2023 Market Forecast by Solidecn

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Oil Analysis​

Oil prices have been dropping for four days straight after reaching their highest point in 13 months. The price of a barrel of WTI oil almost hit $94, as buyers tried hard to keep prices high.

This seems to be the third increase in prices since they fell in June. Starting from last Thursday, any attempts to raise the price during the day have been stopped by large sell orders. On Tuesday, WTI's price briefly fell below $87, which is 7.5% less than the highest point last week.

Worries about a slowing world economy led to large sell orders that stopped any attempts to raise the price during the day. This constant pressure seems to be more than just a temporary cooling off of the market and fits the usual pattern of three downward movements.

Last month, there was a divergence on the daily RSI timeframe when a higher price peak happened at the same time as a lower oscillator peak. This often means that bullish momentum is running out. It's also worth noting that the index has already moved away from the overbought zone, which shows the start of the decline.

The next potential drop in price could be to the $84.4 per barrel area. The 50-day moving average is around this area, as are the price peaks from early August and mid-April.

However, oil prices could drop even further. The slowing global economy and decreasing final demand are now working against it. Moreover, oil has been rising against a rising dollar and falling markets for a long time. And now it might catch up with the falling markets with even greater force.

An important signal from exporters: there were reports last month of increased oil exports from Russia and Saudi Arabia, which reduced the market deficit and raised questions about whether the cartel's production limit is really as strict as it seems.

More solid support for oil might only come with a drop to $78. That's the 50-week moving average, but we wouldn't be surprised to see a drop to $75 by the end of the year. These are high levels by historical standards, but they no longer seem like they're holding back the economy or a good reason for further policy tightening.

From a global perspective, lower oil prices will now be good for equity indices rather than a sign of decreasing risk appetite, as is usually the case.​

 

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USDJPY Takes a Dive, Is Bank of Japan Stepping In?​

The USDJPY pair saw a significant drop this afternoon. The shift was swift and substantial, happening just as the pair reached the 150.00 mark - a peak not seen since October 2022! This level is crucial as it's often considered the trigger point for intervention by the Bank of Japan, as has happened in the past. Before this drop, the pair was climbing due to a strengthening US dollar, spurred on by a rise in JOLTS job openings data for August.

The USDJPY fell from around 150.00 to approximately 147.30 - a nearly 2% drop. Although much of this decline has been recovered, the pair is still trading close to the 149.00 mark.​

 

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Asia Market Wrap:​

Asian markets are seeing a downturn, reflecting a global bond market sell-off due to fears of prolonged high interest rates. This has affected various assets, with global equities taking a significant hit.

The ISM manufacturing data and the JOLTS report suggest a hawkish outlook. The US factory sector, in contraction for 11 months, shows signs of potential expansion. The JOLTS report highlighted a large gap between labour supply and demand, leading to increased wages.

Amid strong economic data and predictions of higher rates from experts like Jamie Dimon and Ray Dalio, bondholders are nervous. Navigating such bond markets requires courage.

The US economy remains strong, with an estimated annualized growth rate of 4.2% in Q3, up from 2.1% in Q2. This is surprising given the Federal Reserve's aggressive monetary policy tightening. Factors like pent-up pandemic demand, job creation, and wage increases contribute to this growth.

However, the US economy is expected to slow down significantly, potentially below 1% in Q4 and may stall next year. This is due to the impact of the Federal Reserve's large interest rate hikes last year. The housing market is particularly affected, with 30-year mortgage rates at a 23-year high of over 7%, leading to low home sales and affordability issues. Bank lending standards are tightening. Services could be affected as households cut back on non-essential purchases and many have depleted their pandemic savings. Additionally, many student loan borrowers have resumed repayments after a 3.5-year break, adding to consumer financial pressures.

The current economic slowdown aligns with the Federal Reserve's aim to control inflation. However, rising oil prices have paused the steady decrease in inflation, which had fallen from a peak of 9.1% in summer 2022 to 3.0% in June, then rose to 3.7% in August. On the bright side, core inflation, excluding food and energy, has remained stable at near two-year lows of 4.3%, down from 6.6% last fall. This is due to smoother global supply chains and slower wage growth. But services inflation remains high, suggesting a return to the Fed's 2% target won't likely happen until early 2025.

