2023-12-14 18:40

US DOLLAR FORECAST The U.S. dollar extends its retracement on Thursday, dragged lower by falling U.S. Treasury yields The Fed’s pivot has sparked a dovish repricing of interest rate expectations This article examines the technical outlook for EUR/USD and USD/JPY Most Read: US Dollar Sinks on Fed Dovish Pivot, Setups on EUR/USD, USD/JPY, GBP/USD The U.S. dollar, as measured by the DXY index, extended its retracement on Thursday, sinking below that 102.00 mark and reaching its lowest level since early August. This selloff was the result of the collapse in U.S. Treasury yields, triggered by the Fed’s dovish posture at its December meeting, which seems to have caught investors, who were expecting a different outcome, completely off guard. To provide background information, the FOMC announced yesterday its last monetary policy decision of the year. Although the institution kept borrowing costs unchanged at a 22-year high, it gave the first signs of an impending strategy shift, with Powell reinforcing the idea of a pivot by admitting that talk of rate cuts has begun. The Fed’s Summary of Economic Projection was also quite dovish, indicating 75 basis points of easing in 2024 and 100 basis points in 2025, a steeper path of rate cuts than contemplated in September. Against this backdrop, yields have plummeted in a matter of days, triggering a large downward shift in the Treasury curve, as highlighted in the chart below, fostering a bearish environment for the greenback. Will the US dollar keep dropping or reverse to the upside? Get all the answers in our quarterly outlook! US TREASURY YIELD CURVE Source: TradingView With the broader U.S. dollar in freefall, EUR/USD has rallied back towards the 1.1000 handle, with gains boosted by the ECB’s less dovish relative stance compared to that of the FOMC. GBP/USD has also soared, reaching its strongest levels in nearly four months. Meanwhile, Meanwhile, USD/JPY has plummeted below its 200-day simple moving average, activating a bearish signal for the pair. Stay ahead of the curve! Request your complimentary EUR/USD trading forecast for a thorough overview of the pair’s technical and fundamental outlook EUR/USD TECHNICAL ANALYSIS EUR/USD extended its advance on Thursday, breaking above a key Fibonacci ceiling and pushing towards cluster resistance in the 1.1015 area. With bullish momentum in its favor, the pair could soon breach this barrier, paving the way for a rally towards 1.1090. On further strength, we can't rule out the possibility of a retest of the July highs. Conversely, if the upward impetus diminishes and prices shift downwards, initial support zone to keep in view rests around 1.0830, which coincides with the 200-day simple moving average. There's potential for the exchange rate to stabilize near these levels on a pullback before resuming its ascending trajectory; however, a clean and decisive breakdown might lead to a decline towards 1.0765. EUR/USD TECHNICAL CHART EUR/USD Chart Prepared Using TradingView Interested in learning how retail positioning can shape the short-term trajectory of USD/JPY? Our sentiment guide explains the role of crowd mentality in FX market dynamics. Get the guide now! USD/JPY TECHNICAL ANALYSIS USD/JPY plummeted on Thursday, breaking below its 200-day simple moving average and briefly hitting its weakest point since late July near 140.70. This technical floor must hold at all costs; otherwise, sellers could become emboldened to launch a bearish attack on trendline support at 139.75. Further weakness could prompt a move towards 137.50. On the other hand, if USD/JPY resumes its rebound unexpectedly, overhead resistance is located at 142.45 and 144.60 thereafter. Buyers might encounter challenges propelling the exchange rate above the latter threshold, but breaching it could trigger a rally towards the 146.00 handle. Continued upward momentum would draw attention to 147.20. USD/JPY TECHNICAL CHART USD/JPY Chart Created Using TradingView https://www.dailyfx.com/news/forex-usd-dollar-demolished-by-fed-s-dovish-pivot-tech-setups-on-eur-usd-and-usd-jpy-20231214.html

