The data released last week suggests that the progressive reduction of price pressures is strengthening consumer resilience. Notwithstanding the enduring increase of the core Consumer Price Index (CPI) at an annual rate of 4.0% in November, indicating a possible disinflation.
The transition from rate hikes to rate cuts is presently underway among the G10 central banks, as evidenced by the European Central Bank, Bank of England, and Swiss National Bank all of which have maintained unchanged interest rates this week.
A relatively robust Q4 Tankan survey indicates that economic development in Japan is on the mend. In contrast, the most recent economic data from China suggests that the country's economy is positioned to end the year on a note of stability rather than strength.
The Federal Open Market Committee (FOMC) unanimously decided to maintain the Fed funds target range at 5.25 to 5.50 percent, as anticipated. At this third meeting in a row, the Committee adhered to a consistent policy stance.
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Forex Technical Outlook for 18 December 2023 to 22 December 2023
Let’s see the list of events to look at this week:
- AUD Monetary Policy Meeting Minutes on Tuesday
- JPY Monetary Policy Statement on Tuesday
- CAD CPI m/m on Tuesday
- GBP CPI y/y on Wednesday
- CB Consumer Confidence on Wednesday
- US Final GDP q/q on Wednesday
- US Unemployment Claims on Thursday
- GBP Retail Sales m/m on Friday
- Core PCE Price Index m/m on Friday
- Revised UoM Consumer Sentiment on Friday
Let’s see the market outlook from the weekly forecast:
Madis Muller, a policymaker at the ECB, reaffirmed that it was premature to declare victory over inflation. Similarly, Francois Villeroy de Galhau, President of the Bank of France and a member of the ECB Governing Council, acknowledged that no policymakers proposed interest rate cuts throughout the policy deliberations in December.
Following the statement by Fed Chairman Jerome Powell that a policy pivot should be discussed, the hawkish posture of the ECB highlighted the possibility of a policy divergence between the European Central Bank and the Federal Reserve.
S&P Global will release preliminary PMI surveys for the Eurozone and the United States later. Although these reports may elicit market responses, anticipating a sustained decline in the EUR/USD may be considered excessively hazardous.
In the weekly chart of EUR/USD, the overall market momentum is bullish as the latest weekly candle closed above last week’s high. Moreover, the existing market trend is bullish, supported by a 20-day EMA and bullish RSI.
In the daily chart, the price failed to overcome the 1.1015 resistance level, which increased the possibility of a bearish correction. In that case, investors should closely monitor how the price trades at the 20-day EMA, where a break below the 1.0515 static level could be a bearish opportunity.
On the other hand, investors should anticipate a bullish continuation, which needs a stable market above the 20 EMA support. A daily candle above the 1.1015 level could be a long opportunity, targeting the 1.1254 resistance level.
In light of a decelerating trend in wage inflation in the United Kingdom, the Bank of England (BoE) refrained from adopting a dovish position. This determination was made after maintaining the key rate at 5.25%.
Monetary policy is anticipated to remain restrictive for an "extended period of time," the BoE reaffirmed in its policy statement. Governor Andrew Bailey stated that it is imprudent to conclude that interest rates have peaked.
The GBP/USD price showed a bullish continuation throughout the week, where the current price hovers above the dynamic 20-day Exponential Moving Average.
In the weekly candlestick chart, the latest candle closed above last week’s high, followed by a bullish trend. It is a primary indication of a bullish continuation, which needs to match the daily trend.
As the recent price reached near the 1.2818 critical resistance level with a potential divergence with the RSI. In that case, a downside correction is possible this week, but investors need to find the daily candle below the 1.2500 level before anticipating a bearish trend.
On the bullish side, an immediate bullish rejection from the 1.2600 to 1.2490 area could be a long opportunity in this pair. Moreover, a bullish daily candle above the 1.2818 level could extend the gain towards the 1.3100 psychological level.
As per last week’s outlook, AUD/USD continued pushing higher, which is supported by the dovish tone of the Fed.
