Daily Market Report

[FOREX.com]

AUD/USD holds firm after its post-FOMC breakout: Asian Open. Dec 15th 2023​

A classic consolidation has formed on AUD/USD's intraday chart that points to a potential bullish breakout. Although given we're approaching the weekend, bulls may want to be cautious and not expect runaway gains.

By : Matt Simpson, Market Analyst

Market Summary:​

• FX majors essentially saw an extension of Wednesday’s moves on Thursday as the US dollar plunged for a second day to allow its peers to extend their gains, to various degrees
• GBP/USD and EUR/USD were the strongest performers as the BOE and ECB were not as dovish as markets had hoped and pushed back against any form of policy tightening, suggesting markets may have been expecting a too much following the Fed’s dovish pivot
• The ECB said that tightening policy was not even discussed, and the BOE said expect rates to remain high “for an extended period”
• EUR/USD rallied over 1% during its best day in 22 and now sits just pips beneath the November highs, the DAX hit a fresh record high of 17k but failed to hold on to gains and left an ominous bearish outside day (but the rumour, sell the fact?)
• GBP/USD rose 1.3% during its best day in 22 to close at a 4-month high, allowing the underperforming FTSE to close at a 41-day high
• The RBA will be forced to retain their hawkish tone as Australia’s job growth exceeded expectations again in November, with the baulk of the 61.5k jobs added being full time and the participation rate hitting a new all-time high. Sure, unemployment rose to 3.9% but this is still not ‘recessionary’ by historical standards.
• Gold posted modest gains on Thursday but formed a small shooting star day to suggest a period of consolidation or a retracement could be approaching
• Crude oil prices rose for a second day after a false break of 68.50, and given the depth of the move from the September high then I am now monitoring its potential for a bullish reversal – and these past two days suggest one could be forming to my technical eyes

Events in focus (AEDT):​

• 09:00 – Australian manufacturing and services PMIs
• 11:30 – Japan’s manufacturing and services PMIs
• 12:30 – China house prices
• 13:00 – Industrial production, fixed asset investment, retail sales, unemployment rate, NBS press conference
• 18:45 – French CPI
• 19:15 – French flash manufacturing, services and composite PMIs
• 19:30 – German flash manufacturing, services and composite PMIs
• 20:30 – UK flash manufacturing, services and composite PMIs
• 01:15 – US flash manufacturing, services and composite PMIs

ASX 200 at a glance:​

• The ASX 200 posted its best day this year and closed just shy of 7,400 as it tracked Wall Street and APAC higher following the relatively dovish Fed meeting
• All 11 sectors posted gains, lead by real estate and info tech, with the ASX now on track for its third bullish week
• SPI 200 futures rose 0.65% to point to a gap higher for the ASX cash market, although the extended moves on Wall Street ad early signs of exhaustion suggest ASX bulls could be cautious and not expect another strong close today like we saw yesterday

AUD/USD technical analysis (1-hour chart):​

If I look at AUD/USD in isolation, I see a classic consolidation following a strong bullish move – and that could point to another burst higher. However, seeing as AUD/USD only marginally closed above the December 4th high, NZD/USD failed to close above its own cycle high, USD/CHF failed to close beneath its respective cycle low and USD/JPY only marginally closed beneath its 200-day MA – I see early signs of exhaustion for US dollar weakness. Add n the fact that we’re approaching the weekend and that can prompt profit taking from US dollar bears, upside potential for AUD/USD may be limited heading into the weekend.


What I do like is how the consolidation is respecting the Q2 open price, so any pullback towards it could tempt bears to enter ling with a stop beneath the Q3 open. A modest target could include the daily R1 pivot, 0.6739 high – a break above which brings 0.6760 into focus near the daily and weekly R2 pivots.

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, GBP/USD, crude oil analysis: COT report – Dec 18, 2023​

The commitment of traders (COT) report shows how large speculators are positioned across futures markets on the CME exchange.