The theme of "higher for longer" has pushed 10-year Treasury yields up by 130 basis points over the past five months, reaching a 16-year high of 4.8%. It's expected that yields will drop to 4.25% by year-end and further to 3.75% in late 2024, but this will likely need US data to show a downturn, a looser labour market, and lower inflation to convince investors.

The quick reversal of the US Treasury yield curve is significant. This change could lead to imminent recession warnings. If the unemployment rate increases even slightly, it could trigger recession alarms.​

 

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EURUSD​

As we move into the second half of 2023, traders have seen the EURUSD fall steadily since mid-July. This downward trend is clearly marked by parallel black lines, showing a strong bearish trend. This has led to opportunities for consistent bearish positions.

Looking at the trend, it's clear that the pair is weak, especially with the repeated tests of the lower boundary of the channel in recent times. Each time it falls towards this key support level, buyers' step in, temporarily stopping the bearish momentum and hinting at a possible break from the continuous fall.

Despite this bearish trend, there are signs of potential bullish activity. The EURUSD seems to be forming a 'double bottom', marked by yellow rectangles that represent two significant lows in the pair's movement. This pattern often signals a possible reversal, particularly when it appears after a significant downtrend.

Traders are eagerly waiting for a key breakout above the upper black line of the downward channel and an important green horizontal resistance. This line serves as the neckline of the suggested double bottom and is a critical level for those hoping for a bullish turn. A strong daily close above these resistances could signal an exciting move into bullish territory, while a rejection could reinforce the current downtrend.​

 

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WTI Oil​

WTI oil is set to continue its downward trend after a brief consolidation period on early Thursday. This follows a significant drop the previous day, marking the largest daily loss since July 5, 2022.

The sentiment has been affected by concerns over demand following recent weak economic data, suggesting a potential further slowdown in global economic growth.

The OPEC+ group, in their meeting on Wednesday, decided to maintain their current oil output policy. Saudi Arabia and Russia have chosen to keep their voluntary output cut unchanged for the rest of the year. Oil prices have dropped to a one-month low, with Wednesday's sharp fall contributing to a reversal pattern on the daily chart.

The price has broken through a key Fibonacci support level at $84.31, indicating that the major downtrend from the 2023 high of $95.00 may continue.

Despite strong bearish momentum, there are signs that the downtrend may start to weaken. However, any price increases should be limited and present better selling opportunities. The previous consolidation floor and broken Fibonacci level at $88.00/40 should limit any significant price increases.

Resistance: 84.90; 86.00; 87.54; 88.00.
Support: 83.88; 81.71; 81.00; 80.00.​

 

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GBPUSD Technical Analysis​

The GBPUSD pair started to lose value early on Thursday. The recovery it made on Wednesday was halted by the 10-day moving average (10DMA) at 1.2173. The UK's construction sector performed poorly in September, which is a negative sign. The pair might continue to lose value, with a risk of falling to 1.20 or even 1.1988. It might move within the range of 1.2074 to 1.2173 before falling again. A break above the 10DMA could reduce this downward pressure.

It might move within the range of 1.2074 to 1.2173 before falling again. A break above the 10DMA could reduce this downward pressure.​

 

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USDJPY Technical Analysis​

The USDJPY is currently around the middle of Tuesday's range of 150.16 to 147.29. This movement was caused by signs that Japan might step in to help their weakening currency, the yen.

Recent reports from the Bank of Japan say there was no such intervention. However, people are still wary because the chance of intervention is high. They're waiting for the US September NFP report, which will give more information about the US job market and what the Federal Reserve might do next.

Daily technical studies are still positive, but the 4-hour structure has weakened. This suggests there's a risk of a downturn, even though strong bids on Tuesday have offset some of this risk.

The NFP report could trigger new activity and provide fresh signals for direction. If the September numbers are solid (at or above the expected 170K), it would ease the Federal Reserve and allow for higher interest rates for a longer time.

On the other hand, if hiring in September is weaker than expected, it would mean that the tight job market is being hurt by high borrowing costs. This could lead to worries about a major economic slowdown and require a more careful approach from the Federal Reserve.

We can expect new direction signals if either pivot point is broken. If it drops below 147.29 (Tuesday's low), there's a risk of a deeper drop. If it breaks above 150, it could signal a continuation of the bullish trend, although there's still a risk of intervention.

