Solid ECN - Fundamental Analysis

[SOLIDECN]

Historic Rise in European Stocks After Fed Maintains Rates

European stocks experienced a significant boost on Thursday, reaching new heights after the US Federal Reserve's decision to maintain current interest rates. This announcement also came with an unexpected revelation: plans for three interest rate reductions in 2024, more than previously anticipated in September. This news sent the STOXX 50 index soaring by 1%, reaching a remarkable 23-year high of 4,585 points. Meanwhile, the wider STOXX 600 index also reached its highest level since January 2022.

The Federal Reserve's future plans, detailed in its "dot plot", suggest an even more aggressive rate reduction strategy. They foresee four cuts in 2025 and another three in 2026, aiming to lower the federal funds rate to between 2% and 2.25%. This approach is part of the Fed's strategy to avoid the risk of maintaining excessively high rates for an extended period, as emphasized by Fed Chairman Jerome Powell.

Investors are now keenly awaiting further monetary policy updates, particularly from the European Central Bank and the Bank of England, expected later on Thursday. These announcements are highly anticipated, as they could further influence global market trends.​

 

[SOLIDECN]

AUDUSD’s Bullish Journey: A Technical Analysis​

Solid ECN – In our last analysis, we highlighted the potential for a positive shift in the AUDUSD pair. Following the Fed’s cautious stance on interest rates, the AUDUSD price has indeed risen above the Ichimoku cloud.

Currently, the AUDUSD price is grappling with a previously broken resistance. This resistance area is defined by the range of 0.6678 to 0.669. Interestingly, the RSI indicator is lingering in the overbought zone, suggesting a possible consolidation phase. As a result, the price may stabilize above 0.6678.

When we take a broader look at the daily chart, we can see the AUDUSD pair moving within a bullish channel. The bulls in the AUDUSD market appear to be aiming for the 78.6 Fibonacci resistance next.

As long as the pair continues to trade within this channel, the primary trend remains optimistic.

 

[SOLIDECN]

Interest Rate Cuts Boost FTSE MIB, But Banks Struggle​

The FTSE MIB experienced a modest increase of 0.5%, reaching the 30,500 mark on Thursday. This peak, last observed in June 2008, followed the Federal Reserve's announcement of a significant 75 basis points reduction in interest rates for the upcoming year, exceeding initial predictions. Despite this rise, the Italian index lagged behind its European counterparts. This underperformance is attributed to the impact of lower borrowing costs on the profit margins of banks. Major banking institutions faced declines, with notable drops in Unicredit (2.9%), Banco BPM (4.7%), Bper Banca (5.6%), and Banca Monte Paschi Siena (4%). In contrast, shares in companies like Amplifon, Telecom Italia, and Diasorin saw an increase of over 4%. Market focus is now shifting to the European Central Bank's upcoming decision, anticipated to maintain high interest rates. Investors are keenly awaiting any indications of potential rate cuts.

​

 

[SOLIDECN]

Dow Jones Hits New Heights Amid Fed's Dovish Stance​

On Wednesday, the Dow Jones was poised for a historic high following a positive response from US stock markets. This surge came after the Federal Reserve decided to keep its funds rate steady at 5.5%, aligning with expectations. Additionally, they signaled larger rate cuts for the coming year. This news boosted the three major stock indices, each rising about 1% after a stagnant morning.

The Federal Open Market Committee (FOMC) revealed its outlook, predicting the funds rate to drop to 4.75% by end of 2024. This is a decrease from their earlier 5.25% estimate. The reason behind this adjustment is the recent reports showing inflation to be lower than anticipated. However, their expectations for unemployment and economic growth remain mostly the same.

In the tech sector, major companies and semiconductor manufacturers saw notable gains. However, not all news was positive. Tesla experienced a 2% decrease in stock value after announcing a vehicle recall. Similarly, Pfizer's stocks fell by 8% due to lowered financial projections.​

 

[SOLIDECN]

Dollar Plummets to Four-Month Low

On Thursday, the dollar index fell below 102.4, hitting its lowest level in four months since early August. This drop came as investors digested the latest decisions on monetary policy and new economic data from the US. For the third time in a row, the Federal Reserve kept interest rates unchanged. They also signaled a more rapid reduction in rates for 2024, estimating 75 basis points in cuts, more than what was projected in September.