By : Matt Simpson, Market Analyst

View the latest commitment of traders reports

Market positioning from the COT report - as of Tuesday 12th December 2023:​

• Large speculators increased their gross-short exposure to crude oil for a ninth week
• Net-short exposure to JPY/USD futures fell to a 19-week low
• Net-short exposure to AUD/USD futures fell to an 18-week low
• Large speculators were bullish on GB/USD futures for a second week
• Net-short exposure to the US 10-year bond note fell to a 37-week low

US dollar index positioning – COT report:​

Traders were net-short the US dollar for a second consecutive week, according to data compile by IMM (International Monetary Market). They were also the most bearish on the US dollar in three months across all pairs and G10 currencies. The fact they flipped to net short before the Fed’s dovish pivot suggests there could be further downside for the US dollar, but when you consider it has fallen -3.8% over the past 10 weeks then one should be on guard for a technical bounce or two along the way.

GBP/USD (British pound futures) positioning – COT report:​

Large speculators were their most bullish on GBP/USD futures in 12 weeks last week. And that was before the BOE pushed back on hopes of an early rate cut. Short interest has continued to fall whilst long interest has perked up, which suggests there could be further upside for the British pound in the weeks ahead.

WTI crude oil (CL) positioning – COT report:​

Crude oil has fallen nearly 30% over the pasty 11 weeks. That stat along should be enough to make one wary of shorting crude oil around current levels, but we also have the fact that large speculators increased their gross-short exposure for a ninth consecutive week and pushed their exposure to a level which could be considered a sentiment extreme. Add in the fact that oil has fallen for eight consecutive weeks and formed a doji week, then the case for a countertrend bounce becomes quite appealing.

JPY/USD (Japanese yen futures) positioning – COT report:​

Traders continue to trim their gross-short exposure to the Japanese yen, although it should be noted that bulls are yet to return in force. This has helped USD/JPY fall to a 4-month low and break beneath its 200-day average and suffer its worst week in five months. However, given it has fallen for five consecutive weeks, USD/JPY bears may want to be cautious around current levels and be on guard for a technical bounce – even if the bias is for a weaker pair in the months ahead.

S&P 500, Nasdaq 100, Dow Jones positioning – COT report:​

The relentless rally on US indices continues. The Dow Jones reached a record high last week and asset managers are now their most bullish in 19 weeks, yet do not appear to be at a sentiment extreme. We’re now in the second half of December, a time of year associated with strong gains. But will history repeat, given we have already seen a strong rally in the first half of the month? Futures markets have just opened for the week and have gapped higher, which indicates they have every intention of bidding the markets higher in line with their seasonal tendency. But traders would be wise to see how the S&P 500 and Nasdaq 100 react around their record highs, because a pullback from those levels also suggests a pullback on the Dow Jones.

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 closes back above its 200-day average ahead of BOJ meeting: Asian Open Dec 19th 2023​

By : Matt Simpson, Market Analyst

Market Summary:​

• Apple shares were down -0.85% after the company announced it would pause sales of its Series 9 and Ultra 2 smartwatches in the US, due to a patent dispute with Masimo
• Regardless, the Nasdaq 100 printed a fresh closing record high – although it remains a touch beneath the all-time high of 16,764.86.
• The Dow Jones also printed an intraday record high but pulled back to close the day slightly lower.
• The S&P 500 remains the odd one out and 78 points beneath its own all-time high
• WTI crude oil extended its countertrend move and briefly traded above $74 on Monday. I noted in yesterday’s COT report and on Twitter (sorry… X) that that crude oil is at or near an important inflection point
• Gold held above Friday's low in what appeared to be technical repositioning, during low liquidity trade. Although gold was dented on Friday as comments from Fed members Bostic and Williams pushed the 'higher for longer' rates narrative.
• PCE inflation is hands down the big event for the week, and traders will want to see a soft set of numbers to justify hopes that that Fed could cut by at least 75bp this year. As PCE inflation is not a volatile data set, there may be some disappointment if they don't come in soft enough.

Events in focus (AEDT):​

There has been some excitement that the BOJ may be close to exiting negative rates. This has led to some speculation that the BOJ could do just that today. But if history is anything to go by, they’ll likely drag their ultra-dovish policies into the new year. And that could help USD/JPY further extend its countertrend move if no action is taken today. Of course, should they hike their interest rate to 0% or higher, USD/JPY could break to new cycle lows.

The RBA also release their monetary policy minutes. I’m intrigued to see if they are as hawkish as the prior two minutes were – as they reversed the apparent dovishness the statement provided.

