Solid ECN - Fundamental Analysis

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Yen Stays Low as Japan Faces Slower Inflation​

Solid ECN – The value of the Japanese yen remained weak, staying over 150 against the dollar, following recent inflation data. In January, Japan's central and underlying inflation rates dropped to 2.2% and 2%, down from December's 2.6% and 2.3%, marking the lowest since March 2022. Despite this, the underlying inflation was still higher than the anticipated 1.8%, suggesting a slower decrease in inflation than expected. With inflation easing, the Bank of Japan will likely continue its lenient monetary policies for a while longer.

The yen is also struggling due to unfavorable trading strategies and weak economic figures, leading to a recession at the end of the year. This poor performance has led to official comments to support the yen, the lowest among major global currencies this year.​

 

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USDJPY Pair Analysis: Bullish Channel and Ichimoku Cloud​

Solid ECN – The USDJPY pair is testing the lower band of the bullish channel, which coincides with the Ichimoku cloud. The 4-hour chart has formed a doji candlestick, which can be interpreted as a signal for the continuation of the bull market.

From a technical standpoint, if the Ichimoku cloud remains intact, the bullish trend should continue, and the first milestone would be the 150.8 resistance.

On the other hand, if the USDJPY price falls below the Ichimoku cloud, the consolidation might extend to the 148.9 support.​

 

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EURUSD Trading at 1.085 Amid Multiple Resistance Levels​

Solid ECN – The EURUSD currency pair trades around 1.085 today. Currently, the price is in conjunction with multiple resistance levels. These include the 38.2% Fibonacci support, the upper band of the bearish flag, and the rising trendline. While the technical indicators give mixed signals, the EURUSD 4-hour chart has formed a long-wick candlestick pattern, which can be interpreted as the bears being more active than the bulls in the current session.

From a technical standpoint, the primary trend remains bearish as long as the price is suppressed below 1.0865s, the 38.2% Fibonacci retracement level. However, for the downtrend to continue, the price must fall below the ascending, precisely the 1.0832 mark.

On the other hand, the uptick momentum that began on February 13th should continue if the bulls cross above the Fibonacci level under discussion and maintain a position above it.​

 

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Sweden's Producer Prices Drop Slows in January 2024​

Solid ECN – In January 2024, Sweden saw a 2.3% annual decrease in producer prices, which improved from the previous month's 7.7% decline. This trend of falling prices continues, now in its ninth month, but the decrease is the least since July 2023. The price drop for energy products was less steep (-10.9% compared to -37.6% in December 2023).

Meanwhile, prices for consumer and capital goods slowed to 1.5% and 4%, respectively, from higher rates the previous month. Ignoring energy products, producer prices fell by 0.5% in January, a change from a 1.4% increase the month before. Month-over-month, producer prices increased by 0.3%, recovering from a 1.6% drop.

 

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EURUSD Analysis: Bearish Trend is Likely To continue​

Solid ECN – The Euro trades around 1.082 against the U.S. Dollar in Wednesday's trading session, stabilizing itself below the broken ascending trendline, as illustrated in the 4-hour chart. This breakout could be interpreted as either a temporary or long-term shift in market direction, transitioning from a bull to a bear market.

Furthermore, as the EURUSD tests the 38.2% Fibonacci support level, technical indicators suggest that the decline, which began from the 1.0865 higher low, is likely to continue.

Therefore, from a technical standpoint, with the price maintaining its position within the bearish flag, depicted in black lines, the bear market is expected to extend and potentially test the 50% Fibonacci support, followed by the 61.8% level.

Conversely, the 1.0866 level acts as resistance. The bearish outlook should be invalidated if the EURUSD price crosses above this level.​

 

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U.S. Dollar Leads in Today's Market Against GBP​

Solid ECN – The U.S. Dollar is leading in today's trading against the pound sterling, with the GBPUSD pair trading around 1.263. The Ichimoku cloud supports this price area. From a technical standpoint, for the downtrend to continue, bears must stabilize the price below this level. Although technical indicators support a bearish scenario, there is still a chance for the bulls to take control, especially if the 1.2611 level holds firm.

In conclusion, the price must fall below the cloud for the bear market to extend further. Otherwise, we will likely witness the GBPUSD pair rise again, aiming for the 1.2709 resistance level.​

 

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Recent Drop in 30-Year Mortgage Rates to 7.04​

The standard interest rate for 30-year fixed mortgages with standard loan amounts (up to $766,550) fell slightly by 0.02% to 7.04% for the week ending February 23, 2024, as reported by the Mortgage Bankers Association. This figure is 0.33% above what it was a year ago. Mike Fratantoni, the chief economist at MBA, noted in a statement that the recent surge in rates has led to a reduction in mortgage applications, especially impacting those applying for FHA and VA refinancing loans.​

 

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USDJPY Bullish Trend: Key Resistance and Potential Invalidations​

Solid ECN – As expected, the USDJPY price rose from the 150.0 mark, maintaining a bullish trend due to this support from the Ichimoku cloud and the bullish channel. For the pair to continue its growth, the bulls must break above the 150.88 resistance.

