The United Kingdom experienced an economic stalemate during the third quarter, as evidenced by the stagnant Q3 GDP on a quarter-over-quarter basis. Despite exceeding the consensus forecast that anticipated a slight decrease, the report's specifics presented a less sanguine picture.
Weaknesses in business investment, consumer spending, and government expenditure all indicated a significant contraction in domestic demand. Notwithstanding this, it is expected that the United Kingdom's economy will enter a moderate recession in late 2023 or early 2024.
A minority of central banks, including the Reserve Bank of Australia (RBA), persist in gradually increasing interest rates. In contrast, the Federal Reserve and other major central banks have maintained their current stances. The RBA resumed its monetary tightening cycle this week with a 25-basis-point increase in the policy rate to 4.35%, following a hiatus since July.
Furthermore, in conjunction with the 2020 Census findings, the U.S. Census Bureau unveiled its initial population projections for the period lasting until 2100. The projections above indicate that population growth is expected to halt in the forthcoming decades, culminating in a zenith of 370 million in 2080, followed by a subsequent decline.
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Forex Technical Outlook for 13 November 2023 to 17 November 2023
Let’s see the list of events to look at this week:
- GBP Claimant Count Change on Tuesday
- The US CPI m/m on Tuesday
- AUD Wage Price Index q/q on Wednesday
- The UK CPI y/y on Wednesday
- The US Core PPI m/m on Wednesday
- Empire State Manufacturing Index on Wednesday
- Core Retail Sales m/m on Wednesday
- AUD Unemployment Rate on Thursday
- GBP Retail Sales m/m on Friday
Let’s see the market outlook from the weekly forecast:
The EUR/USD passed a corrective week due to the absence of significant economic events. As a result, the price of this currency pair remained lower below the 1.0700 critical zone. However, the price tried to overcome the 1.0700 peak this week but failed due to the stronger US Dollar and investors might expect to continue the sentiment this week.
The EUR/USD price remained within a limited range by creating higher highs and lower lows in the weekly chart. Moreover, the weekly price shows a mildly bearish momentum below the 100 SMA, while the 20-day EMA shows a bearish slope. Meanwhile, technical indicators have lost positive momentum and returned to a negative level, which signals a possible bearish pressure in the coming days.
In the daily chart, the EUR/USD price shows a bullish continuation above the 20-day SMA, which is above the 1.0620 support level. Moreover, the Momentum Indicator suggests a bearish continuation but above the 100 lines, while the 14-day RSI is at the 55.00 level, signaling an absence of buyer interest.
On the bearish side, the next support level could be found at the 1.0640 level, which is above the 1.0600 psychological level. Below these levels, investors might find the next target area is at 1.0447, a critical yearly low.
On the bullish side, bulls should overcome the significant barrier of the 1.0755 level, which could open room for reaching the 1.800 psychological level.
The GBP/USD pair declined over the course of the week, as a strengthened dollar fuelled concerns that higher levels of US inflation might persist. The anticipation above increased the probability that the Federal Reserve would execute additional restrictive policies, particularly in light of the central bank's unforeseen aggressive remarks made recently.
The stagnant UK GDP in the third quarter further exacerbated the pressure on the pound, suggesting a state of economic stagnation. Despite this, there are some encouraging indications that a recession will not occur now.
The upcoming week will witness the market redirect its attention towards several significant economic indicators originating from the United Kingdom. The labor market report is scheduled for Tuesday, the CPI for Wednesday, and retail sales for Friday.
In the daily chart of EUR/USD, the bearish continuation continues after last week’s recovery to the 200-day Simple Moving Average level. Moreover, the current 200-day SMA remained with a descending momentum, which is a signal of selling pressure.
Moreover, the weekly price showed a complete bearish recovery from the weekly open and closed bearish. Moreover, the dynamic 20-week EMA works as a strong resistance on the top, which could validate the bearish possibility.
Overall, the GBP/USD price remained on track for the biggest weekly loss as the latest weekly candle closed below the 1.2206 level. Based on this outlook, the downside pressure might extend this week, where the first support level to test is the 1.2154 level before reaching the 1.2095 level.
On the bullish side, investors should find the price above the 1.2240 level with a daily candle, which could open a long possibility, targeting the 1.2291 level.
AUD/USD showed a bearish correction in recent days. The main reason for the selling pressure is the dovish tone from the RBA regarding the future rate hike possibility.