• 11:00 – New Zealand business confidence (ANZ)
• 11:30 – RBA minutes
• 13:30 – BOJ monetary policy statement
• 14:00 – BOJ interest rate decision
• 17:30 – BOJ press conference
• 21:00 – European CPI

ASX 200 at a glance:​

• The ASX 200 snapped a 6-day winning streak with a small bearish inside day on Monday
• The strong rally has stalled beneath the double top pattern around 7472.3 (July highs)
• I’d like to see a pullback before considering longs beneath this key resistance level
• 7400 is a likely support level, a break beneath which could see the 7362 / 7341 highs act as support

USD/JPY technical analysis (daily chart):​

USD/JPY has fallen over 7% from its November high, but I now see the potential for a countertrend move. Prices closed back above the 200-day average on Monday and formed a 3-bar bullish reversal (Morning Star). And despite intraday breaks lower, USD/JPY has closed back above the 141.71 close low. I’m not looking for a particularly large move and suspect bears may be tempted to fade into any move towards 145. But for now, bulls could consider entries around the 200-day average / yesterday’s high to target 144 or the 144.72 low. Or bears could wait for signs of a swing high beneath 146.59.

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 taps 145, ASX 200 surges with seasonality fully behind it. Dec 20th 2023​

USD/JPY rallied nearly 2% after the BOJ's decision to keep policy unchanged, and there could be further upside to come. We also look at daily seasonality pattern for the ASX 200 in December, which suggests a record high could be close.

By : Matt Simpson, Market Analyst

Market Summary:​

• SPX 500 Emini futures touched a record high on Tuesday Wall Street tracked the path of Santa’s rally, which also saw the Dow Jones rise for a ninth consecutive day to its own new record high. The Nasdaq 100 cash index also hit a fresh new high.
• AUD/USD reached a 5-week high as it tracked risk assets and enjoyed the weaker US dollar, despite Fed member Bostic pushing back on an early rate cut
• WTI crude oil extended its countertrend bounce and rose for a fifth day in line with my bullish bias outlined at the beginning of the week. Technically it appeared oversold, and geopolitical tensions around the Red Sea has brought with it concerns over supply.
• USD/JPY rose to 145 by Wednesday’s high following the BOJ’s decision to do absolutely nothing. This is another market flagged as oversold ahead of the meeting. And while economists had fully backed no action, there was some excitement in market pricing that the BOJ might hike their interest rate looking at how well USD/JPY bounced on Wednesday.
• USD/CAD fell to a 4-month low as inflation data for Canada was hotter than expected, with annual trimmed mean, median and headline CPI all failing to drop in line with the consensus estimates. Whilst this does not necessarily mean a BOC hike is imminent, it serves as a reminder as to why Governor Macklem’s said last week that the central bank “may be done, may not be done” in regards to further tightening.
• The OIS curve continues to point towards 5% being the peak rate and cuts to begin next year. Let’s see if USD/CAD can build a base around 1.33, as this move lower could be getting ‘long in the tooth’.

Events in focus (AEDT):​

• 10:30 – Australian leading index (Westpac-Melbourne Institute)
• 10:50 – Japanese trade balance
• 11:00 – New Zealand’s budget balance, economic forecasts
• 18:00 – UK inflation, producer prices
• 01:00 – SNB quarterly bulletin

ASX 200 seasonality patterns in December​

We see a similar pattern on the ASX 200 as we see elsewhere this time of the year; strong gains. Taking data from April 2000, the ASX 200 has delivered a bullish monthly close 73% of the time. But if we drill down to daily returns for December, December 24th stands out for its 87.5% win rate alongside one of the strongest daily performances (average and median). In fact, the win rate is above 50% between December 17th to December 30th, the 27th also delivering notably strong returns on average and median alongside a punchy 80% win rate.

The ASX 200 I son track for a fourth consecutive bullish week with bullish momentum clearly on its side. The ASX now trades less than 2% from its record high, and with seasonality on its side little in the way of topping clues, it could be heading straight for that record high and for the 7700 handle. Pullbacks towards yesterday’s low could appeal to bulls, with 7500 also making a likely support level. 7600 is the next upside target, ahead of 7646 and 7700.

