2024-01-01 18:45

How long will the U.S. dollar’s downward correction last? Get all the answers in our first-quarter forecast! US Treasury yields plummeted in the last three months of 2023 on expectations that the Federal Reserve would significantly reduce borrowing costs over the medium term, sending the U.S. dollar reeling to its lowest level in five months. Against this backdrop, EUR/USD and GBP/USD soared, hitting multi-month highs in late December. The pullback in U.S. bond yields triggered a huge rally in the equity space, enabling the main stock market indexes to climb to new records. Gold prices also advanced, ending 2023 above the psychological $2,000 level but slightly off its all-time high– a bullish development for the precious metal which is likely to benefit from the Fed’s pivot. With U.S. yields skewed to the downside and risk-on sentiment in full swing on Wall Street, the U.S. dollar may extend losses over the coming months. This potential scenario could reinforce upward momentum for gold, EUR/USD, GBP/USD and stocks in Q1, but caution is warranted, with certain markets approaching overbought conditions. Different market dynamics are poised to unfold in the near term, potentially bringing about increased volatility and enticing trading setups for major assets. For an in-depth analysis of the variables and drivers that may influence currencies, commodities (gold, silver, oil) and cryptocurrencies in early 2024, explore the Q1 technical and fundamental forecasts put together by DailyFX's team of experts. Q1 TRADING FORECASTS British Pound Q1 Forecast: Can the BoE Temper UK Rate Cut Expectations? This article delves into the fundamental outlook of the British pound, offering an exhaustive analysis of its medium-term prospects. The piece also discusses crucial risk factors that could steer sterling’s trend in the first quarter of 2024. Australian Dollar Technical Forecast: AUD/USD Enters Q1 at Key Resistance This article presents an in-depth analysis of the Australian dollar’s outlook for the first quarter, providing valuable insights into price action dynamics and market sentiment. Bitcoin Q1 Fundamental Outlook – Positive Tailwinds on the Horizon Bitcoin goes into the first quarter of 2024 with two specific events set to determine price action in Q1 – a spot Bitcoin Exchange Traded Fund (ETF) and the run-up into the latest Bitcoin ‘halving’ event. Euro Q1 Technical Forecast: A Mixed Picture EUR/USD closed out 2023 on a positive note, recovering a sizeable chunk of the decline witnessed in the second half of the year. The medium-term trend appears bullish but yield differentials will struggle to motivate a prolonged period of upside potential. Crude Oil Q1 Fundamental Forecast: US Rate Cut Hopes Offer Support Amid Demand Worries Oil prices hit their highest level of 2023 in September but have declined very sharply since, with shaky economic data keeping markets fretting about the demand outlook. USD/JPY Q1 Technical Forecast: Will the US Dollar Downtrend Endure? USD/JPY Q1 Technical Forecast: Will the US Dollar Downtrend Endure? The preceding quarter saw USD/JPY power up to highs not previously seen since mid-1990, thanks largely to those fundamental, interest-rate differentials. Gold, Silver Q1 Forecast: Fundamental Drivers Align but Real Rates Pose a Threat The article focuses on the fundamental outlook for precious metals in the first quarter, focusing specifically on gold and silver prices, taking into account interest rate dynamics, as well as the U.S. dollar’s broader trend. US Equities Q1 Technical Outlook: Stocks in Overbought Territory. Can It Continue? The technical picture is a little hard to read for the S&P 500 heading into the first quarter of 2024, with immediate resistance resting near the record high around the 4,817 level. US Dollar Q1 Fundamental Outlook: A Tale of Two Halves – Weak Start, Strong Finish The Fed’s unexpected dovish pivot is a clear signal that officials want to shift policy in time to engineer a soft landing; in other words, they are prioritizing growth over inflation. For a complete overview of the euro’s technical and fundamental outlook in the coming months, make sure to grab your complimentary Q1 trading forecast now! Q1 TOP TRADE OPPORTUNITIES Q1 Top Trade: Bullish Russell 2000 as Soft-Landing Scenario Gets Traction This article analyzes the technical and fundamental outlook for the Russell 2000 for the first quarter of 2024, examining the main variables that could determine its medium-term prospects. Bullish Gold: Top Trade Q1 2024 There are several factors influencing gold’s price that appear to be pulling in the same direction ahead of Q1 of 2024. These help to form the trading thesis and are outlined in the rest of this article along with technical considerations. Short USD/JPY - Rising Rate Cut Expectations and FX Intervention by the BoJ USD/JPY held the high ground for the first half of Q4 2023 before finally declining from near the 2022 highs. The selloff gained traction following growing chatter toward the end of November regarding a policy shift from the BoJ. Coinbase (COIN) – Growing Tailwinds as Cryptocurrency Interest Swells? Coinbase, the largest cryptocurrency exchange in the US, has seen its shares perform strongly in the second half of this year, rallying from around $46 in early June to a current level of $150. Short GBP/USD - Going Against the Grain: Top Trade Q1, 2024 The British pound enters 2024 on a relatively strong footing against the USD after markets reacted ‘dovishly’ to the Federal Reserve’s more accommodative messaging in the last FOMC announcement. https://www.dailyfx.com/news/forex-markets-q1-outlook-gold-stocks-in-record-zone-eur-usd-gbp-usd-soar-as-usd-breaks-down-20240101.html

