The current weekly update consists of an exhaustive examination of economic data as 2023 draws to a close. A substantial portion of the current state of affairs is favorable: consumer spending continues to be strong, inflation remains at a persistently low level, the housing sector is undergoing a recovery attributed to reduced mortgage rates, and employment expansion is prevalent throughout the country.
Active throughout the entirety of 2023, central banks addressed a variety of economic challenges. Despite the fact that the year is coming to a close, policymakers have not yet begun to ease up. Interest rates and future monetary policy were subjects of discussion among policymakers from Asia and Latin America this week.
As interest rates continue to rise, it has become progressively more difficult for households in a variety of global economies to manage the interest on their various forms of debt. It is anticipated that the current pattern of interest expense growth exceeding disposable income growth will continue into the new year, presenting difficulties for a number of significant developed economies.
In the aftermath of yet another momentous campaign, we present an update on the Economics of College Football's postseason edition. Please consult The Economics of College Football: Playoffs Edition for a comprehensive report.
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Forex Technical Outlook for 25 December 2023 to 29 December 2023
Let’s see the list of events to look at this week:
- Richmond Manufacturing Index on Wednesday
- USD Unemployment Claims on Thursday
- Pending Home Sales m/m on Thursday
- Spanish Flash CPI y/y on Friday
Let’s see the market outlook from the weekly forecast:
If one were to define the fundamental nature of the year 2023 succinctly, it would be "sentiment." A paradigm shift has occurred on a global scale within the last four years, altering the outlooks of investors. As we near the culmination of this calendar year, indications of restoration are beginning to appear, notwithstanding the considerable distance that still lies ahead.
With its extensive implementation of security measures, the 2020 pandemic disrupted global economic activities to recall recent events. In 2021, the global community awoke from a period of dormancy, endeavoring to restore a modicum of normalcy while confronted with substantial obstacles. The debts accumulated by governments continued to loom, and central banks were unprepared for the events that transpired.
The EUR/USD price traded below the 1.0477 level throughout the year, while the market sentiment was the key player. Overall, the technical perspective was towards the Euro as the monthly chart shows a buying pressure above the 20 EMA after forming bottom at the 1.0600 area.
Meanwhile, the 100-day SMA lacks the directional strength as the current dynamic resistance is at the 1.1250 level, which is above the 1.1275 yearly high. Moreover, bulls hold the grip as the current price remains stable above the 1.1000 psychological level.
The weekly price suggests a bullish continuation, above the 20- and 100-week SMAs, while the flat 200 SMA remains at the 1.1160 level. In that case, the psychological level is 1.1100 level would be a crucial level to look at as a bullish bounce is possible from this zone.
As per the current price action, the next resistance level for the EUR/USD would be at the 1.1200 psychological level, which is below the 1.1274 swing high.
On the bearish side, the US Dollar’s strength could kick at any time, where the long-term bearish momentum might come after violating the 1.0700 level. In that case, the downside trend could extend toward the 1.1447 yearly low at any time.
Numerous unknowns and imminent uncertainties complicate the task of generating a certain forecast regarding the course of the Pound Sterling relative to the US Dollar in 2024 when examining the GBP/USD price outlook. Unless unanticipated geopolitical risks alter the situation, the increased probability of a recession, the transition to dovish monetary policies, and the forthcoming general elections are expected to have significant impacts on the GBPUSD price.
Despite a tumultuous year for the GBP/USD in 2023, the Pound Sterling maintained the gains it made in the first half of the year and peaked at 1.3142, its highest level in 15 months. The US Dollar, on the other hand, encountered difficulties in sustaining its reversal, which contributed to the GBP/USD gaining over 5.0% for the entire year.
However, as 2024 approaches, the sustainability of the British Pound's upward trend against the US Dollar remains dubious.
Following a recovery from the 1.1800 level, the GBP/USD pair entered a consolidation phase on the monthly chart in 2023, having a stable market below the psychological level of 1.3150.
The inability to maintain a position above the 50-month Simple Moving Average (SMA) of 1.2875, the price went bearish below the 1.1800 level, which corresponds to the 50% Fibonacci Retracement level spanning from September 2022 low to the 2023 high.
In the past two months, the Relative Strength Index (RSI) has re-entered favorable territory, bolstering the recent recovery from the 1.2070 level and bolstering bullish sentiment.
In order to sustain additional gains, purchasers of the pound sterling must surmount significant barriers located at the 50-month and 100-month SMAs (1.2875 and 1.3066, respectively), with the target area extending to the static resistance at 1.3500 and the supply zone near 1.3700.