USD/JPY 4-hour chart:​

USD/JPY has played quite nicely with my analysis this week, rising towards 145 following the BOJ’s ‘surprise’ decision of not changing rates (for a seventh year running…). The next big event for this pair is the US PCE inflation report on Thursday (early hours Friday for Sydney). Given the Fed are now pushing back against an early cut next year, then I suspect downside potential for USD/JPY may be limited and it is vulnerable to another leg higher. Take note that the 1-week implied volatility level has narrowed to indicate market expectations of lower volatility for the pair.



With RSI 14 above 50 and trending higher and RSI back below 50 (but not oversold), I’m now looking for prices to retraces towards 143 / 143.16. If it gets there during low volatility trade, the bias is bullish while prices remain above the 142.26 lows and for another crack at 145.

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, USD/JPY: US inflation report set to enhance soft landing narrative. Dec 22nd 2023​

AUD/USD and USD/JPY sit at interesting levels on the charts ahead of Friday’s key US PCE inflation report, providing two-way optionality and decent risk-reward for those traders still active in the markets.

By : David Scutt, Market Analyst

• The Fed’s preferred underlying inflation measure will be released later Friday
• On a six-month annualised basis, the data may confirm underlying inflation has returned to the Fed’s 2% target
• AUD/USD and USD/JPY have conveniently parked themselves near technical levels heading into the report

AUD/USD and USD/JPY sit at interesting levels on the charts ahead of Friday’s key US PCE inflation report, providing two-way optionality and decent risk-reward for those traders still active in the markets.

PCE inflation report likely to enhance soft landing narrative​

With over six rate cuts now priced into the Fed funds rate curve for 2024, it’s up to the data to continue to show inflation is likely to return to the Federal Reserve’s 2% target. With the core PCE deflator – the Fed’s preferred inflation measure – expected to increase 0.2% in November, the year-on-year change is seen slowing to 3.3% from 3.5% in October. Importantly, on a six-month annualised basis, underlying inflation is tipped to show underlying inflation has returned to the Fed’s mandate.

While that outcome is factored into pricing, in the absence of a big upside surprise, or evidence services inflation excluding housing costs remains elevated, markets will be able to cling on to the soft-landing narrative, likely keeping US bond yields pressured amidst expectations the Fed ease policy rapidly to reduce the risk of deflationary forces taking hold.

In the absence of unexpected market news, the PCE deflator, along with the strength in incomes and broader consumer expenditure, will likely dictate how the AUD/USD and USD/JPY fair before Christmas.

AUD/USD eyeing 2023 highs​

For those looking at trades involving AUD/USD, it has settled around .6800 heading into the inflation report. This minor support and resistance level can be used to initiate positions, with a stop on the opposite side to where the price move for protection. An upside break would target a push towards the double-top hit in June and July just shy of .6900. On the downside, .6720 and .6675 are the initial levels to watch.

USD/JPY testing recent lows​

With the release of Japanese consumer price inflation and minutes of the Bank of Japan’s November monetary policy meeting vanishing into the distance in the rear-view mirror, attention now will be on the US inflation report. Like the AUD/USD, the USD/JPY, too, has conveniently parked itself around support, providing the opportunity to position for a bounce or break.

Dating back to July this year, the pair has either tagged or nearly tagged 141.56 of five occasions without closing below, suggesting it could be used for protection regardless of which way the price moves. If it bounces on the inflation report, traders could place a stop below targeting a push back to 144.80. Should the price break lower, a move towards 138.75 could be on the cards. On the way, it may encounter bids around the psychological 140 level. A stop above 141.55 would offer protection.

-- Written by David Scutt

Follow David on Twitter @scutty


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 hints at double top ahead of US inflation: Asian Open Jan 11th 2024​

A broadly weaker Japanese yen has seen USD/JPY consider a break of last week's highs. But with US inflation now in focus, the key CPI report could dictate which side of resistance it closes on.