Resistance: 148.72 - 149.31 - 149.7
Support: 148.25 - 147.29 - 146.10 - 145.9​

 

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US Dollar Index Analysis​

The US Dollar Index is currently trading in a tight range this Friday morning. The market is in a state of anticipation as it awaits the release of the US Non-Farm Payrolls (NFP) report, a key event this week.

The index remains above the trendline support at 106.01, following a two-day pullback from its 2023 peak at 107.03. This pullback appears to be a healthy correction of the larger uptrend, providing an opportunity for traders to re-enter the bullish market at better levels.

Daily studies continue to support a bullish outlook, suggesting a potential renewed push through the critical resistance zone at 107.00. A break above this level would signal a continuation of the bullish trend.

However, today's direction will likely be influenced by fundamental factors as traders seek more information about the state of the US labor market. This information will directly impact the Federal Reserve's perspective on future interest rates.

Job growth in the US is expected to slow slightly in September (NFP Sep 170K forecast vs Aug 187K), but the unemployment rate is anticipated to decrease from a 1 ½ year high (Sep 3.7% forecast vs Aug 3.8%). Wage growth is expected to remain strong (Sep 0.3% vs Aug 0.2%).

These forecasted numbers suggest that the US labor sector remains robust and is least affected by high borrowing costs among the economy's key sectors. Any expected easing is not likely to significantly impact the overall positive outlook.

In such conditions, the Federal Reserve may opt for another rate hike by year-end or more likely, maintain tight monetary policy for some time. This is because recent drastic measures to control inflation have not yet had the desired impact on the economy.

Two other reports from the US labor sector released earlier this week showed mixed results. Job openings rose well above forecasts, while hiring in the private sector fell significantly last month.

If the September NFP report exceeds expectations, it would reinforce the Federal Reserve's hawkish stance and further support the dollar. However, if the NFP report misses expectations, demand for the dollar would ease.

Initial direction signals are expected on a sustained break of trendline support (bearish) or a lift above pivotal barriers at 107.00 zone (bull

Resistance: 106.96; 107.13; 107.88; 108.79.
Support: 106.01; 105.50; 105.13; 104.32.​

 

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Strong Job Data Impacts Investments and Oil Prices​

The path to a safe economic slowdown, which doesn't harm investments, is tricky. After the release of the latest job data (NFP data), people are worried. They think the fast growth might affect one of the main goals of the Federal Reserve (the Fed). The job data shows that there's not much improvement in job balance, so the Fed might need to take more actions. This strong job data could be seen as bad for investments and might make the dollar stronger.

Oil prices were already going down because people were scared of a recession caused by high interest rates. The strong job data might limit the increase in oil prices. If US 10-year loan interest rates get close to 5%, it might cause another drop in oil prices.​

 

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EURUSD: Euro Struggles Amid New Geopolitical Concerns​

The Euro is facing renewed pressure, nearing the 1.05 mark due to fresh geopolitical issues in the Middle East. Investors are gravitating back towards the US dollar, a traditional safe haven currency.

Despite a brief surge on Friday, where the Euro almost reached 1.06 after the announcement of new US jobs, it's back under pressure. This surge was in line with my previous predictions, where I suggested not betting on the US dollar below 1.05 due to a potential strong response from the Euro.

However, this response was short-lived due to escalating tensions in the Middle East following a Palestinian attack on Israel. If not for this, the Euro's rally might have lasted longer. Friday's job report was a boon for the US economy as it exceeded expectations, reinforcing the labor sector as a key strength and helping to keep inflation in check. There's still a slim chance that the Federal Reserve might increase rates again.

Friday afternoon's exchange rate behavior was deceptive. The announcement of new jobs led many investors to back the dollar, only to close their positions at a loss soon after. The Euro's strong response, resulting in weekly gains after 11 straight weeks of losses, serves as a reminder of its resilience under pressure. The future is uncertain with new factors coming into play. Increased geopolitical instability could cause unpredictable shocks in global markets.

It might be wise to adopt a wait-and-see approach. However, I still believe in buying the Euro on dips and particularly at new local lows.​

 

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Bitcoin is better than digital Gold​

Bitcoin and gold are both seen as valuable assets, according to a recent report by Matrixport. Bitcoin's popularity has surged due to its digital nature, making it a desirable asset. Currently, Bitcoin's market value is $540 billion, which is about 10.8% of the total value of physical gold. Gold ETFs, on the other hand, are worth $200 billion.