During the press conference, Fed Chair Powell maintained a dovish stance, hinting at possible reductions in borrowing costs due to a faster-than-expected drop in inflation. On the other hand, the European Central Bank (ECB) and the Bank of England decided to keep their rates steady. They committed to maintaining higher rates to tackle inflation. Despite robust US retail sales and a fall in weekly jobless claims, these developments didn't significantly alter investors' outlook.​

 

[SOLIDECN]

Predicting NZDUSD's Next Moves​

Recently, the NZDUSD currency pair reached the important 38.2% Fibonacci support level. This was something we had anticipated earlier, suggesting that the pair might regain and stabilize some of its recent increases. Looking ahead, if buyers, or 'bulls', can keep the currency above this crucial 38.2% mark, we could see the NZDUSD's value start to climb.

However, if sellers, known as 'bears', manage to push the value below this 38.2% Fibonacci level, the pair might enter a longer phase of stabilization, possibly reaching the area known as the Ichimoku cloud.

 

[SOLIDECN]

Euro and the Impact of Global Monetary Policies and PMI Data

Recently, the euro has been lingering just under the $1.1 level. This comes as investors are taking in a series of decisions made by central banks last week, as well as the latest PMI (Purchasing Managers' Index) data. Last Thursday, the European Central Bank (ECB) chose to keep interest rates stable, going against some expectations of a rate cut. ECB President Lagarde emphasized that the idea of reducing borrowing costs wasn't discussed, and any future decisions will be based on upcoming data.

In contrast, the US Federal Reserve indicated on Wednesday that its period of significant monetary policy tightening might be over, suggesting that we could see up to three rate reductions in 2024. Additionally, there’s a focus on the recent PMI numbers from Europe, which were lower than expected, showing a greater decline in the Eurozone's private sector activities for December.​

 

[SOLIDECN]

Brazilian Real Stabilizes Amid Monetary Changes​

On Wednesday, the Brazilian real hovered around 4.92 per USD. This comes after it hit a low not seen in over a month the day before. The fluctuation follows key monetary policy decisions from both the Brazilian Central Bank and the US Federal Reserve. Brazil's Central Bank recently decided to reduce interest rates by 50 basis points (bps).

This decision, marking the fourth time the bank has committed to gradual monetary easing, was influenced by slowing local inflation and a somewhat struggling economy. In November, Brazil recorded an annual inflation rate of 4.68%, meeting forecasts and showing a continued decrease since September. Brazil's Finance Minister, Fernando Haddad, pointed out that despite a minor GDP growth in the third quarter, the overall economy is still weakening. In contrast, the US Federal Reserve kept its borrowing costs unchanged, while projecting rate cuts totaling 75 basis points through 2024.​

 

[SOLIDECN]

China's Stock Market Dips Amid Economic Uncertainties​

Solid ECN – On Monday, a sense of economic unease led to a downturn in China's stock market, with the Shanghai Composite index decreasing by 0.4% to 2,931 and the Shenzhen Component index falling 1.13% to 9,279. These indices hit their lowest points in over a year, reflecting the growing concerns about China's economic stability. Recent mixed economic data from November has highlighted weak demand in the country, a major point of discussion in a high-level policy meeting held last week. Despite setting economic goals and formulating policy strategies, Chinese officials were unable to boost investor confidence.

Attention is now shifting to the upcoming decision on the loan prime rate by the People’s Bank of China, set to be announced on Wednesday. The global market sentiment also suffered, influenced by comments from John Williams, President of the New York Fed, who expressed skepticism about the likelihood of rate cuts. Major losses were recorded by leading companies, with Contemporary Amperex, COL Group, and iSoftStone seeing declines of 5.2%, 11.3%, and 5.8%, respectively.​

 

[SOLIDECN]

EURUSD Bullish Wave: Eyes on Fibonacci Levels​

In mid-December, the EURUSD pair soared, reaching a peak of 1.1016, mirroring the November high. This notable resistance was bolstered by signals from the Awesome Oscillator, indicating divergence. Consequently, the EURUSD's value dipped beneath the critical 38.2% Fibonacci support level, a move further backed by a previously breached bullish flag.

Technical analysis suggests a potential continuation of the upward trend. The ADX indicator's green bar ascended past the 20 mark, while the RSI remains steadfast above 50. However, the Awesome Oscillator stands alone in signaling bearish possibilities.

Should the bulls successfully maintain the EURUSD above the 38.2% threshold, a fresh surge in bullish momentum is likely, targeting the recent highs. Conversely, a decline below this pivotal level could signal a prolonged consolidation phase, potentially stretching down to the 61.8% and 78.6% Fibonacci support levels.​

 

[SOLIDECN]

GBPUSD's Resistance Impact and Market Analysis​

Solid ECN – After reaching the 1.2797 resistance point, the GBPUSD currency pair experienced a downturn. The significance of this resistance level is underscored by the fact that it has been a consistent point of contention throughout the trading year of 2023.