By : Matt Simpson, Market Analyst

Market Summary:​

• The RBA are likely to hold their cash rate at the 12-year high of 4.35% in February, and calls for peak rate have resurfaced following November’s soft inflation figures. Weighed CPI y/y is now below the cash rate at 4.3%, trimmed mean slowed to a 17-month low of 4.6% and CPI less volatile items and travel fell to 4.8%.
• RBA cash rate futures now imply a 97% chance that the RBA will hold rates at their February 6th meeting, no more hikes are to follow and the first full 25bp cut is priced in for August.
• Yet this was not enough to help the ASX 200 rally, which was bogged down by the mining sector and a heavy day of losses for lithium stocks
• The S&P 500 and Dow Jones are on track for bullish engulfing weeks while the Nasdaq 100 is trying to form a 2-week bullish reversal pattern (bullish piercing line), although the US inflation report is a key risk event which could mix things up over the next 24 hours
• The Japanese yen was the weakest FX major and lower against all of its peers on Wednesday. CHF/JPY broke to a record high, AUD/JPY formed a bullish engulfing candle and both GBP/JPY and EUR/JPY rose to 6-week highs
• Strong tech stocks helped the Nikkei reach a 33-yeare high on Wednesday and close just shy of 35k
• Gold prices have continued to drift lower since the December 28 peak, although a series of lower wicks on the 1-hour chart suggest support could reside around $2020 over the near term

Events in focus (AEDT):​

• 11:30 – Australian trade balance
• 16:00 – Japan’s leading and coincident indices
• 00:30 – US CPI

US inflation is the key metric on trader’s radars over the next 24 hours, and that leaves the risk of no appetite for risk and low levels of volatility in today’s Asian session. Core CPI is expected to have risen 0.3% m/m in December (as it did in November) which is above its long-term average of 0.28%. And whilst core CPI y/y is expected to slow to 3.8% y/y – its lowest level since September 2021 – headline CPI is expected to increase to 0.2% m/m (from 0.1% prior) and 3.2% y/y (from 3.1% prior).

With Fed fund futures effectively pricing in for the Fed to hold rate at their late-January meeting, today’s report is really about justifying the several rate cuts priced in this year. And that likely means we need to see inflation data come in softer across the board to avoid a stronger US dollar.

ASX 200 at a glance:​

• The ASX 200 reversed most of Tuesday’s gains and formed a bearish inside day
• Its daily low probed yet respected the 20-day average for a third day to show the market is paying attention to the technical level, yet it remains unclear whether the average will act as a springboard or a key level of support waiting to be broken
• The US inflation report is likely to be a key driver tomorrow should it surprise Wall Street enough (a strong set could be bearish for global indices, whereas a soft CPI report could be bullish)
• I suspect it could be a low volatility day today without a domestic catalyst, so traders may prefer to stick to intraday positions with smaller profit objectives

USD/JPY technical analysis (chart):​

It has been a decent start to the year for USD/JPY, which printed a prominent bullish engulfing candle on the first week of January and is on the cusp of testing last week’s high for a second bullish week. Yet how it performs from here is likely in the hands of the US inflation report at 00:30 AEDT (13:30 GMT).

Failure to break above 146 risks leaving a double top on the pair with a bearish divergence on RSI (14) while RSI (2) remains in highly overbought levels. Given the consensus for a slightly hotter set of CPI figures, the contrarian in me wonders whether even a slightly softer set of numbers could knock USD/JPY from its perch.

A low volatility session in Asia seems likely, but from here bears may want to fade into moves towards 146 / monthly S1 pivot for a cheeky countertrend short. But given the trend structure on the weekly chart ad prominent bullish engulfing week, I see the potential for a higher USD/JPY in the coming weeks.

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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, NZD/USD remains supported despite hot US CPI: Asian Open. Jan 12th 2024​

The US dollar failed to dominate the FX space despite stronger-than-expected inflation data. And with AUD/USD and NZD/USD holding key support levels, we see the potential for a move higher over the near-term unless the wheels fall off sentiment.

By : Matt Simpson, Market Analyst

Market Summary:​

Once again, we see a disparity between market pricing, data and the Fed’s narrative. At 0.3% m/m, US core and headline inflation were slightly above their long-term averages which helped pushed the annual rates above estimates at 3.4% and 3.9% y/y respectively.

Given the strong labour market, five Fed cuts seems overly optimistic unless the wheels to the US economy truly fall off. And until employment data takes a serious hit, the Fed won’t be bullied into aggressive hikes with inflation at these levels – or feel inclined to cut by more than the 75bp indicated in the dot plot.