2024-01-01 12:00

US Dollar - Market Recap The U.S. dollar, as measured by the DXY index, started the fourth quarter on the front foot, briefly reaching its strongest position in almost a year. These gains were underpinned by the steady and consistent rise in U.S. Treasury yields, catalyzed by bets that the Federal Reserve would keep a restrictive stance for an extended period to restore price stability in the economy. However, the greenback was unable to maintain its upward momentum for long. Shortly after setting a new 2023 high in early October, DXY shifted lower, undercut by the sharp downward correction in real and nominal yields following benign inflation readings. With inflationary forces downshifting, markets began to price in aggressive rate cuts over the next few years in an attempt to front-run the FOMC next easing cycle. The U.S. central bank initially resisted the pressure to pivot, but relented at its December meeting, when it indicated that "talk" of cutting borrowing costs had already begun. The Fed’s pivot accelerated the pullback in yields, sending the 2-year note below 4.40 %, a significant retracement from the cycle high of 5.25%. Simultaneously, the 10-year note plunged beneath the 4.0% threshold, when weeks earlier it was threatening to breach the psychological 5.0% level. In this context, the U.S. dollar index plummeted, hitting its weakest point since August. The chart below shows how U.S. Treasury yields have performed in the fourth quarter. US Treasury Yields Q4 Performance Source: TradingView, Prepared by Diego Colman US Dollar Fundamental Outlook The Fed’s unexpected dovish pivot is a clear signal that officials want to shift policy in time to engineer a soft landing; in other words, they are prioritizing growth over inflation. This bias won’t change overnight, but will likely consolidate further in the near term, so the path of least resistance remains lower for both bond yields and the U.S. dollar, at least for the first couple of months of 2024. Navigational winds, however, could shift in favor of the greenback by the end of the first quarter, when additional data will become available for a more complete assessment of the macroeconomic picture. The significant relaxation of financial conditions observed in November and December, which ignited a powerful surge in stocks, is likely to amplify the wealth effect heading into the new year, helping sustain sturdy household consumption—the key driver of GDP. In this context, the prospect of an economic upswing in the medium term should not be completely ruled out. Any reacceleration in growth should boost employment gains and reinforce labor market tightness, putting upward pressure on wages. In this environment, inflation could settle well above the 2.0% target while staying skewed to the upside, preventing the Federal Reserve from pursuing a forceful easing campaign. Although there is a heightened sense of optimism regarding the U.S. inflation outlook following encouraging CPI and Core PCE reports in the latter part of 2023, it is premature to declare victory. Any pause in progress or an upward reversal of the underlying trend in consumer prices next year could be cataclysmic for sentiment, prompting a hawkish repricing of interest rate expectations. The chart outlines market expectations for monetary policy easing in 2024. Looking for new strategies for 2024? Explore the top trading ideas developed by DailyFX's team of experts 2024 Fed Funds Futures Implied Yields by Monthly Contracts Source: TradingView, Chart Created by Diego Colman Winds May Shift in Favor of US Dollar Late in Q1 As the transition from Q1 to Q2 approaches, traders may finally grapple with the realization that the Fed won't have the flexibility to cut rates as aggressively as once discounted. Adjusting to a new reality and shifting market assumptions, U.S. yields could stage a moderate comeback, fostering optimal conditions for the U.S. dollar to rebound more sustainably against its major peers. https://www.dailyfx.com/news/forex-usd-dollar-q1-fundamental-outlook-a-tale-of-two-halves-weak-start-strong-finish-20231231.html