2023-12-14 15:28

AUD/USD ANALYSIS & TALKING POINTS Aussie stays bid despite solid US retail sales. Australian and US PMI’s in focus tomorrow. AUD/USD breakout may be short-lived as bearish divergence comes into play. AUSTRALIAN DOLLAR FUNDAMENTAL BACKDROP The Australian dollar saw a massive uptick as the pro-growth currency capitalized on the Federal Reserve’s interest rate decision yesterday. The announcement to hold rates was not unexpected but the dovish tone by Fed Chair Jerome Powell came as a surprise. Perhaps the signs were there when the Fed’s Waller shifted his outlook recently but with the rate of disinflation slowing, I expected some pushback to the current dovish market pricing. This may be the Fed’s way of engineering a soft landing as opposed to being overly restrictive for too long. That being said, timing will be key moving forward in terms of rate cuts and scale as prices can easily blowout once again thus undoing much of the central bank’s efforts to bring down inflationary pressures in the US. The announcement subsequently rippled across financial markets and rate expectations including the Reserve Bank of Australia (RBA) where cumulative rate cuts in 2024 now stand around the 50bps mark. Earlier this morning, Australian labor data showed some resilience which strengthened the Aussie dollar despite the uptick in the unemployment rate which reached yearly highs. US retail sales data then pushed back to the Fed’s dovish narrative by beating forecasts suggesting that consumers are still prepared to spend in the current tight monetary policy environment. Tomorrow’s Australian PMI, US PMI and US industrial production data will close out the trading week but is unlikely to move the needle too far as markets continue to digest the recent shift by the FOMC. TECHNICAL ANALYSIS AUD/USD DAILY CHART Chart prepared by Warren Venketas, TradingView AUD/USD daily price action above has broken above both the falling wedge pattern (dashed black lines) and the long-term trendline resistance (black) zone with the pair now peeking above the 0.6700 psychological handle for the first time since August. A confirmation close above this level could prompt a move higher towards the 0.6822 swing high. That being said, the Relative Strength Index (RSI) indicates bearish/negative divergence by the lower highs, and may lead to a weekly close back below trendline resistance. 0.7000 0.6822 Key support levels: 0.6700 Trendline resistance 0.6596 200-day MA 0.6500 IG CLIENT SENTIMENT DATA: BULLISH (AUD/USD) IGCS shows retail traders are currently net SHORT on AUD/USD, with 53% of traders currently holding SHORT positions. https://www.dailyfx.com/news/forex-aud-propped-up-by-australian-robust-jobs-report-fomc-wv-20231214.html

2023-12-14 13:57

ECB RATE DECISION: European Central Bank Keep Rates Steady and Takes a Tentative Step toward the Doves. ECB Sees 2023 Inflation at 5.4%, 2024 at 2.7% and 2025 at 2.1%. ECB's PEPP reinvestments will continue in full during the first half of 2024. EUR/USD Ticks Higher Immediately but Appears to be Struggling to Hold onto Gains. Where to Next? To Learn More About Price Action, Chart Patterns and Moving Averages, Check out the DailyFX Education Section. The European Central Bank has kept interest rates steady today while downgrading its inflation forecasts. The Central Bank also signaled an early conclusion to its last remaining bond purchase scheme, all as part of efforts to combat high inflation. The ECB stated while inflation has dropped in recent months, it is likely to pick up again temporarily in the near term. According to the latest Eurosystem staff projections for the euro area, inflation is expected to decline gradually over the course of next year, before approaching the Governing Council’s 2% target in 2025. Overall, staff expect headline inflation to average 5.4% in 2023, 2.7% in 2024, 2.1% in 2025 and 1.9% in 2026. Compared with the September staff projections, this amounts to a downward revision for 2023 and especially for 2024. The confession by the Central Bank regarding a possible uptick in inflation in the near term saw the Central Bank reiterate the need to keep rates at the current level for a sufficient amount of time. The ECB also said it expected that economic growth would remain subdued in the near term with the economy expected to recover because of rising real incomes. On the growth front the ECB projections estimate 0.6% for 2023 to 0.8% for 2024, and to 1.5% for both 2025 and 2026. The ECB Press Conference Begins Shortly. ***UPDATES TO FOLLOW**** LOOKING AHEAD The European Central Bank (ECB) face the toughest task in comparison to the BoE and the Federal Reserve. The slow growth in the Euro Area and technical recession hints at more aggressive rate cuts in 2024 which is in stark contrast to what we just heard from the Bank of England (BoE). The comments from the ECB today do not signal a great deal of optimism with the Central Bank warning that economic growth is to remain subdued in the near term. Not a lot of pushbacks from the ECB, I did expect more and something in a similar vain to Fed Chair Powell. The downward revisions to inflation were not as significant as expected and this in part could explain the initial bout of Euro strength following the announcement. MARKET REACTION The initial reaction on EURUSD saw a 30-pip jump toward the daily high around the 1.0940 handle. As time passed however the euro began to lose it shine and surrendered some of its gains. Can the Euro continue its advance against the Greenback? EURUSD Daily Chart Source: TradingView, prepared by Zain Vawda EURUSD has enjoyed a strong rally this week, in particular yesterday following the FOMC. The 1.1000 level remains a key stumbling block for further upside with the 1.0700 level a key area of support. These two levels could keep EURUSD rangebound for some time if price fails to break higher than the 1.1000 mark today. IG CLIENT SENTIMENT IGCSshows retail traders are currently SHORT on EURUSD, with 55% of traders currently holding SHORT positions. At DailyFX we typically take a contrarian view to crowd sentiment, and the fact that traders are short suggests that EURUSD may find the downside limited before price continues moving higher. https://www.dailyfx.com/news/ecb-keep-rates-steady-with-tentative-inflation-downgrades-eur-usd-rises-20231214.html