Even so, Fed Fund futures still imply a 70% chance of a 25bp cut in March and five cuts this year despite Fed’s Mester pushing back on any early easing. And the US dollar didn’t behave in such a way to suggest USD bears are running scared. EUR/USD closed effectively flat and volatility levels across FX markets were relatively low.

However, US treasury yields continued to fall which helped Wall Street recover most of its early losses. And that could be a combination of bond traders calling ‘bulldust’ on the US economy and the growing concerns over a regional conflict in the Middle East. But looking across key markets, my guess is few got what they wanted in terms of market reaction from this month’s CPI report.

• Gold once again recovered back above $2020 following a false, intraday break beneath it
• The S&P 500 briefly traded above the December high ad remains within easy reach of its all-time high
• The Dow Jones remains at the top of its consolidation around its record high
• The Nasdaq 100 trades less than 1% from its record high
• Forex major pairs were mostly flat and volatility was relatively low relative to the event
• ECB president Lagarde warned that the re-election of Trump could “would represent a threat for Europe”
• A rise in Australian coal exports saw their trade surplus rise to A$11.4 bn in November, with exports rising 1.7% and imports down -7.9%

Events in focus (AEDT):​

• 09:00 – Australian
• 10:50 – Japan’s current account, bank lending, foreign bond/stock purchases
• 11:30 – Australian loans
• 12:30 – China CPI, PPI
• 14:00 – China trade balance
• 18:00 – UK GDP (m/m, y/y), index of services, industrial production, manufacturing production, trade balance

ASX 200 at a glance:​

• The ASX 200 held above the July ‘double-top’ high and formed a small bullish inside day
• The 20-day average continues to support the ASX 200
• 10 of its 11 sectors advanced, led by info tech and healthcare (utilities declined)
• Around current prices, the ASX is on track to form a weekly doji around support / July highs
• With Wall Street holding onto gains and remaining near cycle highs, bulls may want to seek dips towards recent lows for near-term long positions

AUD/USD technical analysis (daily chart):​

Today’s charts are a good example of when technical, fundamentals and sentiment are not fully aligned. Yet the technicals seem good enough to at least warrant a look for a potential setup.

AUD/USD has seen a decent pullback from its December high and prices are holding above trend support, while the daily closes hold above the Q3 open and 61.8% Fibonacci retracement level. Two long-tailed doji’s have also formed to suggest support resides around 0.66450, and a bullish divergence formed with RSI (2) whilst it was in the oversold zone.

What we’re lacking is a bullish catalyst. Still, as long as prices hold above last week’s low, any low volatility retracement towards it could entice bulls to step in to try and milk a relatively low-risk entry, on the bet that a bullish catalyst may arrive, prices form a swing low and then they’re ‘off to the races. 0.6750 could mark a sensible initial target, a break above which assumes a bullish catalyst has arrived.

NZD/USD technical analysis (daily chart):​

There are of course similarities between AUD/USD and NZD/USD, but out of the two I prefer NZD/USD for longs over the near-term. It has formed the more bullish trend structure on the daily chart, and its pullback from the December high has found support around a prior volume cluster. And if prices were to rally from here, it would have turned resistance into support.

Again, we see a bullish divergence has formed with RSI (2) after it dipped into the overbought zone. The bias remains cautiously bullish whilst prices remain above last week’s low and for bulls to enter upon any low volatility move towards it (and a stop well beneath it). 0.6300 could make a viable bullish target over the near-term.

View the full economic calendar


-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge


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]

US dollar bears remain undeterred: COT report​

Traders were their most bearish on the US dollar against all currencies in four months, despite the Fed's attempt to push back on multipole rate cuts this year.

By : Matt Simpson, Market Analyst

View the latest commitment of traders reports

Market positioning from the COT report - as of Tuesday 2023:​

• Traders were net-short the US dollar against all currencies by the most bearish amount since August, according to IMM
• Large speculators are their least bearish on AUD/USD futures since April
• Net-short exposure to the 2-year bond bill fell to a 15-week low
• Gross-short exposure to GBP/USD futures fell to a 20-week low
• Large speculators were their least bearish on JPY/USD futures in nine months
• Net-short exposure to CAD/USD futures fell for a third week and large specs are their least bearish in 22 weeks
• Large speculators flipped to net-short exposure to copper futures

US dollar positioning – COT report:​

Traders continue to express a bearish view on the US dollar despite the Fed’s attempt to push back against multiple rate cut expectations this year. According to data compiled by IMM, traders were net-short the US dollar against all currencies by their most bearish amount since August, and the most bearish against G10 currencies since September. For now, the US dollar index continues to trade in a very tight range and above its December low. Yet I continue to suspect there is some upside potential for the dollar when market reprice Fed cut expectations lower.

