2023 Market Forecast by Solidecn

[SOLIDECN]

EURUSD​

Flash PMI indices for April from France and Germany were released at 8:15 am BST and 8:30 am BST, respectively.

French reading was mixed - services index showed a big and unexpected improvement while the manufacturing sector showed large and also unexpected deterioration. Deterioration in manufacturing, which reached 35-month low, can be explained with massive employee strikes that are occurring in France in response to new pension reform. Improvement in services is puzzling but we will have to wait for the final release for details.

German reading was mixed on the same note - miss in manufacturing and beat in services. However, in case of German data, strikes cannot be used as an explanation so we will have to wait for final data with sector/industry breakdown.

France

• Manufacturing: 45.5 vs 47.9 expected (47.3 previously)
• Services: 56.3 vs 53.5 expected (53.9 previously)

Germany

• Manufacturing: 44.0 vs 45.6 expected (44.7 previously)
• Services: 55.7 vs 53.3 expected (53.7 previously)

EUR ticked higher following the release of French data but the move was minimal. Indices also moved higher in a knee-jerk move but have later turned lower. Those moves were magnified after German release with EURUSD adding to previous gains and DE30 deepening slide.

DE30 deepens drop below 15,900 pts price zone after mixed PMIs from France and Germany.

 

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Chart of the Day - EURUSD​

EURUSD is pulling back this morning. The move lower is driven mostly by strengthening of the US dollar. The main currency pair tried to recover some losses after the release of mixed PMIs for France and Germany that showed major improvement in the services sector and significant deterioration in manufacturing. While flash PMIs failed to trigger a strong recovery move, they seem to have been enough to halt declines.

Taking a look at EURUSD at the H1 interval, we can see that the pair dropped to the 1.0940 area, where the short-term upward trendline can be found. Bulls managed to defend this price zone and now we can see the pair trying to climb back above 1.0950. From a technical point of view, this is a bullish development but whether this translates into a large upward impulse will depend on whether bulls manage to break above the 1.0980 resistance zone that has been limiting upward moves this week. Should such a break occur, EUR bulls may target recent highs in the 1.1070 area next.

The pair may see some volatility around 2:45 pm BST when flash PMIs from the United States for April are released. Market expects a small deterioration in both manufacturing and services.​

 

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Oil​

• Indices from Asia-Pacific traded lower at the beginning of a new week. Nikkei, S&P/ASX 200 and Nifty 50 traded flat, Kospi dropped 0.9% and indices from China traded 0.3-1.3% lower​
• DAX futures and S&P 500 futures trade slightly lower​
• Russia warned that it will terminate Black Sea grain deal if G7 moves to impose a total ban on exports​
• BoJ Governor Ueda said that inflation forecasts strong and close to 2% for bank to consider changing its yield curve control mechanism​
• Financial Times reports that United States asked South Korea not to increase chip sales to China if chips of US company Micron get banned as part of Chinese investigation​
• Cryptocurrencies traded mostly sideways over the weekend. Small gains can be seen today - Bitcoin gains 0.8%, Ethereum adds 0.3% and Dogecoin jumps 1.2%​
• USD and CHF are the best performing major currencies while AUD and JPY lag the most​
• Precious metals pull back amid USD strengthening. Gold drops 0.2%, silver trades 0.7% lower and platinum plunges 2.3%​
• Energy commodities trade lower as well - oil drops 1.2% while US natural gas prices decline 0.5%​

Brent (OIL) is inches away from closing a bearish price gap triggered by an unexpected OPEC+ output cut.​

 

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JPY Recovers losses ahead of upcoming BOJ meeting​

Japanese central bankers will meet this week to decide on monetary policy (Friday). This will be the first meeting under new Bank of Japan governor Ueda. There was some hope in the markets that change at BoJ helm will result in change in BoJ policy. However, Ueda so far has been hinting at continuation of the ultra-loose policy of his predecessor, at least for now. On the other hand, Sankei reports that the central bank may review and assess the past 10 years of monetary policy. One cannot rule out that even in spite of lack of change in policy or statement, assessment alone may offer some guidance. JPY is recovering some of its recent losses as the meeting draws closer.

USDJPY is trading higher today, due to USD strength, but has lost some ground after the Sankei news report. USDJPY continues to trade in an uptrend started at the end of March but has run into resistance in the 135.00 area.​

 

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US100​

Taking a look at US100 chart at H1 interval, we can see that the index has been trading in a triangle pattern for some time with a 13,000 pts area serving as the lower limit of the pattern. This is a continuation pattern so traders should be aware of a potential for a downside breakout, especially as price has reached a lower limit recently. In case of a break below 13,000 pts, textbook range of breakout from the pattern suggests possibility of an around 350-points drop, to 12,650 pts area.