2024-01-01 06:00

If you're looking for an in-depth analysis of U.S. equity indices, our first-quarter stock market trading forecast is packed with great fundamental and technical insights. Get it now! S&P 500 From a technical standpoint, 2023 has been excellent for the S&P 500 as it flirts with the January 2022 highs just above the 4800 mark. This meteoric rise since November coincided with a dovish tilt regarding rate cut expectations, however even before that the S&P was enjoying a relatively positive year. The technical picture is a little hard to read with immediate resistance resting at the previous high around the 4817 mark. A break beyond this level however makes it difficult as there is no historical price action to monitor with the 5000 psychological level likely to be the next big hurdle. If a retracement does take place immediate support rested at 4639 and more resting just below at the 4600 area. There are further levels of support to the downside which could come into play as well which I will list below. Looking for new strategies for 2024? Explore the top trading ideas developed by DailyFX's team of experts S&P 500 Key Levels to Keep an Eye On: Support Levels: 4600 4435 (20-day MA) 4288 (50-day MA) 4172 (100-day MA) Resistance Levels: 4817 5000 S&P 500 Weekly Chart Source: TradingView, Prepared by Zain Vawda Nasdaq 100 The Nasdaq is even more difficult to read as we are already in uncharted territory as we have already printed fresh highs. If I am looking at the resistance levels up ahead, the lack of historical price action leaves us with little to look at. The effect of psychological levels is well documented hence why I believe the 17000 may prove a tough nut to crack and could lead to some form of retracement. Above this as well I only see potential areas of resistance around key psychological levels and round numbers. If we do have some downside on the Nasdaq, the previous swing high around 15960 is the first key support area and could facilitate a bullish continuation. The 15950 level is about 700 points away which is a decently sized retracement, but if we do break below, then there is a host of support levels between the 15950 and 15000 handles. Nasdaq 100 Key Levels to Keep an Eye On: Support Levels: 15950 15328 15000 14750 Resistance Levels: 17000 17500 18000 18500 Nasdaq 100 Weekly Chart Source: TradingView, Prepared by Zain Vawda https://www.dailyfx.com/news/us-equities-q1-technical-outlook-stocks-in-overbought-territory-can-it-continue-20240101.html

2024-01-01 00:00

Gold Review in a Year of Conflicts and Banking Stress Gold showed just how volatile it can be throughout 2023. The precious metal declined as the dollar and Treasury yields rose in Q3 but reversed course in Q4 when the greenback and yields turned sharply lower. Gold also revealed its allure as a safe-haven asset during the banking turmoil in March as well as the early days of the Israel-Hamas war, seeing the commodity eventually obliterate the previous all-time high. Expectations heading into Q1 2024 is for US growth to moderate and for inflation to record further progress, putting pressure on the Fed to cut elevated interest rates. Overall, the fundamental landscape favours bullish potential or at the very least, appears supportive of precious metals. Weaker USD and Declining Treasury Yields to Support Gold/Silver Silver and gold tend to move in the same direction and respond to similar developments/fundamentals hence, the remainder of this article delves into topics that relate to both precious metals. Gold inherently has an inverse relationship with US Treasury yields as well as the US dollar. When the dollar weakens this stimulates gold purchases for foreign buyers and since gold offers no yield, the metal gains in attractiveness whenever yields drop as the opportunity cost for holding gold declines. Despite the Fed maintaining the possibility of another rate hike, markets have decided that the pathway for the Fed funds rate is to the downside. This is portrayed via the sharp drop in Treasury yields and the subsequent move lower in the dollar but also derived from implied rate cut probabilities from the Fed funds futures market. The chart below reveals how far gold prices have risen while USD and yields have fallen. Therefore, even if gold prices were to stall, the lower trend in yields and USD are likely to keep XAU/USD prices supported at the very least. Spot Gold Price (gold line) with DXY (green) and US 10-Year Yield (blue) Overlayed Source: TradingView, Prepared by Richard Snow The broader commodity complex is showing signs of recovery after months of a general decline. A lower US dollar and the prospect of interest rates being drawn back faster than the Fed anticipated, has provided a lift for the sector. This is according to the Bloomberg Commodity Index which is a broadly diversified index distributed by Bloomberg tracking futures contracts on physical commodities. The combined weighting of gold and silver prices constitutes around 20% of the index meaning precious metal prices maintain a notable representation within the overall calculation. Bloomberg Commodity Index 2023 Showing Early Signs of a Recovery Source: Refinitiv, Bloomberg, Prepared by Richard Snow Acquire the knowledge needed for maintaining trading consistency. Grab your "How to Trade Gold" guide for invaluable insights and tips! Gold’s Allure as a Safe Haven May Add to Existing Tailwinds We saw in March and early October how sensitive gold is to systemic and geopolitical threats. In March there was the very real possibility of a banking crisis and in October the conflict surrounding Israel and Hamas resulted in war. In 2024 market participants will need to keep tabs on developments between China and Taiwan but also the growing tensions between North Korea and Japan, South Korea and the US. Real Yields May Pose a Risk to the Outlook One of the risks to a bullish outlook for gold throughout Q1 is the prospect that the Fed funds rate remains above 5% while inflation heads lower. Such an outcome raises real yields (nominal interest rate – inflation), which could draw capital away from the non-yielding gold and silver in favour of money market alternatives. https://www.dailyfx.com/news/gold-silver-q1-forecast-fundamental-drivers-align-but-real-rates-pose-a-threat-20231231.html