Conversely, the bull market could be invalidated if the price dips below the cloud, specifically below the 150.0 mark.​

 

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Gold Rises Amid US Rate Cut Speculation; Eurozone Woes​

Solid ECN – Gold prices slightly increased to about $2,035 per ounce this Wednesday, influenced by the decline in yields. This change comes as traders evaluate the potential for more accessible monetary policies before releasing important US inflation data tomorrow.

Additionally, the financial community is keeping a close eye on the speeches from various Federal Reserve officials. Regarding broader economic indicators, the US economy expanded by 3.2% in the fourth quarter, a bit lower than the initially predicted 3.3%, demonstrating a robust financial framework.

Investors predict that the Federal Reserve will maintain the current interest rates in March and May, with a more than half likelihood of a rate reduction by June. In other news, the economic mood in the Eurozone has taken a downturn in February, falling below expectations and indicating a drop in consumer demand.​

 

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GBPJPY Navigates Bullish Patterns Amid Mixed Signals​

Solid ECN – The GBPJPY currency pair recently declined from the upper line of its bullish wedge pattern at the 191.0 mark. Subsequently, the pair tested the lower band and bounced back from 190.2, and it currently trades around 190.6.

The primary trend remains bullish, but the technical indicators provide mixed signals. On one hand, the RSI indicator suggests continuing the bull market. On the other hand, the Awesome Oscillator bars have turned red and are approaching the signal line, indicating potential caution. Based on the primary GBPJPY trend, we can predict that the uptick momentum will likely resume if the pair maintains its position within the wedge's boundaries.

Even if the price dips below the 190.2 level, considered a resistance point, the Ichimoku cloud emerges as the next significant barrier for the sellers.

From a technical standpoint, as long as the price remains above the cloud, our technical analysis remains unchanged. This situation suggests a potential for continued bullish behavior, securing any significant market shifts.​

 

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Offshore Yuan Hits Week Low Amid China's Economic Strain​

Solid ECN – The offshore yuan has dropped to its lowest level in a week, nearing 7.22 against the dollar, due to ongoing deflationary pressures, economic growth hurdles, and issues in the property market in China, affecting investor mood. There's also a wary eye on Beijing, as there's an expectation of further policy relaxation to prop up the economy.

Just last week, the People’s Bank of China (PBOC) significantly reduced its five-year loan prime rate by 25 basis points, bringing it down to 3.95%, a larger cut than the anticipated 15 basis points. This reduction, the sharpest since the rate's 2019 inception, aims to stimulate growth. Yet, the PBOC kept the one-year loan prime rate steady at 3.45%. Earlier in the month, the PBOC also cut the reserve requirements for banks by 50 basis points, releasing approximately 1 trillion yuan of long-term funds.​

 

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Anticipated Rise of Pound Sterling: A Clear Signal from Technical Indicators​

Solid ECN – As anticipated, the pound sterling has once again risen from the support zone of the Ichimoku cloud, the 1.2621 mark. Today, the technical indicators are providing a clearer signal. With the RSI flipping above the median line and the appearance of green bars on the awesome oscillator, we can forecast that the bull market will likely expand further.

The first significant milestone for the bulls is reaching the February high of 1.2709. Interestingly, this resistance level is reinforced by the 61.8% Fibonacci retracement, adding to its significance.

However, it's important to note that if the GBPUSD price falls below the cloud, the validity of the bull market could be called into question. This is a crucial point to remember as we monitor market trends.​

 

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AUDUSD Analysis: Breaking Bullish Trends and Testing Fibo Level​

Solid ECN – The U.S. dollar broke below the ascending bullish channel in yesterday's trading session against the Australian dollar. Interestingly, the pair tested the broken support, which now acts as resistance, specifically at the 50% Fibonacci level or the 0.6521 mark.

The technical indicators give mixed signals: the RSI is bearish, while the Awesome Oscillator signals a bull market.

Based on the price action, the 50% Fibonacci level plays as resistance, and it is expected for the downtrend to extend to the 78.6% Fibonacci support, followed by the February low at 0.6442.

The bearish outlook for the AUD/USD pair should be invalidated if the price stabilizes itself above the 50% Fibonacci level.​

 

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Gold Price Analysis: Potential Bullish Breakout​

Solid ECN – The yellow metal is testing the $2,037 mark. What distinguishes this resistance area is its conjunction with the 61.8% Fibonacci level and the descending trendline, depicted in blue.

Upon examining the price action, we observe that the divergence in the awesome oscillator couldn't initiate a shift in the market. Consequently, the Gold price remained above the 50% Fibonacci level and the Ichimoku cloud. With the RSI indicator hovering above the 50 lines, it is likely for the price to make a bullish breakout and climb to the 78.6% Fibonacci resistance, corresponding to the $2,048 mark.