 

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Coca-Cola on wave of strong demand and higher prices​

Like other companies in the industry, the Coca-Cola Company has increased the prices of its products, but this has not affected consumer demand. In recent years, as pandemic-related restrictions have disappeared, the company has seen an increase in productivity. This is mainly due to consumers being willing to pay more for drinks in public places such as restaurants, stadiums and concerts.

Current premarket trading on Wall Street indicates that Coca-Cola (KO.US) shares have broken above the important resistance set by the local peaks of December 2022.​

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EURUSD​

EURUSD has once again moved above the resistance zone at 1.10 USD. If this break is sustained, a continuation of the upward movement towards the next resistance level at 1.1273 is not excluded.

 

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BTC​

Recently, many events have overlapped and influenced the prevailing sentiment on the cryptocurrency market.

On the one hand, we observe weakening bulls on the broader financial market after high index results in the first quarter of this year. Investors are trying to price in new quarterly reports published by the largest technology companies in the US and deteriorating macroeconomic data, which are starting to forecast the upcoming recession on the financial markets.

On the other hand, a lot has happened in the crypto market space. The recent hearing of SEC chairman Gary Gancler did not bring any new news. The SEC chairman continued his narrative without any explanation that all cryptocurrencies except BTC should be considered security - despite many questions from Congress Representatives.

Another wave of declines came today after the news about Coinbase suing the SEC. According to the information provided, Coinbase has taken legal action in a US federal court to force the country's securities regulator to give a definitive response to a petition it submitted in July. The petition sought clearer regulatory guidelines for the cryptocurrency industry in the US.

On the 4-hour timeframe, the BTC price continued to consolidate below $28,000, with the largest cryptocurrency by market capitalization trading at around $27,240, down 0.55% in the past 24 hours. BTC has already dropped by 13% from its recent highs of $31000. The price broke through the key support level around $28,600, indicating a bearish trend in the short term. Currently, the price is at the equilibrium level of the last consolidation range, indicating that the market is in a state of indecision. However, further price action downwards is expected, with the next resistance level likely to be at $26,650. This level acted as a support in the past. Overall, the short-term trend for Bitcoin appears bearish and traders should exercise caution when taking long positions. It is essential to keep an eye on any major news events or developments in the cryptocurrency space that may impact the price of Bitcoin.​

 

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Microsoft​

Microsoft (MSFT.US), interval D1. The major supply has activated in $280 zone, it's level of resistance from summer 2022 highs. If the earnings will be weaker than expected, the major support may be at 270 or 260 USD levels, where we can see 23,6 and 38,2 Fibonacci retracement of upward wave started in the October 2022. On the other hand if the financial report will be strong, with possible optimistic guidance the major resistance at $300 level may be exceed. Also 'golden cross' formation of moving averages (SMA200, SMA100) may indicate that bulls will be still strong.

 

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USD dips after US survey, new home sales data​

A pack of US data was released at 3:00 pm BST today. While both soft and hard data was released, the market was more focused on the former, especially Conference Board consumer confidence reading for April. CB reading turned out to be a disappointment with headline index dropping from 104.2 to 101.3 (exp. 104.0). Lower reading was driven by a drop in expectations subindex. Other data released simultaneously to CB reading turned out to be mixed - new home sales increased 9.6% MoM in March and beat expectations while Richmond Fed index came in lower than expected.

US data released at 3:00 pm BST today​

• Conference Board Consumer Confidence for April:101.3 vs 104.0 expected (104.2 previously)​
• Present situation: 151.1 vs 151.1 previously​
• Expectations: 68.1 vs 73.0 previously​
• Richmond Fed manufacturing index for April: -10.0 vs -8.0 expected (-5.0 previously)​
• New home sales for March: 683k vs 630k expected (640k previously)​

Markets barely saw any reaction to the release of US data. USD ticked lower with EURUSD attempting to halt a decline in the 1.10 area while US index futures moved slightly higher following the release.

EURUSD attempts to bounce off the 1.1000 area after release of US survey and housing market data.​

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Oil

Oil continues to trade near but has not yet managed to close a bullish price gap, triggered by an unexpected OPEC+ output cut announcement. A bearish sentiment can be spotted on the crude market since mid-April and is trading less than $1 per barrel away from closing a bullish gap. Taking a look at OIL.WTI at the D1 interval from a technical point of view, we can see that downward move accelerated after the price failed to break above $82 resistance. According to the Overbalance methodology, this hints that the long-term trend remains bearish. Moreover, price dropped back below 100-period EMA, what further supports the bearish outlook.

Taking a look at WTI at a lower interval (H1), we can see that price tested a recently-broken support as a resistance and, after a failure to break above it, downward move was resumed. Currently, we are observing OIL.WTI testing recent local lows in the $76.85 per barrel area and should we see a break below this zone, the way towards $75.50 - lower limit of bullish price gap - will be left open.