In the daily chart, the RSI indicator is maintaining a position above the 50 line, while the Awesome Oscillator displays green bars. These indicators collectively point to a robust bullish market. However, for a more detailed understanding, it's beneficial to examine the 4-hour chart.

In this shorter timeframe, the technical indicators present a more varied outlook. With the 1.2797 resistance level as a backdrop, there's an anticipation that the GBPUSD pair might see further declines. This suggests that the current consolidation phase could extend, possibly reaching the Ichimoku cloud and then the lower band of the bullish flag.​

 

[SOLIDECN]

AUDUSD Stays Bullish Above Key Support​

In the realm of technical analysis, the AUDUSD currency pair has impressively established itself above a key support zone, which spans a tight range from 1.6678 to 1.6690.

Turning to the indicators, the Relative Strength Index (RSI) is inching closer to the overbought threshold, indicating a strong buying interest. Simultaneously, the Awesome Oscillator and the Average Directional Index (ADX) both point towards a sustained bullish momentum. While the rising RSI does hint at a possible consolidation phase, the bullish trajectory appears likely to aim for the upper boundary of the bullish channel. This bullish sentiment is further reinforced by the 61.8% Fibonacci retracement level. As the AUDUSD pair continues trading above this level, the bullish forces are expected to maintain their dominance.

 

[SOLIDECN]

Canada's New Home Prices Dip in November 2023​

In November 2023, Canada witnessed a 0.2% month-over-month decrease in new home prices, slightly exceeding the market's forecast of a 0.1% reduction. This decline follows a steady reading in October. A notable change was seen across 25 of the 27 census metropolitan areas, where costs either decreased or remained stable. Sherbrooke experienced the most substantial drop in prices, falling by 1.2%, with St. John's and Hamilton closely following, each recording a 1.0% decrease. These significant reductions are primarily linked to less robust market conditions.

Conversely, new home prices in Trois-Rivières and St. Catharines-Niagara bucked the trend, rising by 0.5% and 0.3% respectively. These increases can be attributed to the escalating costs of construction in these areas. On an annual basis, the cost of new homes in Canada in November 2023 marked a decrease of 0.9%, continuing a downward trajectory that has persisted since November 2019.​

 

[SOLIDECN]

NZDUSD Rises, Bullish Trend Foreseen​

Solid ECN – The NZDUSD pair recently achieved a notable uptick, reaching the highs of the previous week, closely aligned with the proximity of the Ichimoku cloud. A glance at the 4-hour chart reveals that the ADX lines linger below the 20 mark. This positioning indicates that the NZDUSD has been experiencing a range-bound movement in today's trading, marked by a discernible lack of momentum.

Looking at the RSI indicator, it maintains a position above 50, and the Awesome Oscillator bars present in green, signaling a positive trend. Taking these technical indicators into account, along with the overall market trajectory, it seems probable that the NZDUSD's value might escalate, potentially targeting the upper limit of the bullish flag.

Supporting this bullish stance are the Ichimoku cloud and the lower band of the bullish flag. The bullish forecast for the NZDUSD remains valid as long as it continues to trade above these levels.​

 

[SOLIDECN]

Dollar Climbs Back, Awaits Inflation Data

The value of the dollar has seen an uptick, currently hovering around 102.5 this Tuesday. This rise comes after a dip below 102 just last week. The shift in momentum is partly due to comments from officials at the US Federal Reserve, who have been hinting that expectations for a decrease in interest rates might be a bit hasty.

Among the voices urging caution were Chicago's Austan Goolsbee and Cleveland's Loretta Mester, adding to similar sentiments previously expressed by John Williams from New York. Across the Atlantic, the European Central Bank and the Bank of England have held their rates steady, committing to higher rates in the fight against inflation. Market participants are now keenly awaiting the US PCE inflation figures, hoping for a clearer picture of inflation trends.​

 

[SOLIDECN]

Shanghai Index Stabilizes Amid New Financial Rules​

Tuesday witnessed minimal movement in China's stock market, with the Shanghai Composite index closing almost flat at 2,932.39. This came as a contrast to the previous four days of falling figures. Market players were busy analyzing new rules for non-banking financial companies in China, set to be implemented from May 1, 2024. However, the calm of the day didn't lift the index much, as it hovered near its lowest point in 13 months, indicating investors' cautious approach. This cautiousness stems from the upcoming decision on loan prime rates by China's central bank, the PBoC, due on Wednesday, and mixed reports of economic activities in China for November, driven by low demand and ongoing policy challenges.