Gold futures (GC) positioning – COT report:​

Managed funds and large speculators reduced their long exposure to gold futures last week, at the fastest pace since February. Short exposure also ticked higher slightly higher, which should serve as a cautionary tale for bulls following gold’s false break to a record high. With that said, gold is back in demand due to safe-haven flows due to the rising geopolitical tensions in the Middle East. And with bears seemingly not taking new bets on gold, perhaps it can make another dash for $2100 after all.

Copper futures (HG) positioning – COT report:​

Large speculators and managed funds flipped back to net-short exposure to copper futures after a brief spell at being net long. Longs were trimmed at their fastest pace since August and shorts were increased at their fastest pace since October. Futures traders do not seem to have a rosy outlook for the global economy, and that is one of the key reasons I suspect that the Australian dollar’s upside could be capped.

S&P 500, Nasdaq 100, Dow Jones futures positioning – COT report:​

Equity traders remain defiantly bullish on US indices, although managed funds appear to have changed their tune in respect to the Dow Jones. Shorts were added and longs were closed last week, to bring net-long exposure to its least bullish level in four weeks. Yet prices are yet to follow the change in sentiment, and all three US indices trade within tight consolidations just off of their cycle highs. If yields continue to fall and bets remain in place of five or more Fed cuts, perhaps we’ll see indices break higher. Yet I remain sceptical that the Fed will cut so aggressively, and if or when markets realise this then it leaves indices vulnerable to a pullback.

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 probes trend support ahead of Waller speech: Asian Open Jan 16th 2024​

AUD/USD has pulled back into a key zone of support ahead of what could become a very binary Fed speech from Waller.

By : Matt Simpson, Market Analyst

Market Summary:​

I noted in Friday’s Week Ahead report that, for whatever reason, January 15th had averaged the strongest daily returns for the US dollar index alongside the high win rate of 78.9%. So, it is interesting to see that the US dollar index did indeed turn higher yesterday and was nearly the strongest major (a close second place behind the euro).

The US dollar index remains within its tight range flagged in Friday’s report, although now in the top half of that range. Traders remain heavily net-short the US dollar on bets on multiple rate cuts, so a key event for traders to watch is FOMC member Waller’s speech titled “Economic Outlook” at 11:00 EST on Tuesday (16:00 GMT, 03:00 AETD). Ultimately, traders will want to see Waller’s outlook align with their pricing of multiple rate cuts, as failure to do so could end up supporting the US dollar due to short-covering and weigh on appetite for risk.

Trading volumes are expected to pick up in the European and US session with US traders returning to their desks after a 3-day weekend.

Australian inflation rose 1% in December according to the Melbourne Institute’s CPI gauge, up from 0.3% the month prior. It doesn’t generally carry the same weigh as official CPI data as it is considered to be less reliable, but it is something to take in mind ahead of employment data on Thursday and the quarterly CPI report on January 31.

Events in focus (AEDT):​

• 10:30 – Australian consumer sentiment (Westpac)
• 10:50 – Japan’s producer price index
• 11:30 – Australian building permits, private housing approvals
• 18:00 – German CPI
• 18:00 – UK employment, average earnings, claiming count
• 20:00 – ZEW economic sentiment for Germany and Eurozone, consumer CPI expectations
• 12:30 – Canadian inflation report
• 02:00 – BOE governor Bailey speaks
• 03:00 – Fed Waller speech: Economic Outlook

ASX 200 at a glance:​

• The ASX 200 is coiling up on the daily chart and formed an indecision candle last week to show overall indecision (and low volatility)
• This could suggest volatility is to return, but as for when it remains to be seen
• But given we’re trading within a tight range near the 2023 highs, bulls may want to question how much more upside potential there is – as a sustained bullish breakout likely requires a dovish Fed and RBA
• Energy and financial stocks are the strongest ASX sectors this year so far, with materials and utilities lagging

AUD/USD technical analysis (daily chart):​

Last week I highlighted a potential long swing trade opportunity for AUD/USD, and whilst it remains valid with prices holding above th0.6640 low – it is trading a bit too close for comfort for my liking. Besides, we may have a binary outcome from Fed Waller’s speech which could just as easily see it break to new lows as it could rally higher form current levels.