On the other hand, if the XAU/USD price dips and stabilizes below the 50% Fibonacci support, the bullish analysis will be invalidated. In such a scenario, the price might experience a further decline to the 38.2% level.​

 

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USDJPY Experiences Significant Downward Momentum​

Solid ECN – The USDJPY is experiencing significant downward momentum in today’s trading session. The pair has crossed below the Ichimoku cloud and is trading around 149.2 at the time of writing. Interestingly, the RSI indicator has entered the oversold area below 30. Therefore, considering the primary trend is bullish, the price might test the previously broken support, the Ichimoku cloud.

From a technical standpoint, the data from the USDJPY 4-hour chart indicates that the uptrend will be on pause for a while, and the decline will likely extend to the 23.6% Fibonacci support, corresponding to the 148.3 mark.

On the flip side, bulls must push the price above the Ichimoku cloud again for the uptrend to continue.​

 

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Silver Prices Surge Amid US Economic Updates​

Solid ECN – Silver's price rose above $22.5 per ounce, thanks to a weaker US dollar, as market players reacted positively to new economic data from the US. The Federal Reserve closely monitors the core PCE price index, which increased by 0.4% from January last month, aligning with analysts' predictions.

Furthermore, the year-on-year rates have hit their lowest point since 2021, reinforcing the view that inflation is staying on its expected path. In other developments, initial jobless claims were slightly higher than expected, reducing concerns over an overly tight job market. Market participants anticipate 79 basis points in Fed rate cuts in 2023, with expectations for the initial reduction in June. As borrowing costs fall, the attractiveness of non-income-generating assets like silver increases.​

 

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Gold Prices Stay High Amid Steady US Inflation Data​

Solid ECN – Gold prices remained above $2,040 an ounce last Friday, marking the second week of gains. This trend follows the latest U.S. inflation data, which met expectations and continued to support the anticipation of Federal Reserve interest rate reductions this year. The recent data revealed that core PCE prices in the U.S., an inflation measure closely watched by the Fed, increased by 0.4% month-over-month in January. This is a jump from the 0.1% rise seen in December, aligning with forecasts.

Furthermore, New York Fed President John Williams commented that he anticipates the central bank will lower interest rates later in the year, driven by decreasing inflation and a stable economy. He also mentioned that he doesn't foresee circumstances requiring another Fed rate hike.

Currently, the market anticipates roughly a two-thirds likelihood of a Fed rate reduction in June, with expectations for no changes in March and May.​

 

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Gold Stabilizes as US Economic Concerns Mount: A Quick Overview​

Solid ECN – On Monday, the price of gold remained steady at around $2,080 per ounce, following a nearly 2% increase the day before. This was mainly due to a fall in both the US dollar and Treasury yields, which happened in response to disappointing economic indicators from the US. Specifically, recent reports revealed that the country's manufacturing sector has been shrinking for 16 months as of February.

Additionally, a survey from the University of Michigan indicated consumer confidence last month was lower than predicted. Regarding interest rates, John Williams of the New York Fed anticipates reductions later this year, although not all officials agree to such a change. Investors are now turning their attention to upcoming events: they are eagerly awaiting Federal Reserve Chair Jerome Powell's forthcoming testimony to Congress for any signs of changes in monetary policy. They are also looking for essential updates on US employment and manufacturing activity.​

 

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EURUSD Analysis: A Close Look at Key Fibonacci Levels​

Solid ECN – The EURUSD is trading around 1.0856, slightly below the 38.2% Fibonacci retracement level. Interestingly, the bulls have managed to break above the bearish channel. However, Euro buyers must overcome the 1.0865 barrier for the uptrend to continue. The technical indicators support a bullish market, with the RSI hovering above 50 and the Awesome Oscillator bars turning green and rising above the signal line.

From a technical standpoint, the bulls will likely target the 50% Fibonacci retracement level if they can stabilize the price above 1.0865.

Conversely, if the EURUSD price falls below the 1.0796 mark, representing the 23.6% Fibonacci support, the decline that began in December 2023 will likely resume.​

 

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Bullish Outlook: GBP USD's Potential to Overcome Resistance​

Solid ECN – The pound sterling is stabilizing at around 1.267 against the U.S. dollar, above the 50 EMA but slightly below the 61.8% Fibonacci resistance. The GBPUSD daily chart shows that the pair has traded sideways since mid-November 2023.

While the technical indicators don't provide anything significant, from a technical standpoint, the primary trend is bullish. As long as the pair trades above the ascending trendline, depicted in blue, we expect the market to surpass the 1.270 barrier and aim for the 78.6% Fibonacci resistance.

Conversely, the bearish channel will remain valid if the price falls below the ascending trendline. In this scenario, the next target for the sellers would be the 38.2% Fibonacci level.​