An increase in energy costs that contributes to a larger-than-anticipated change in the headline Consumer Price Index (CPI) indicates that inflation is beginning to moderate. In contrast, the core CPI, for the first time the annual change, has declined below 4% in over two and a half years. Moreover, the December release of a sluggish Producer Price Index (PPI) substantiates that inflationary forces are subsiding.
The Chinese economy is confronted with structural obstacles, as the recently released December activity data indicates, demonstrating a lack of robust economic momentum. Conversely, several significant developing economies have yet to descend significantly into deflation.
Following arduous interest rate increases spanning the last two years, the financial markets are presently observing an increase in optimism as they anticipate an imminent decline. This optimistic perspective is shaped by anticipations of a policy environment with fewer restrictions, which would facilitate a gentle landing.
November marked the third consecutive month of growth in household borrowing as consumers grew more dependent on credit cards. Outstanding consumer credit surpassed $5 trillion for the first time, representing an increase of $23.8 billion. Revolving consumer credit was the principal catalyst for this expansion, contributing $19.1 billion to the overall upswing.
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Forex Technical Outlook for 15 January 2024 to 19 January 2024
Let’s see the list of events to look at this week:
- Claimant Count Change on Tuesday
- CAD CPI m/m on Tuesday
- GBP CPI y/y on Wednesday
- US Retail Sales m/m on Thursday
- AUD Employment Change on Thursday
- Prelim UoM Consumer Sentiment on Friday
Let’s see the market outlook from the weekly forecast:
The EUR/USD ended the trading week at the 1.0950 level, as investors showed disappointment from the latest economic releases. In the first half of the previous week, a lack of market momentum was seen amid top-tiered economic releases awaited for the US and Eurozone.
The EUR/USD failed to maintain momentum after decent market pressure in December 2023. Moreover, the weekly chart suggests a range-bound market where the January low is at 1.0876.
Overall, technical indicators in the weekly EUR/USD chart suggest a lack of a directional bias, where the current price trades below the 200-day Simple Moving Average. Meanwhile, the 20 and 100 SMA levels are closer to the price, with a sideways market.
The daily EUR/USD chart shows possible selling pressure as the price faces selling pressures from dynamic 20-day SMA. Meanwhile, the 100 and 200-day SMA remains directionless, while the Momentum Indicator grabbed sufficient bullish traction from the negative level.
The EUR/USD price reached the 1.1000 level in early January but failed to hold the momentum above it. In that case, a bullish buying pressure above the 1.1000 psychological level could increase the price toward the 1.1120 resistance level.
After a lackluster close to the first week of the new trading year, the pound regained strength against the dollar. Buyers returned to the GBP/USD market, prompted by the expanding monetary policy gap between the US Federal Reserve (Fed) and the Bank of England (BoE), which slowed the US Dollar's rebound.
Despite higher-than-expected US Consumer Price Index (CPI) statistics in December, demand for the US dollar fell as markets continued to factor in a roughly 70% chance of the Fed cutting interest rates in March. The figures showed a 0.3% increase in the headline CPI last month, for an annual growth of 3.4%, exceeding the expected 0.2% and 3.2%, respectively.
Furthermore, market predictions indicate that the Federal Reserve will lower interest rates by around 140 basis points in 2024.
In the daily chart of GBP/USD, the recent price continued pushing higher and moved above the dynamic 20-day EMA level with the confluence support from the 1.2700 psychological level. Moreover, the 14-day RSI moved north, suggesting a bullish continuation opportunity.
In the main chart, the 50 and 200-day Simple Moving Average suggests an upward pressure with a Golden Cross formation.
Based on the market outlook of GBP/USD, the near-term resistance is at the 1.2830 level, below the 1.2900 psychological resistance. In that case, an ongoing bullish continuation with a stable market above this critical resistance could open a long opportunity, targeting the 1.3000 resistance level.
If bulls fail to hold the buying pressure above this line, investors might keep an eye on the 21-day SMA, which is at the 1.2710 level. In that case, downside pressure below this line could lower the price towards the 1.2651 level.