The long-term support is immediately located at the 21-month SMA at 1.2260, and the 38.2% Fibonacci level is at the 1.2070 level. The potential for a downtrend continuation would be toward the 61.8% Fibonacci level at 1.1414 and the 50.0% Fibonacci level at 1.1800.
The holiday session is ahead, and investors have shown their interest in the commodity currency AUD.
In the weekly AUD/USD price, the broader market direction remains bullish as the latest bullish candle closed after a bullish engulfing pattern formation. Moreover, the weekly 20 MA is below the near-term support level with bullish traction, while the RSI remained bullish above the 50.00 line.
In the daily chart, the price reached the premium zone, where the 50% Fibonacci Retracement level went from 0.6896 high to 0.6271 low and is at the 0.6583 level. Moreover, the dynamic 20 EMA has an upward direction, while the RSI is at the overbought 70.00 line.
Based on the daily structure, a bullish correction and selling pressure from the 0.6896 static level could be a bearish opportunity, targeting the 0.6583 level. However, a stable bullish market above the 0.6898 level could advance the price towards the 0.7000 psychological level.
The upward correction of the USD/JPY price is over, as shown in the previous weekly outlook. As the current price is trading down after falling to the top, investors might expect a corrective price action in the upcoming holiday season.
In the weekly USD/JPY price, the most recent price closed bullish within the existing bearish candle. It is a sign of a bearish inside bar formation, which is followed by the 20-week Simple Moving Average as the near-term resistance.
In the daily chart, the current price trades above 140.93 swing low, with a wider gap with the dynamic 20-day EMA. Moreover, the 14-day RSI reached the oversold 30.00 line, which indicates the primary bullish possibility.
Based on the current market outlook of USD/JPY, the overall market direction is bullish as a mean reversion to the 20 EMA level. However, the 140.93 support level could be the crucial price area to look at. Therefore, a bearish daily candle below the 140.90 level could lower the price towards the 137.64 support level.
Following the upward trend observed in Q4 of 2022, the price of gold continued to rise at the start of 2023. After the significant gains recorded in March, the XAU/USD pair encountered a corrective phase during the third quarter prior to ascending to an all-time high that surpassed $2,100 in early December.
In the run-up to 2024, gold is confronted with a dual-risk scenario. Prospective geopolitical events, the state of the global economy, and the imminent monetary policy decisions of the Federal Reserve all possess the capacity to exert a substantial impact on the future trajectory of the XAU/USD pair.
In the weekly XAU/USD price remains bullish in the long-term outlook, where the current RSI is above the 50.00 line.
In the broader outlook, the XAU/USD price remained bullish, with the interim resistance at the 2060.00 level. In that case, an additional bullish continuation towards the 2125.00 to 2150.00 area is possible, which needs a stable price above the 2060.00 level.
On the bearish side, the 20-week Simple Moving Average has an upward slope. In that case, an extended bearish pressure with a daily candle below the 1960.00 level could lower the price toward the 1880.00 support level in the coming days.
Macroeconomic variables like interest rates and inflation had little impact on Bitcoin in 2023, but individual events did. The FTX case and Binance's CEO's money laundering plea caused volatility, but historical Q4 returns, Bitcoin ETF anticipation, and the April 2024 Bitcoin halving set the tone for Bitcoin in 2024.
The fourth quarter of 2023 saw Bitcoin's greatest returns, around 160%. Spot BTC ETFs, scheduled to be approved between January 5 and 10, boosted market excitement. Bitcoin's price responded to Federal Open Market Committee decisions despite weaker macroeconomic data reactions. Bitcoin performed better than in 2022 due to reduced interest rates.
Bitcoin remained inversely connected with the dollar, garnering adoption in high inflation and currency devaluation markets as a hedge. The narrative of spot BTC ETFs drove market volatility and Bitcoin's price rise. Experts expect a 90% possibility of SEC approval between January 5 and 10, resulting in billions in new investments, transparency, and market liquidity. The certification may potentially increase regulatory acceptance of Bitcoin in mainstream finance.
The SEC is concerned owing to market manipulation and fraud, while proponents say the sector has matured. The SEC and institutional players are working to overcome these concerns and usher in a new era for Bitcoin ETFs.
Based on the daily structure, the BTC/USDT price trades remained bullish above the dynamic 20-day EMA. Moreover, the broader market direction is bullish, followed by the market structure. However, a bearish correction is pending as the recent price formed a divergence with the RSI.
In that case, a bearish D1 close below the 40551.00 level could lower the price towards the 34855.75 level. However, a bullish rebound is possible from the 20-day EMA, which could increase the price towards the 50000.00 level.