (AEDT):​

• 09:00 – Australian manufacturing, construction index (AIG)
• 11:30 – Australian building approvals, trade balance
• 14:00 – China’s trade balance
• 16:00 – Japan’s leading index, coincident indicator
• 23:30 – US Challenger job cuts
• 00:30 – US jobless claims

Nasdaq 100 technical analysis (daily chart):​

Some interesting price action has been presented by the Nasdaq 100, as it plays suggests markets are trying to follow the seasonal pattern for US indices in December – which tend to top ~7th December until they rally ~16th December in the year end.

A 2-day bearish reversal pattern formed (dark cloud cover) which also formed a lower high, following a false break of 16k – which also acted as resistance on Wednesday.

A move towards the monthly pivot point / gap support / September high seems feasible from here. Although we may also need to see the S&P 500 break beneath 4540 for the move to unfold. And if it does, it could also suggest a deeper retracement for the Nasdaq ahead of its presumed rally in the second half of December, assuming Santa’s rally kicks into gear at all.


Related analysis: S&P 500 forecast - A closer look at 'Santa's rally'

AUD/NZD technical analysis (daily chart):​

Fundamentally, AUD/NZD is not exactly primed for a rally. Soft Australian GDP data renewed calls that the RBA are done hiking with a peak rate at 4.35%. And that makes the Australian dollar less attractive on a relative basis to NZD, as the RBNZ have the higher interest rate of 5.5% and recently delivered a hawkish pause.



However, AUD/NZD is falling towards a potential support zone around 1.06 – 1.065 which includes a rising trendline and cycle lows. And the AU 2yr – NZ 2yr differential remains elevated relative to spot. And that means Australian bond yields need to fall at a much faster rate relative to New Zealand’s to justify the current spot rate, or the AUD/NZD spot rate may indeed bounce. Just how a large a bounce we may see remains to be seen, but pairs such as AUD/NZD can present excellent swing trading opportunities once in a while, even if they fly in the face of fundamentals.

View the full economic calendar


-- Written by Matt Simpson

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

USD/JPY, Gold: Risk for US dollar, Treasury yields skewed higher unless CPI comes in cool. Dec 11th 2023​

• The US macro calendar is full of risk events this week with the Fed rate decision, US CPI and Two long bond auctions arriving over the next few days. Gold and USD/JPY are two markets particularly sensitive to shifts in US interest rates.


By : David Scutt, Market Analyst

• The US macro calendar is full of risk events this week with the Fed rate decision, US CPI and Two long bond auctions arriving over the next few days
• After recent moves reflecting growing expectations for rate cuts next year, anything that pushes back against the dovish narrative could easily generate upside for the USD
• Gold and USD/JPY are two markets particularly sensitive to shifts in US interest rates

The soft-landing narrative that’s been accompanied by growing monetary policy easing expectations faces a series of big tests this week with rate decisions from the Fed, ECB and BoE, long bond auctions in the US and Japan, US consumer price inflation along with flash PMIs. Except for the latter, risks are skewed towards higher yields following recent market moves, creating an environment which may be positive for the US dollar. Entering what’s traditionally a strong period for riskier asset classes on the back of declining market liquidity, that amplifies the risk we could see extremely whippy price action across the risk asset spectrum.

Hawkish Fed risk is elevated​

While it’s a busy macro week, one event stands out above all others: the Federal Reserve’s FOMC policy decision on Wednesday. Including updated economic projections, it could set the tone for other central bank meetings in the subsequent days. With traders flirting between the idea of four or five rate cuts next year, it’s not difficult to see the risk of Fed officials providing a rates outlook far less dovish than what markets expect.

Looking back three months when the prior economic and rates projections were released, FOMC members forecast another rate hike in 2023 and = two rate cuts for 2024. With little chance the Fed will deliver on that 2023 hike at this meeting, and with financial conditions far looser now than they were then, will the Fed want to validate aggressive easing expectations that have been priced in by markets? Sure, there has been progress in bringing underlying inflation towards target, and the pace of job creation is slowing, but the unemployment rate is only 3.7% with wages growth continuing to motor along at a decent clip. It’s extremely doubtful.

New dot plot may forecast only one cut for 2024​

Rather than the median economist forecast for two cuts and market pricing for four or more, it would not surprise to see the Fed forecast only one cut for 2024 in its updated funds rate dot plot. To indicate more would be ignorant of the significant easing in financial conditions which has been seen since the FOMC last met, especially after the Fed cited the preceding tightening in financial conditions as a factor likely to reduce inflation in its November policy statement.

Don’t rule out a change to commentary towards financial conditions​

While not extremely likely, there’s also a risk the Fed may remove its reference to financial conditions altogether from its statement, a move that would signify an attempt to take back control of the outlook for rates after passing off the job of finishing the inflation fight to markets in the runup to its November meeting.