2023-12-14 12:29

GBP/USD Analysis and Chart BoE monetary policy left unchanged, 3 members vote for a 25bp hike. Fed’s dovish pivot sends global bond yields slumping to multi-month lows. Most Read: US Dollar Sinks on Fed Dovish Pivot Learn How to Trade Economic Releases with our Complimentary Guide The Bank of England left all monetary policy settings unchanged today, as expected, for the third meeting in a row, while three MPC members continue to push for another 25 basis point rate hike. BoE Governor Bailey continued to press forward the central bank’s case that UK inflation was still too high and that rates would be hiked if needed, and that the current restrictive policy would likely be needed for an extended period of time. Governor Bailey’s hawkish stance is in stark contrast to last night’s FOMC outcome where Fed Chair Powell left the market in no doubt that the US central bank will cut rates in 2024. The Fed’s prediction of three 25 basis points cuts next year however is in sharp contrast to current market pricing that sees a total of 150 basis points of rate cuts in 2024 with the first quarter-point cut seen at the March FOMC meeting. Current UK rate forecasts differ from the Bank of England’s hawkish view with the first 25bp rate cut set to be announced at the March BoE meeting with a total of 113bps of cuts seen in 2024. BoE Rate Expectations Cable picked up further after today’s announcement and tested 1.2700 against the US dollar. The US dollar is weak today after last night’s FOMC meeting and cable may well test the November 29 high at 1.2733 in the near term. A break above here would see the pair back at levels last traded at the end of August. GBP/USD Daily Price Chart Chart using TradingView GBP/USD retail trade data shows 49.23% of traders are net-long with the ratio of traders short to long at 1.03 to 1.The number of traders net-long is 8.40% lower than yesterday and 11.30% lower than last week, while the number of traders net-short is 0.09% higher than yesterday and 5.46% lower than last week. What Does Changing Retail Sentiment Mean for GBP/USD Price Action? What is your view on the British Pound – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1. https://www.dailyfx.com/news/hawkish-boe-leaves-rates-unchanged-gbp-usd-breaks-above-1-2700-20231214.html

2023-12-14 11:00

Article by IG Chief Market Analyst Chris Beauchamp Dow Jones, Nasdaq 100, CAC 40 - Analysis and Charts Dow surges through 37,000 The index shot to a record high last night, closing above 37,000 for the first time in its history. The dovish tone of the FOMC press conference provided fuel for the rally, capping a remarkable period for the index since late October. Momentum is a powerful force in markets, as we have seen since late October, and so while the price looks overextended in the short term, we could see further gains as positive seasonality kicks in. A pullback might begin with a reversal below the previous highs at 36,954, and could then head back towards the summer highs around 35,690, but at present bearish momentum has yet to show its hand. Dow Jones Daily Chart Nasdaq 100 targeting previous peak For once the Nasdaq 100 is not the one leading the charge to new highs, but it has still enjoyed an impressive bounce over the past two months.It is now targeting the record highs at 16,769, with a move above this taking it into uncharted territory. As with the Dow, the index looks overstretched in the short term, but there is little sign of a move lower at present. Some initial weakness might target 16,000, or down to the 50-day SMA (currently 15,423). Nasdaq 100 Daily Chart CAC40 hits new record This index is pushing to new highs too, having cleared trendline resistance last week. The buyers have seized control over the past week, with any intraday weakness being seized upon as a buying opportunity. In the event of a pullback, the 7587 and then 7525 July highs would be the initial areas to watch for support. CAC 40 Daily Chart https://www.dailyfx.com/news/dow-nasdaq-100-and-cac40-all-make-strong-gains-20231214.html