2023-12-31 18:00

This article zeroes in on the yen's technical outlook for Q1, 2024. Unlock a more detailed analysis of the Japanese currency's fundamental profile for the next three months with our free first-quarter forecast. Request the guide now! USD/JPY Needs to Retake Resistance at 147.48 The preceding quarter saw USD/JPY power up to highs not previously seen since mid-1990, thanks largely to those fundamental, interest-rate differentials. In that context the retreat since has been very modest, but it still means the pair is set to end this three-month period fairly close to where it started (USD/JPY was at 145.80 at the start of September). The big question as we head into 2024 is the extent to which the current Dollar downtrend endures. The pair looks to have solid support ahead of the fourth Fibonacci retracement of the rise to November’s highs from the lows of January 2023. That comes in at 137.66 and the Dollar has bounced twice before a test of that in the past six months. Still, Dollar bulls will probably need to retake the territory lost in December’s sharp falls if they’re going to convince. That will mean retaking resistance at 147.48. USD/JPY Daily Chart Source: TradingView, Prepared by David Cottle EUR/JPY May Take its Clues From EUR/USD The EUR/JPY chart looks broadly similar to USD/JPYs, but it must be unlikely that both will continue in lockstep should the Fed start to cut interest rates while the European Central Bank keeps them on hold. The Euro has bounced back into a wide trading band that broadly defined trade between late August and early November between 157 and 159.77. As the new year gets under way it will probably be instructive to watch the direction of any new break of this range for near-term directional cues. EUR/USD remains in its own uptrend, in place since early October, and the EUR/JPY cross may well take its cues from this, at least in the early months of 2024. EUR/JPY Daily Chart Source: TradingView, Prepared by David Cottle https://www.dailyfx.com/news/forex-usd-jpy-q1-technical-forecast-will-the-us-dollar-downtrend-endure-20231231.html

2023-12-31 17:00

Gain a competitive edge in 2024: Access DailyFX's Q1 guide to unlock potential trading opportunities and market insights. British Pound Fundamental Backdrop The British pound enters 2024 on a relatively strong footing against the USD after markets reacted ‘dovishly’ to the Federal Reserve’s more accommodative messaging in the last FOMC announcement. That being said, the most recent data from the UK showed a stark shift in the inflation trend whereby both headline and core inflation metrics fell sharply. Up until then, the UK was touted an outlying economy with sticker inflation than its developed market counterparts. The Bank of England (BoE) now has a more complex task of timing interest rate cuts so as to not shock the economy or possibly reignite inflationary pressures. Currently, markets expect the first rate cut to begin in May 2024 (refer to table below) with approximately 134bps of cumulative rate cuts by year-end. An extension of lower inflation could bring forward this first round of cuts as soon as February. Bank of England Interest Rate Probabilities Source: Refinitiv, Prepared by Warren Venketas From a US dollar perspective, the almost automated reaction by markets to a dovish Fed Chair Jerome Powell could be too much too soon. Considering external risk drivers including the wars in Ukraine and Gaza, any slight escalation could bring the safe haven appeal of the greenback into play. Implied Fed funds futures suggest 150bps of rate cuts by December 2024 and this projection has seen some pushback from certain Fed officials. The risk to current pricing is skewed towards a lesser easing cycle which could ultimately see GBP/USD fall. Curious to learn how retail positioning can shape the short-term trajectory of GBP/USD? Our sentiment guide has all the relevant information you need. Grab a free copy now! GBP/USD Technical Analysis Weekly GBP/USD price action below can be seen tentatively testing the 200-week moving average (blue) after failing a breakout in mid-July 2023. I believe we will see a breach above this level in due course but may not be as early as Q1. That being said, incoming data is of utmost importance and a confirmation close above, could spark a continuation of the recent upside rally. GBP/USD Weekly Chart Source: TradingView, Prepared by Warren Venketas Cable’s consolidation around the 1.2746 swing high shows bearish/negative divergence as the Relative Strength Index (RSI) ticks lower coming out of the overbought territory. While I do not expect major moves in Q1, markets should pull back somewhat in early Q1 before settling around current levels towards the latter part of the quarter. GBP/USD Daily Chart Source: TradingView, Prepared by Warren Venketas Key resistance levels: 1.2900 1.2848 1.2746 Key support levels: 1.2500/200-day MA (blue) 1.2400/50-day MA (yellow) https://www.dailyfx.com/news/forex-short-gbp-usd-going-against-the-grain-top-trade-q1-2024-20231231.html