The latest candle closed bullish in the Weekly AUD/USD price, engulfing last week’s bearish pressure. Moreover, the weekly RSI shows an upward continuation as it remains higher above the 50.00 line.
In the daily chart, the recent bullish pressure is valid as the current price looks stable above the dynamic 20 EMA. Moreover, the price formed a bottom at the 0.6526 low, which worked as a confluence bullish factor.
The daily RSI shows the same story, where the current reading is below the 70.00 overbought level with an upward slope.
Based on this outlook, a bearish daily close below the 0.6655 level could open a short-term downward possibility at the 0.6550 low. However, a break below the 0.6526 support level could validate the selling pressure in this pair, targeting the 0.6339 support level.
Bears continued to dominate Friday, causing price consolidation above a fresh multi-month low at 140.95. The pair remains bearish, heading for its fifth weekly loss.
Breaking crucial support at 142.48 on Thursday, defined by the Fibonacci 38.2% level of the range from 127.22 to 151.90 and the 200-day moving average. As a result, bearish structure formation is possible, which requires a weekly closure below this level.
On the other hand, the daily studies show oversold circumstances; thus, bears may face resistance. However, fundamentals may drive the pair's near-term movement.
The Federal Reserve maintained interest rates and suggested the tightening cycle be done at its previous policy meeting. This has fuelled 2024 rate cut speculation.
Next Tuesday, the Bank of Japan will host a meeting with growing expectations that officials would raise interest rates, ending ultra-loose monetary policy.
The Japanese currency would benefit if the BoJ raised interest rates, unlike other major central banks considering rate cuts.
Bearish goals are 140.00 and 139.56, psychological and 50% retracement levels of 127.22 to 151.90. The 200-day moving average should provide ideal resistance, maintaining the negative view.
The price of gold is anticipated to record a weekly increase, regaining ground from the substantial decline witnessed the week prior after its all-time high of $2,144. The present trajectory of gold is impact-driven by a transient cessation in the depreciation of the US Dollar, accompanied by a moderate resurgence in US Treasury bond yields.
Simultaneously, the US Dollar experiences stability as Asian equities reverse initial gains in anticipation of the release of preliminary PMI data from the Eurozone and the United States. These forthcoming reports are anticipated to offer fresh insights into the present condition of the worldwide economy.
The XAU/USD recovered above the 2040.00 to 2050.00 area but failed to hold the momentum above it. Moreover, the weekly candle closed as an inside bar within the long bearish candle in the previous week.
In the daily chart, the 14-day Relative Strength Index (RSI) suggests a corrective pressure as the recent reading is just above the 50.00 neutral line. Moreover, the dynamic 20-day EMA is below the current price, acting as an immediate support level.
Based on the current weekly forecast for XAU/USD, a sustainable bearish pressure might come after overcoming the 2000.00 threshold. In that case, the next support level would be the 1980.00 level.
On the bullish side, a stable price above the 2040.00 level could offer an extended opportunity, where the main aim would be to test the 2100.00 psychological level.
The recent selling pressure in Bitcoin (BTC) can be attributed to the absence of compelling factors in the market. In the past, market activity was driven by narratives, rumours, and themes, which generated a surge in fear of missing out (FOMO).
Bitcoin has traditionally generated positive returns in November and the fourth quarter (Q4). Additionally, the sanction of spot Bitcoin exchange-traded funds (ETFs) by the US Securities & Exchange Commission (SEC) generated considerable anticipation.
As anticipated gains for the fourth quarter appear to have been factored in, exceeding 65% since October, the focus has shifted to spot Bitcoin ETFs and the halving. In particular with regard to ETFs and the halving, the market was hindered by weekly supply barriers ranging in price from $40,698 to $46,999 zone.
Based on the daily outlook, Bitcoin may experience additional ascents, as indicated by the Bollinger Bands indicator surpassing the upper band at the 41,881.00 level. On the contrary, the 43,860.00 level could serve as a barrier, increasing the possibility of retreating towards the 31,144.00 level.