AUD/USD continued pushing down as a correction to the broader bullish leg, where a consolidation below the dynamic 20 DMA is visible.
The AUD/USD weekly chart shows a bearish engulfing pattern from the top, suggesting a bearish continuation opportunity.
The daily chart shows consolidation below the dynamic 20 DMA, suggesting a continuation of the bearish trend. Moreover, the MACD indicator shows a bearish crossover, which could be an early bearish opportunity.
Based on the weekly market outlook of AUD/USD, a daily candle below the 0.6640 static level could be a strong bearish opportunity, targeting the 0.6451 support level.
On the other hand, a bullish continuation needs a strong rebound above the dynamic 20-day EMA, which could increase the price towards the 0.6950 psychological level.
In the previous weekly outlook of USD/JPY, strong buying pressure has come above the dynamic 20-day EMA. However, the price remained sideways throughout the week, which might need additional clues before finding a stable trend.
In the weekly USD/JPY outlook, a bullish continuation is visible from the weekly candlestick formation. However, the 20-week SMA level is still protected, which needs a stable market above it before anticipating a long opportunity.
The daily chart shows a bullish rejection above the dynamic 20 EMA level, which could act as a bullish continuation opportunity. Moreover, a strong reversal is visible at the MACD Signal line, while the Histogram remains stable above the neutral line.
Based on this outlook, a daily candle above the 146.56 resistance level could be a strong bullish trend-trading opportunity, targeting the 151.91 level.
On the bearish side, a rebound with a stable market below the 20-day EMA could lower the price towards the 140.24 support level.
Gold gained momentum on Friday as a result of geopolitical concerns raised by US and UK airstrikes on Houthi insurgency in Yemen. The strikes were intended to deter attacks against Red Sea ships. Gold for February delivery was $32.40 higher at $2,051.60 per ounce.
The raids were in response to warnings sent to the Iran-backed militant organization to stop attacking Red Sea ships with drones and missiles, ostensibly in support of Hamas in its struggle with Israel. According to the US Air Forces Central, the strikes targeted 60 targets in Yemen.
Gold prices were boosted not just by global tensions but also by US inflation data that was less than expected. According to Marketwatch, the US core Producer Price Index remained constant last month, contrary to the expected 0.2% increase. Despite a higher-than-expected rise in consumer prices last month, this data supports forecasts of further US interest rate reduction.
Despite the disappointing PPI figure, the dollar strengthened, with the ICE dollar index rising 0.1 points to 102.39. Treasury yields have fallen, which is a plus for gold, given its lack of interest.
The bullish continuation in the XAU/USD weekly forecast is clear as the recent price trades within an ascending channel. Moreover, the ongoing tension in the Middle East could trigger the technical outlook above the 2089.11 resistance level.
According to Bloomberg data, the recently launched bitcoin exchange-traded funds (ETFs) garnered a significant $655 million net inflows on their first trading day, indicating strong investor demand.
The Bitwise Bitcoin ETF was the top performer in terms of inflows, attracting $238 million. The fund's sponsor had pledged to seed it with up to $200 million in initial money, far above other funds' declared seed capital. Following closely after was the Fidelity Wise Origin Bitcoin Fund, which had $227 million in inflows, and the BlackRock iShares Bitcoin Trust, which received $112 million.
Investors withdrew assets from the Grayscale Bitcoin Trust, a decade-old financial entity that converted to an ETF after trading over the counter. Grayscale experienced net outflows of $95 million.
According to JPMorgan analysts, the most successful funds appeared to be those with the lowest costs, demonstrating that investors make decisions based on pricing. Several funds, including Bitwise and Fidelity, provide 0% management fees for the first year, followed by less than 0.3% costs. The Grayscale ETF, on the other hand, charges a 1.5% fee.
Crypto investors are keeping a tight eye on ETF inflows, hoping that these new funds will channel a significant amount of money from traditional investors into bitcoin, potentially driving up the digital currency's price.