The report suggests that if the U.S. Securities and Exchange Commission (SEC) approves a Bitcoin ETF, it could attract an investment of $20 - $30 billion. This could potentially cause a significant increase in Bitcoin's value. However, the SEC has been slow in making a decision on this matter and has postponed all new applications until October. Despite this, the crypto market remains optimistic about the potential influx of mainstream investment.

Interestingly, Bitcoin has an advantage over gold. You can remember your private keys, which means there's no risk of them being taken away.

Matrixport's head of research, Markus Thielen, pointed out that storing wealth in gold is becoming less popular in today's digital age. It also has limitations when it comes to international transactions. In contrast, Bitcoin allows for quick and discreet transfers of value across borders.

In conclusion, given the current technological advancements, Bitcoin serves two main purposes. It acts as a store of value similar to gold and as a speculative financial asset.​

 

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XAUUSD Technical Analysis​

Our XAUUSD analysis shows Gold (XAU) is in a correction phase against the US Dollar (USD). It's moving below the Ichimoku Cloud, indicating a bearish trend. We expect a rise to 1860 before falling to 1775. This could change with a breakout above 1885 or below 1875. These are predictions based on current trends and technical analysis.

 

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EURUSD Technical Analysis​

The EURUSD currency pair is currently following a downward trend, even though there has been a recent increase in its value.

There are certain points, known as resistance points, which could potentially halt the currency pair's upward movement. The first resistance point could be at 1.0617, which is where the recent high value was observed. Another resistance point could be at 1.0673, which aligns with the 34-day simple moving average (SMA), a trend indicator.

Further up, the 100-day and 200-day SMAs might also act as resistance points near the value of 1.0830.

On the other hand, if the value of the currency pair starts to decrease, it might find support (a level where the price might stop falling) near the recent low values of 1.0480 and 1.0440.​

 

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AUDUSD​

The AUDUSD currency pair has seen a slight decrease in value in the early European trading hours on Tuesday. This comes after a small increase during the Asian trading hours, which was influenced by positive economic data from Australia and dovish remarks from officials of the Federal Reserve on Monday.

However, this recent upward trend faced some resistance and had difficulty breaking clearly above the 0.6400 zone. This zone was previously a Fibonacci support level but has now turned into a resistance level, further strengthened by the 20-day moving average (20DMA). When we look at the daily chart, technical indicators suggest a bearish trend. The 14-day momentum is in negative territory and the price action is being suppressed by a falling daily cloud. These factors suggest that the recent four-day recovery might be losing momentum.

The price action during Tuesday's Asian and early European sessions formed a bearish candle with a long upper shadow. This adds to the initial warning of a stall, which would become more likely if the price falls further and closes below the 10-day moving average (10DMA) at 0.6375. If this happens, it would shift the near-term focus lower again and could lead to a retest of last week's new low for 2023 at 0.6285.

On the other hand, if the price can sustain a break above the 0.6400 zone, it would be an initial sign that the recovery might continue. However, for this signal to be confirmed, we would need to see an acceleration through the falling 55-day moving average (55DMA) at 0.6458.

Resistance levels are at: 0.6403; 0.6432; 0.6458; 0.65.
Support levels are at: 0.6375; 0.6360; 0.6312; 0.6285.​

 

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USDJPY​

The USDJPY currency pair has seen a resurgence of momentum on Tuesday, although it continues to trade within a range that has persisted for four consecutive days.

The currency pair's pullback from its 2023 peak of 150.16 has consistently found support at the rising 20-day moving average (20DMA), currently at 148.58, indicating strong buying interest.

The broader uptrend from the 2023 low of 127.22 remains unbroken, and the near-term price action suggests a minor correction before the bulls take over once again.

A close above the 10-day moving average (10DMA) at 149.12 would provide an initial bullish signal, paving the way for a retest of key resistance levels at 150.00 (a psychological level) and 150.16 (the high for 2023). These levels are just below the peak for 2022 and a multi-decade high of 151.94.

The daily chart shows strong positive momentum, with the Tenkan-sen and Kijun-sen lines in a bullish configuration. The price action is also supported by a rising and thickening daily Ichimoku cloud, keeping the focus on further upside potential.

However, traders should be cautious if the price breaks below the 20DMA, as this would weaken the near-term structure. A move and close below the spike low of 147.29 from October 3rd would be required to sideline the bulls and signal a deeper correction.