Over in the US, the stock market futures remained mostly unchanged. Investors were holding their breath for the upcoming US Personal Consumption Expenditures (PCE) index release, a critical measure of inflation monitored by the Federal Reserve, expected to impact future monetary policy.

In the realm of corporate developments, Shenzhen L&A Design witnessed a remarkable 20% jump, reaching a two-year peak. This followed news of its subsidiary, Altron Engine Data Services, planning to invest CNY 435 million in new computing servers. Other significant market shifts included CSSC Science & Tech rising by 5.6% and Kangxin New Materials gaining 3.3%. In contrast, Jiangsu Boxin Investing and Citychamp Dartong Co experienced drops of 7.2% and 2.3%, respectively.​

 

[SOLIDECN]

BoJ Holds Rates Steady in Year-End Meeting

The Bank of Japan (BoJ) concluded its final meeting of the year with a unanimous decision to keep its key short-term interest rate at -0.1% and the 10-year bond yields close to 0%, as anticipated. The central bank also decided to maintain the flexible upper limit for long-term government bond yields at 1.0%.

Amidst significant uncertainties both domestically and internationally, the BoJ committed to persist with its monetary easing policy. The board emphasized its readiness to adjust to changes in economic conditions, prices, and financial stability. The ultimate goal of the BoJ is to sustainably reach a 2% price stability target, ideally alongside rising wages. The committee also expressed its willingness to implement additional easing measures if necessary. Recently, the central bank governor, Kazuo Ueda, acknowledged that wage growth is trailing behind the increase in prices, casting doubt on the sustainability of the inflation target level.​

 

[SOLIDECN]

Swiss Franc Climbs High, Supported by SNB​

The Swiss franc has risen past 0.87 against the USD, reaching its highest level since the end of July. This surge is partly due to a temporary dip in the dollar's strength and ongoing support from the Swiss National Bank. Recent dovish comments from Federal Reserve officials hinting at potential rate cuts next year have put pressure on the US dollar.

Meanwhile, the Swiss National Bank has been actively supporting the franc by selling off its foreign currency reserves. This strategy helps to mitigate the impact of fluctuating commodity prices and keeps import inflation in check, a crucial tool in combating high price growth in Europe. Latest reports show that the Swiss National Bank's foreign exchange reserves have decreased for the sixth consecutive month, hitting a seven-year low in November. On the policy side, the central bank maintained its key interest rate last week and indicated that, despite a slowdown in the country's Consumer Price Index (CPI), inflation risks are still present.​

 

[SOLIDECN]

Rand Dips as Dollar Stabilizes​

The South African rand is currently trading at about 18.6 against the US dollar, a slight decline from its recent one-month peak of 18.3. This change comes as the dollar finds stability, influenced by several Federal Reserve policymakers who expressed hawkish views. These officials are challenging the extent of the interest rate cuts that the markets were expecting for next year.

In South Africa, the Reserve Bank decided to maintain its main lending rate at 8.25% for the third consecutive meeting on November 23rd, a rate that hasn't been this high in 14 years. The bank continues to highlight ongoing inflationary risks. Notably, the annual inflation rate in South Africa decreased to 5.5% in November 2023. This is a drop from the five-month peak of 5.9% seen in October and brings it nearer to the central bank's target range of 3% to 6%.​

 

[SOLIDECN]

Hungary's Central Bank Cuts Rates Amid Slowing Inflation

During its December 2023 meeting, Hungary's central bank lowered its key base rate by 75 basis points to 10.75%, aligning with what analysts had predicted. This decision was made as inflation shows signs of slowing down. Similarly, rates for collateralized loans and overnight deposits were decreased to 11.75% and 9.75%, respectively. However, the central bank is standing firm against government calls for deeper rate cuts aimed at stimulating the economy.

In November, the country saw a 7.9% year-on-year rise in consumer prices, the smallest since January 2022, yet still well above the central bank's target midpoint of 3%. The bank predicts a steady reduction in inflation, expecting it to fall to about 7% by the end of 2023, and to re-enter the target range by 2025. Looking forward, policymakers are likely to continue their current approach to rate cuts, mindful of the potential risks of an economic slump in Hungary.​