In the daily AUD/USD price, a bullish range breakout pushed the price higher at the September high to grab the buy-side liquidity. As a result, an immediate selling pressure has come at the congestion area, which suggests a corrective price action.
Based on this outlook, an upward pressure with a daily close above the dynamic 20 EMA could be a long opportunity, targeting the 0.6511 level.
On the other hand, a sharp downside pressure below the 0.6286 level could be a strong bearish opportunity, targeting the 0.6100 psychological level.
The USD/JPY experienced a surge from the 128.00 level in March 2022, a historically unfavourable position. The increase in USD/JPY from 128.00s coincided with the initial interest rate rise by the Federal Reserve.
It is not anticipated that the Bank of Japan (BOJ) will intervene shortly, allowing the USD/JPY exchange rate to fluctuate within the existing market averages.
The most significant development for USD/JPY occurred on August 2, during Uchida's speech, when it was revealed that the BOJ's rate reduction from -0.1 to -0.8 would amount to a mere 10 percentage points if it were to increase rates. Regarding interest rates, the BOJ will maintain a pessimistic outlook for the foreseeable future.
Although Japan's inflation rate is a factor, the BOJ does not currently perceive an imminent need to raise interest rates or engage in ongoing deliberations.
In the weekly USD/JPY price, a bullish recovery is seen as the latest candlestick formed as an inside bar within a strong bullish candle.
On the daily candlestick chart, the upward continuation is solid as the dynamic 20 EMA is backing the buying pressure at the support level.
Considering the action from the BoJ, we may expect the upward pressure to continue, aiming for the 153.37 Fibonacci Extension level.
On the bearish side, some minor downside momentum might come but a bearish exhaustion from the 151.70 to 152.50 area is needed.
Gold (XAU/USD) showed a deeper correction in the last week, pushing the price below the monthly low of 1950.00. However, multiple attempts and failures above the 2000.00 mark by bulls pushed the price down. Now, investors' sentiment turned to the CPI release and Fed officials’ comments this week.
The 14-day RSI shows a loss of bullish pressure in the XAU/USD daily chart. As a result, a strong support level has formed at the 1925.00 to 1930.00 area, as the 200-day and 100-day SMA converge in this zone.
Therefore, if Gold falls below this critical support area, we may expect the price to exceed the 1900.00 psychological level. Moreover, the crucial 38.2% Fibonacci Retracement level from the recent swing is the 1875.00 area, which could be the next sellers’ target.
On the bullish side, the price should overcome the 1960.00 static level before aiming for the 1975.00 and 2000.00 levels.
Year-to-date, Bitcoin (BTC) has increased by 121% due to anticipation of ETF approval. A similar trend remains probable, particularly concerning the SEC's position and the approaching ETF approval window.
According to data from CoinGlass, an abrupt 6% sell-off on November 9 eliminated $1.6 billion in open interest and caused approximately $500 million in total liquidations.
Bitcoin has risen to 38,000.00 as the positive impact of ETF approval news has counterbalanced the selling pressure caused by the weekly breaker. A lack of response from the SEC or delays in ETF approval, on the other hand, could reverse this trend.
The potential pullback is further supported by the Momentum Reversal Indicator (MRI), which issues a red "one" sell signal and predicts one to two down candlesticks.
By comparing the period following the COVID-19 pandemic in March 2020, during which Bitcoin surged 174% before a 15% decline precipitated by an analogous red "one" sell signal, the present projection reveals the possibility of a return to 34,000.00. This level coincides, not coincidentally, with the newly established FVG, spanning 30,300.00 to 34,000.00.
Bitcoin has filled the Fair Value Gap (FVG) between 34,243.00 and 37,386.00 according to the weekly chart. By filling this void, which is situated near the midpoint of the weekly bearish breaker and extends from 28,805.00 to 41,330.00, a balanced price delivery is established.
The bearish breaker signifies an inverted demand zone where bulls are confined and attempting to escape. A selling frenzy could be triggered by a retest of this zone from below, as was observed in April and June when retests resulted in nearly 20% corrections.
Initiating the subsequent stage of the bullish movement may be contingent, which may aim for the psychological 40,000.00 threshold. Beyond this, at 46,680.00, is a critical resistance level that poses a formidable obstacle for supporters of Bitcoin.