US debt auctions, falling yields to test buyer demand​

Potentially adding to upside risks for US yields, the US Treasury will hold a series of bond auctions that will provide a test for demand after the significant decline in yields since the start of November. Three and 10-year note auctions will be held Monday with a 30-year bond offer going off 24 hours later. For context, yields on existing 10 and 30-year debt have fallen more than 70 basis points from the recent highs. Combined with the risk of the Fed being far less dovish than markets expect, buyer demand could easily disappoint, especially with the US fiscal trajectory anything but solved.

With the ECB and BoE also likely to push back against building easing expectations, even if not likely to be regarded as realistic by some traders, it puts the emphasis on the US November core CPI print to limit the potential upside for US yields and dollar this week.

Anything that suggests inflation may settle at an annualised pace above the Fed’s 2% target will surely raise questions over market pricing for large-scale rate cuts next year. The median economist forecast looks for a increase in core inflation of 0.3%. While better than those seen in 2022, such a result would not be compatible with the Fed achieving its inflation mandate.

Gold struggling after last Monday’s significant reversal​

Looking at markets sensitive to shifts in US bond yields, it’s hard to go past gold and USD/JPY.

Looking at the daily chart, gold has struggled after the blow-off-top-type price action seen on Monday last week, pushing back towards the $2000 level. All else being equal, higher US yields and a stronger US dollar would normally hurt the bullion price, suggesting downside risks may be greater than upside in the near-term. Should support above $2000 give way, minor support is located around $1988 with more meaningful buying likely to kick in between $1945 to $1952, the latter the location of the 200-day moving average. On the topside, gold struggled to break and close above $2029 on four separate occasions last week.

USD/JPY snaps back hard from key support​

For USD/JPY, following a week where much of the price action was driven by speculation on whether the Bank of Japan (BOJ) would look to abandon negative interest rate policy as soon as this month, gyrations in the pair are likely to reflect changes to the US rate outlook on this occasion. The test and retest of horizontal support at 142 and 200-day moving average 40 pips higher gives the sense we may have seen the lows for USD/JPY in the near-term, likely explaining why the pair has gone on with the move in Asia to start the new trading week. Speculation over a normalisation of BOJ policy settings was also arguably moving into unrealistic territory given recent Japanese data flow.

Having closed above 144.80 on Friday, bulls will be eyeing off a test of 146.50 and potentially 147.50, two levels that have acted as both support and resistance at times this year. On the downside, 142.00 will provide a stern test for shorts in the absence of a dramatic dovish shift in US rate expectations above that already seen.

-- Written by David Scutt

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

S&P 500, China A50: A break and a bounce ahead of major event risk. Dec 12th 2023​

In contrast to price action on the S&P 500 which is within touching distance of record highs, China’s A50 languishes at multi-year lows, hit by a sluggish domestic economy, fears about negative spillover effects from distressed property developers, along with geopolitical and regulatory risks.

By : David Scutt, Market Analyst

• Chinese equities have been the market left behind in the global rally this year
• Reports of state-backed buying helped China’s A50 bounce off a key level on Monday
• The US S&P 500 broke to fresh YTD highs ahead of key inflation data, suggesting only hot underlying reading may be enough to derail the rally

Equities worldwide are in beast-mode, putting in higher highs after higher highs, in some instances to record territory. But there is one exception to the rule: China. In contrast to price action on the S&P 500 which is within touching distance of record highs, China’s A50 is languishing at multi-year lows, hit by a sluggish domestic economy, fears about negative spillover effects from distressed property developers, along with geopolitical and regulatory risks which have exacerbated foreign capital outflows.

Given how synchronised equity markets have been over the cycle in other parts of the world, it comes as no surprise that Chinese markets are on the nose. Too hard basket, many would say. Some may even argue that given the risks, China is uninvestable. But when evaluating risk versus reward, everything has a price. Eventually.

Perhaps we’re nearing that point?

‘National Team’ reportedly sparks big A50 bounce​

While it comes with the full disclaimer the rebound likely reflects buying from one or multiple Chinese state-backed institutions referred to outside of China as the ‘National Team’, the price action on the A50 Index on Monday was arguably the most bullish thing mainland equity investors have seen in 2023. Looking at the daily chart, there’s not much else to choose from.

But having tagged the low struck during the worst of lockdown pessimism last year, the bounce over the second half of the session was truly spectacular, seeing the index manage to close above the intraday highs seen in prior three sessions. While not quite a bullish engulfing candle, taken in isolation, the price action was just as bullish, pointing to the potential for a more meaningful rebound. Yes, it was probably forced, and there is major Chinese economic data out this week in the form of industrial production, property investment and retail sales that could add to elevated levels of pessimism, but it's the type of move that may mark a near-term bottom.

For those considering a countertrend long, entry around these levels, with a stop below 11160, could target a move back towards the 50-day moving average and horizontal resistance just below 11900. If the trade were to be successful, a decision could be made to either hold or cut once the target has been achieved.