AUD/USD has closed beneath the Q3 open for the first time since December 13th, which has dragged the RSI (2) back into oversold and invalidated its small bullish divergence. Should Waller deliver a hawkish speech it could weigh on risk and send AUD/USD towards 0.66 initially, a break beneath which beings the volume cluster around 0.6546 onto focus.

View the full economic calendar


-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge



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 dollar perks up, EUR/USD, AUD/USD take a turn for the worse Jan 17th 2024​

A key voting member of the FOMC pushed back on imminent Fed rate cuts on Tuesday, sending bond yields and the US dollar higher - to the detriment of EUR/USD and AUD/USD.

By : Matt Simpson, Market Analyst

A key voting member of the FOMC pushed back on imminent Fed rate cuts on Tuesday, sending bond yields and the US dollar higher. The 7-year yield rose 7.6 bps, nearly twice its 1-year daily positive average of 3.9 bps. The 5-yeaar up to the 20-year all rose over 10 bps on the day.



"...the central bank should not rush to cut its benchmark interest rate until it is clear lower inflation will be sustained" FOMC voting member Governor Christopher Waller said on Tuesday



While conceding that it is ultimately up to the Federal Reserve board to decide the course of rates, Waller thinks cuts should not begin until the Fed are “relatively convinced” inflation was “sustainably” near its 2% goal. Given core CPI is still nearly twice the Fed’s target and CPI rose to 3.4% y/y, a rate cut in March seems highly unlikely in my view.

Still, Fed fund futures still imply a cut in March with a 64.2% probability, although this is down from 76.9% the day prior. This now places a 34.1% probability of a hold in March, up from 19% the day prior. Market pricing now sees just four cuts in 2024, down from five the day prior. But unless the wheels fall of the economy, two to three may be more realistic in my view. And that leaves further upside potential for the US dollar.

US dollar technical analysis and market positioning (weekly chart):​

Traders remain net-short USD futures against all tradable currencies according to the IMM. Whilst exposure may not be at a sentiment extreme by historical standard, sentiment is changing and likely forcing bears to cover their short USD positions and send the dollar higher. And as it retains the highest interest rate against all FX majors barring the New Zealand dollar, it suggests outperformance for the dollar against those currencies.

EUR/USD technical analysis (weekly chart):​

It’s interest to see that EUR/USD stalled just below its 200-week MA in December and formed a weekly shooting star candle. Prices are now back beneath the 200-week EMA – and both averages have provided bearish moves in excess of -4% since May. EUR/UD is just -4.5% lower from its December high, and as market pricing remains too dovish in my view then I retain a bearish bias on the EUR/USD weekly chart and for a break beneath 1.08.

EUR/USD technical analysis (daily chart):​

We saw a clear breakout from a bear flag on the EUR/USD daily chart, in line with yesterday’s bias. The bear flag measures an approximate target near the December low, although 1.08 makes a viable interim target (which also resides near the 1-week implied volatility lower band). From here, the bias remains bearish beneath 1.095. Bears could consider fading into minor moves on lower timeframes, or seek bearish breaks of consolidation or continuation patterns.

AUD/USD technical analysis (4-hour chart):​

The Australian dollar saw an extended move lower on Tuesday, and it is not uncommon to see prices retrace against such a move in the Asian session (especially if stability has been seen at the beginning of the session). RSI 2 and 14 reached oversold levels but are now curling higher as prices try to lift themselves from their lows. Given the heavy volumes during the last hours of NY trade near the cycle lows, bears may be caught short if prices retrace higher. Therefore, bears may want to wait for a retracement before rejoining the bearish trend on the four-hour chart.



The bias is to look for signs of weakness around 66c, or below the 38.2% Fibonacci ration around 0.6635 in anticipation of a move to 0.6550 and 0.6500.

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge






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.