2023-12-14 10:14

FOMC Post Event Analysis Fed keeps rate hike on the table as insurance during a dovish meeting A bearish USD and hopes of a major policy pivot in Japan highlight USD/JPY US stocks hardly require a reason to rally but got one anyway The analysis in this article makes use of chart patterns and key support and resistance levels. For more information visit our comprehensive education library Fed Keeps Rate Hike on the Table as Insurance During a Dovish Meeting Jerome Powell spent the majority of the press conference talking about progress being made on the inflation front, the likelihood we have reached peak interest rates and an economy that is likely to ease in 2024 alongside the labour market. The Fed Chairman also admitted that the topic of interest rate cuts is coming into view which is as close as you’re likely to get to an admission that the committee believes it has done enough as far as the tightening cycle is concerned. The updated summary of economic projections revealed an anticipated 75 basis points worth of cuts next year, which only emboldened the Fed funds futures market to price in 150 basis points in cuts for 2024 – weighing on the US dollar. Inflation forecasts were also revised lower in light of recent progress on more sticky measures of inflation like services inflation ex-housing and core measures of inflation. Economic growth was revised substantially higher for 2023 to account for the phenomenal performance in Q3, while question marks remain around Q4 which is expected to moderate to a more sustainable level. Source: US Federal Reserve Bank, prepared by Richard Snow USD Extends Bearish Trend – Trading Below Key Marker The US dollar surrendered recent gains in the wake of the FOMC statement and subsequent press conference as did bond yields. With the prospect of another rate hike fading away, the greenback continues to sell-off, even this morning. DXY dropped below the 200-day simple moving average (SMA), taking out the key 103.00 level in the process. Daily Chart: US Dollar Basket (DXY) Source: TradingView, prepared by Richard Snow Are you new to FX trading? The team at DailyFX has curated a collection of guides to help you understand the key fundamentals of the FX market to accelerate your learning : US bond yields were also weaker, having a ripple effect in other major economies where sovereign yields moved lower too. The 10- year yield has shed an entire percentage point since the late October peak when inflation data had managed to surprise to the upside to keep chances of that final rate hike alive. US 10-Year Treasury Yields Source: TradingView, prepared by Richard Snow A Bearish USD and Hopes of a Major Policy Pivot in Japan Highlight USD/JPY It is no surprise to see the USD/JPY bear trend accelerate after the FOMC announcement. Traders have been adding to bets that the Bank of Japan (BoJ) is nearing a historic shift in its ultra-loose monetary policy framework which has wide ranging ramifications for global markets as the carry trade is under threat. At a time when rate expectations in the US are on the decline, Japan is potentially looking to raise rates in the first half of next year if the decision-making body is convinced of consistently high inflation with wage growth to match. The weaker dollar combined with anticipated yen appreciation means that USD/JPY is shaping up to be a crucial FX pair into year end and particularly for 2024. The pair erased all recent gains stopping short of the 200 SMA but this morning managed to conquer it. The current level of support is at 141.50, followed by 138.20 – a notable level of support in June and July as well as providing a pivot point (as resistance) in March. Dynamic resistance appears at the 200 SMA in the event of a pullback. USD/JPY Daily Chart Source: TradingView, prepared by Richard Snow US Stocks Hardly Require a Reason to Rally but Got one Anyway US equities soared higher in the aftermath of the FOMC event despite trading well into overbought territory. US Indices have completed an impressive recovery, reclaiming lost ground since the August decline and then extending even higher to mark a new yearly high. The S&P 500 is 2.3% off the all-time high and with interest rate cuts firmly in view, it is likely we get there. Google’s launch of its rival to Chat-GPT, Gemini, has reignited the AI hype train to add to bullish factors in favour of further gains in the tech heavy index. 4818 is the next level of resistance but the big question around any let off in the bullish run remains unanswered. It would be a monumental effort to print an all-time high without taking a breather from here and so 4607 is the mark to look out for is we are to see the index taking a breather before the next advance. However, current momentum is yet to show a conclusive momentum shift, meaning further gains from such extended levels remain a possibility. S&P 500 Daily Chart Source: TradingView, prepared by Richard Snow https://www.dailyfx.com/news/fomc-roundup-dovish-fed-signals-end-to-hiking-cycle-improves-risk-appetite-20231214.html