Resistance levels to watch are at: 149.12; 149.53; 150; and 150.16.
Support levels to watch are at: 148.00; 147.29; 146.1; and 145.9.​

 

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AUDUSD​

The AUDUSD currency pair has seen a slight decrease in value in the early European trading hours on Tuesday. This comes after a small increase during the Asian trading hours, which was influenced by positive economic data from Australia and dovish remarks from officials of the Federal Reserve on Monday.

However, this recent upward trend faced some resistance and had difficulty breaking clearly above the 0.6400 zone. This zone was previously a Fibonacci support level but has now turned into a resistance level, further strengthened by the 20-day moving average (20DMA). When we look at the daily chart, technical indicators suggest a bearish trend. The 14-day momentum is in negative territory and the price action is being suppressed by a falling daily cloud. These factors suggest that the recent four-day recovery might be losing momentum.

The price action during Tuesday's Asian and early European sessions formed a bearish candle with a long upper shadow. This adds to the initial warning of a stall, which would become more likely if the price falls further and closes below the 10-day moving average (10DMA) at 0.6375. If this happens, it would shift the near-term focus lower again and could lead to a retest of last week's new low for 2023 at 0.6285.

On the other hand, if the price can sustain a break above the 0.6400 zone, it would be an initial sign that the recovery might continue. However, for this signal to be confirmed, we would need to see an acceleration through the falling 55-day moving average (55DMA) at 0.6458.

Resistance levels are at: 0.6403; 0.6432; 0.6458; 0.65.
Support levels are at: 0.6375; 0.6360; 0.6312; 0.6285.​

 

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Gold​

Our latest gold market analysis shows a rise in gold prices to $1,859, following a rebound from the $1,805 support area. Key indicators, including the RSI and stochastic indicator, suggested a potential rise. A bullish engulfing candlestick pattern near the $1,805 support on the daily chart signals a potential market reversal.

On the 4H chart, gold price is grappling with a non-linear trendline and RSI near level 70. However, a significant barrier at the $1,883 pivot point suggests a stronger bearish scenario. We suggest a sell stop at 1,849, targeting 1,806, with risk at 1,870.

Always do your own research before trading.​

 

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EURUSD​

Despite recent bullish sentiment, the pair hasn't closed outside the declining channel or above the 1.065 pivot. While trading below this pivot and inside the channel, the outlook is bearish, with a potential decrease to a 1.041 support level.

 

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NZDUSD​

The NZDUSD currency pair, which represents the value of the New Zealand Dollar against the US dollar, is currently testing what we call ‘signal lines’ of a certain indicator. This is like a student taking a test to see how well they’re doing.

Now, the price of this currency pair is moving above something known as the ‘Ichimoku Cloud’. The Ichimoku Cloud is a tool that traders use to get an idea of where the market might be heading. When the price moves above this cloud, it usually suggests that we might see an upward trend. This means that the New Zealand Dollar could increase in value compared to the US dollar.

Traders are expecting that the price will test the upper boundary of this cloud, which is currently at 0.5995. If it passes this test, it could rise further to 0.6085. Think of this like a climber trying to reach a higher point on a mountain - if they succeed, they can aim for an even higher point.

Another sign that could confirm this upward trend would be if the price bounces back from the lower boundary of what’s known as a ‘bullish channel’. This channel is like a path that upward trends tend to follow.

However, there’s always a chance that things won’t go as expected. If the price breaks through the lower boundary of the Ichimoku Cloud and manages to stay under 0.5965, it would suggest that instead of rising, the New Zealand Dollar might decline in value against the US dollar to possibly around 0.5875. This would be like our climber slipping and falling down the mountain.

So, while current signs point towards an increase in the value of New Zealand Dollar against the US dollar, it’s always important to keep an eye on these key levels as they can indicate potential changes in trend.​

 

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GBPJPY​

In the daily chart, GBPJPY broke out of the channel, tested the 182.9 pivot, and rebounded. Today's session saw the bulls break the pivot, with the RSI indicator above 50, indicating a likely uptrend continuation.

Technical indicators suggest a bullish market direction, despite oscillators being in the sell zone. Moving averages signal a strong buy.

The 4H chart shows GBPJPY forming a new bullish trend, with RSI nearing overbought. We recommend waiting for a test of the 182.9 support before entering a long position.

If the price stays in the bullish channel, we target the 184.39 resistance.​