 

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AUDUSD​

Investors' morning attention in the FX market turned towards Australia, where we learned the latest inflation data. Australia's headline CPI came in at 1.4% k/k in Q1 2023 (versus the expected 1.3%). However, the AUDUSD pair saw declines, dictated by a lower core inflation reading (1.2% quarter-on-quarter versus expectations of 1.4%). By weight, it is core inflation that is the more important factor creating predictions for future RBA policy.

The Reserve Bank of Australia has forecast and continues to forecast a slowdown in inflation in the near future. The bank's rhetoric comments relatively bluntly that changes in monetary policy have a lagged effect on economic activity and its indicators. The combination of these two factors persuaded the RBA to hold the cash rate steady at its April meeting, and today's decline in core inflation will add to the case for another pause at the RBA's next meeting on 2 May. At the moment, the swap market is pricing in a near 80% probability of holding rates at 3.6%.

Looking at the technical situation of the AUDUSD currency pair, we can see that the AUD is weakening against the US dollar and is currently descending into the support area defined by the March 2023 lows and the 61.8% Fibo retracement of the upward wave initiated in October 2022. The nearest region of resistance is the confluence of the 50-, 100- and 200-day exponential moving averages marked on the chart.​

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Bitcoin

Bitcoin chart, D1 interval and US500 (yellow chart). Bitcoin again showed a negative correlation with the S&P500 and started an upward movement when US500 contracts weakened, influenced by weakness in the banking sector. The RSI indicator is still at relatively neutral levels indicating that the bulls still have plenty of room to possibly continue their attack. The first significant resistance level appears to be around $30,000 - $31,000, last seen in early summer 2022. The bulls has defended the bullish momentum at 23,6 Fibonacci retracement.

 

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Gold​

Risky assets, like equities or commodity currencies, dipped shortly before the Wall Street cash session opened following a report from CNBC on First Republic Bank. According to the media piece, the US government is currently unwilling to intervene to save First Republic Bank. First Republic Bank is on watch after Q1 earnings release highlighted the bank was close to collapse during recent US banking turmoil and that this risk has not waned yet.

S&P 500 futures (US500) dropped around 0.2% on the news. Interestingly, we also saw a move lower in USD with GBPUSD jumping above 1.25 mark and EURUSD moving closer to 1.11 handle. Safe haven flows as well as weaker USD provided fuel for around-0.5% jump on gold market, with precious metal climbing above the $2,000 mark.

GOLD jumped above the 200-hour moving average and $2,000 mark following CNBC report on First Republic Bank.​

 

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US500​

• Wall Street indices finished yesterday's trading mixed - Dow Jones and S&P 500 dropped while Nasdaq gained fueled by solid performance of Microsoft and NVIDIA​
• US index futures caught a bid after close of the session following better-than-expected earnings release from Meta Platforms​
• Meta Platforms jumped over 11% in the after-hours trading, following Q1 earnings release. Company reported Q1 EPS at $2.20 (exp. $2.03), revenue at $28.65 billion (exp. $27.65 billion) and revenue per user at $9.62 (exp. $9.30)​
• Meta had 2.04 billion daily active users in Q1 2023 (exp. 2.01 billion) while monthly active users were reported at 2.99 billion - in-line with expectations. Meta's Reality Lab reported a $3.99 billion operating loss and company expect this losses in the unit to increase this year​
• Indices from Asia-Pacific traded mostly higher today - Nikkei and Nifty 50 gained 0.1%, Kospi moved 0.4% higher and indices from China traded up to 0.7% higher. S&P/ASX 200 was a laggard and dropped 0.4%​
• DAX futures point to a slightly lower opening of the European cash session today​
• The US House of Representatives passed a bill on spending cuts and debt ceiling. However, bill still needs to win backing in the Senate​
• New prime minister of New Zealand Hipkins said that there will be no major tax changes in the upcoming budget announcement (May 18, 2023)​
• Russian deputy prime minister Novak said that OPEC+ cooperation may be extended beyond this year (current agreement is valid until end-2023)​
• Chinese industrial profits dropped 21.4% YoY in the January-March period. Profits were down 19.2% YoY in March alone​
• Cryptocurrencies are trading higher - Bitcoin gains 1.6% while Dogecoin and Ethereum jump 1.7%​
• Energy commodities trade little changed this morning - oil gains 0.3% while US natural gas prices drop 0.1%​
• Precious metals benefit from USD weakness and trade higher - gold adds 0.6%, silver gains 0.7% and platinum jumps 1.1%​
• AUD and NZD are the best performing major currencies while JPY and USD lag the most​

US500 recovered part of yesterday's losses after Meta reported better-than-expected earnings. Nevertheless, the technical picture remains bearish following the recent failure to break above the upper limit of the Overbalance structure at 4,190 pts.​

 

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USDJPY​

USDJPY is one of the FX pairs that may see elevated volatility until the end of the week. This is because of a number of top-tier releases and events from the United States and Japan, scheduled for the final two days of the week. Traders will be offered a flash release of Q1 GDP report from the United States today at 1:30 pm BST and PCE inflation data for March tomorrow at 1:30 pm BST. In between those two releases, the Bank of Japan will announce its monetary policy decision.