S&P 500 traders show no fear of CPI or Fed​

As mentioned above, relative to the price performance from the largest Chinese listed companies, those in the United States have been flying since the end of October, helping the S&P 500 jump to the highest level of the year. Having managed to crack and close above 4592 on Friday, the index went on with the move to start the trading week, showing little concern about a series of significant risk events that arrive in the coming days.

While the Federal Reserve December FOMC interest rate decision is naturally getting plenty of attention given it has updated economic and interest rate projections along with the statement and press conference, Tuesday’s US consumer price inflation report (CPI) may set the tone for the remainder of the week.

Given the willingness of traders to push the index to fresh year-to-date highs heading into the event, you get the sense only an uncomfortably strong core CPI reading will be enough to dent confidence the Fed will follow through with the more than 100 basis points of rate cuts expected in 2024.

If the disinflationary trend remains intact, markets may choose to look through any attempt from the Fed to push back against current pricing. Core inflation is expected to have increased 0.3% in November, leaving the annual rate steady from a month earlier at 4%. While not the Fed’s preferred inflation gauge, the latter would still be double its 2% target.

On the topside, minor resistance is located at 4638 and again around 4744. Above that, the next stop would be record highs. As for nearby downside support, 4592, 4549 and 4520 are the levels to watch. Unless the inflation data starts heating up or activity data begin to roll over rapidly – unlikely in the near-term – the path of least resistance remains to the upside.

-- Written by David Scutt

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

 

[FOREX.com]

AUD/USD eyes breakout post FOMC, USD/JPY to break 200-day MA? Asian Open. Dec 14th 2023​

The Fed gave markets what they wanted for Christmas by signalling that rate cuts are likely coming in 2024. And that places AUD/USD and USD/JPY on notice for breakouts.

By : Matt Simpson, Market Analyst

Market Summary:​

The Fed gave markets what they wanted for Christmas by signalling that rate cuts are likely coming in 2024. The dot plot showed that the median Fed funds rates for 2024 was lowered by 50bp from 5.1% to 4.6%, which allows three full 25bp from the current rate by the end of 2024. The staff projections also saw PCE inflation lowered in 2023 through to 2025, although growth was slightly downgraded to 1.4% from 1.5% in 2024 - but this still plays into the soft landing scenario.

This is a huge development for markets as we head into the new year and provides much needed clarity. And clarity in this instance meant risk on.

• The S&P 500 closed above 4700 for the first time since January 2022 and trades -2.3% from its record high. Also note that the seasonality pattern suggests a swing low tends to develop around the middle of December for a strong rally into the year end – which places a break to a new record high on the cards.
• The Nasdaq 100 needs to rise just 1.2% to reach a new record high, whilst the Dow Jones sits pretty at a record high.
• The USD dollar was the weakest major, with JPY, AUD and NZD leading the way. The US dollar index suffered its worst day in 22 and closed back beneath its 200-day MA. Whilst we’d usually expect to see AUD or NDZ take the lead, bets that the BOJ are closer to tightening policy saw the Japanese yen take pole position and send USD/JPY back to a 3-day low around 143.
• Bond yields were crushed which weighed on the US dollar, with the US 2-year yield moving decisively back beneath its 200-day MA / EMA.
• Gold enjoyed its best day in 44 and broke convincingly back above $2000 to close around $2027

Events in focus (AEDT):​

• 09:00 – Australian manufacturing, construction index (AIG)
• 10:50 – Japan’s core machinery orders, foreigner’s bond/stock buying
• 11:00 – Australian inflation expectations (Westpac-Melbourne Institute)
• 11:30 – Australian employment report, RBA assistant governor Jones to speak
• 23:00 – BOE interest rate decision
• 00:15 – ECB interest rate decision

AUD/USD technical analysis (daily chart):​

The Australian dollar looks set for a bullish breakout from a cluster of key resistance levels, following the Fed’s dovish pivot. A bullish engulfing candle formed on Wednesday as part of a strong rally from the 200-day MA / EMA, and marks another prominent higher low during its strong rally form 63c.

From here, bulls can consider breaks higher or seek to enter on pullbacks, with a view for it to head for 0.68 at a minimum but also the double top highs around 0.69.

USD/JPY technical analysis (daily chart):​

Wednesday’s bearish momentum mark’s Monday’s 146.6 level as a swing high for USD/JPY. Whilst the 200-day MA has come to the rescue again, my bias is for an eventual break beneath it now the Fed have delivered their dovish pivot. Moreover, with it looking more likely the BOJ are heading towards some form of tightening next year and the yen is strengthening across the board, the path of least resistance appears to be lower.

Perhaps we’ll see a minor bounce from yesterday’s lows as it reconsiders a break of the 200-day MA / 142 handle. But retracements within yesterday’s range could allows bears to fade into a bounce in anticipation of a break lower. Take note of the volume cluster around 139.4, near the 140 handle and lower 1-week implied volatility band – making the zone a potential support area.

View the full economic calendar

-- Written by Matt Simpson

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.