The US GDP report is expected to show a slowdown in annualized growth rate from 2.6% in Q4 2022 to 2.0% in Q1 2023. PCE inflation for March is expected to show deceleration in core measure from 4.6 to 4.5% YoY. However, a rate decision from the Bank of Japan is potentially the biggest volatility event of the three. This will be the first BoJ meeting after Ueda took over as governor and because of that there are hopes that he may push for a change in BoJ's ultra-loose monetary policy. While it looks rather unlikely that any major policy change will be delivered tomorrow, one cannot rule out significant changes in an accompanying statement. Any hints at a hawkish shift could be a significant driver for USDJPY moves.

Taking a look at USDJPY chart at H4 interval, we can see that the pair has been trading in an upward channel since late-March. Advance was halted recently at 61.8% retracement of the downward move launched on March 8, 2023 (134.77 area) and the pair started to pull back. However, unless we see a break below the lower limit of the channel and below the lower limit of the Overbalance structure later on, technical picture continues to favor buyers.​

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US100 tests 13,000 pts ahead of GDP data​

Reading close to market estimates could be a positive for Wall Street and may help alleviate concerns around banking sectors. Simultaneously, it should be neutral for USD as it will be more reactive to Fed. A strong GDP reading could provide fuel for USD gains as it would boost odds for more hikes from Fed. This, in turn, could be negative for Wall Street. Weak GDP report may have mixed impact on Wall Street but would most likely be negative for USD.

US100 is trading in the 13,000 pts area. Yields resumed climb (drop on TNOTE) and suggest a pullback.​

 

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US100 tests 13,000 pts ahead of GDP data​

Reading close to market estimates could be a positive for Wall Street and may help alleviate concerns around banking sectors. Simultaneously, it should be neutral for USD as it will be more reactive to Fed. A strong GDP reading could provide fuel for USD gains as it would boost odds for more hikes from Fed. This, in turn, could be negative for Wall Street. Weak GDP report may have mixed impact on Wall Street but would most likely be negative for USD.

US100 is trading in the 13,000 pts area. Yields resumed climb (drop on TNOTE) and suggest a pullback.​

 

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3 markets to watch this week​

First week of May looks busy, especially the second half of it, as investors will be offered top-tier macro data from North America as well as rate decisions from Fed and ECB. Stock markets will continue to react to earnings. Among top earnings releases next week one can find Apple, AMD and Qualcomm. Be sure to watch GOLD, USDCAD and US100.

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GOLD​

Investors will get rate decisions from two major central banks next week - Fed on Wednesday, 7:00 pm BST and ECB on Thursday, 12:45 pm BST. Both banks are expected to deliver 25 basis point rate hikes. Forward guidance will be crucial - hint that rate hike cycle is about to be paused, or nears its end, could be an important mover for GOLD which has recently struggled to climb back above $2,000 per ounce. On the other hand, hawkish guidance would be negative for precious metals and can add more fuel to recent pullback.

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USDCAD​

While central bank decisions will be the most closely watched events in the week ahead, investors will also be offered some top-tier macro releases. USDCAD may experience elevated volatility on Friday as jobs reports for April from the United States and Canada will be released at 1:30 pm BST. Apart from that, USD may also see some moves on the release of manufacturing ISM (Monday, 3:00 pm BST), ADP employment report (Wednesday, 1:15 pm BST) and services ISM (Wednesday, 3:00 pm BST).

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US100​

Solid earnings reports from Meta Platforms, Microsoft and Alphabet helped lift sentiment towards the tech sector this week. Apple, the final of the 5 US mega-tech companies, will report earnings next week on Thursday after the close of the Wall Street session. Earnings reports from two semiconductor companies - Advanced Micro Devices (Tuesday, after market close) and Qualcomm (Wednesday, after market close) - may provide additional fuel for moves on Nasdaq-100 index (US100).​

 

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EURUSD​

• The EURUSD is in a tight bull channel. However, it is collecting much strong bear closes.​
• The odds are that the channel up from the May low is converting into a trading range.​
• The bears need to get closes below the moving average to begin to convince traders that they are taking control.​
• Overall, the market will probably begin to test prior higher lows from the channel up that began on March 24th and convert into a trading range. Traders should expect more sideways trading.​