Solid ECN – In October 2023, Japan's main economic forecast tool (the Leading Economic Index), saw a slight increase to 108.9 from an initial 108.7. However, this was still not as high as the previous month's 109.3, showing that Japan's economic recovery is still weak.
The country is dealing with rising prices and lots of outside uncertainties. During the third quarter of 2023, Japan's economy went down by 0.7%, marking its first drop in a year. This downturn was caused by reduced spending by both people and businesses, and trade issues also played a part in lowering the country's overall economic performance. Additionally, people's confidence in the economy in October was almost at its lowest in six months.
Solid ECN – On Monday, the Nikkei 225 index rose by 85.05 points or 0.26%, ending at 33,254.03. This continued the gains from the previous session. Investors were encouraged by Wall Street’s year-end rally on Friday, especially after the US Federal Reserve’s preferred inflation measure for November was lower than expected and closer to the central bank’s 2% target.
Meanwhile, both overall and core inflation in Japan dropped to a 16-month low last month. On a quiet Christmas day, investors paid attention to a speech by Kazuo Ueda, the governor of the Bank of Japan. He suggested that the central bank might change its monetary policy if wages and prices start moving in the right direction. He also repeated that the board was keeping its very supportive monetary policy to protect the delicate economic recovery.
The healthcare sector led the increase, followed by property, tech, and consumer sectors. The top performers of the day included Nexon Co. (5.4%), NTT Data Group (4.5%), Lasertec Co. (2.8%), NH Foods (2.5%), and Takashimaya Co. (2.4%).
On Tuesday, amidst holiday trading, the dollar index lingered around 101.6. This was near its five-month low, due to signs of slowing US inflation. This has led to predictions that the Federal Reserve will begin to lower interest rates next year. Data from Friday revealed that the core PCE index, the Federal Reserve’s favored inflation measure, dropped to 3.2% in November from 3.4% in October.
This was lower than the projected 3.3%. Furthermore, figures from Thursday showed a weaker than expected US economic growth in Q3 and a minor rise in unemployment benefit claims recently. The dollar was trading near multi-month lows against other major currencies. It is at risk of further depreciation against the yen, as BOJ Governor Kazuo Ueda stated on Monday that the chances of reaching the 2% inflation target were “gradually rising.”
Solid ECN – The euro recently climbed to $1.1, marking its highest point in five months. This rise is largely due to the weakening U.S. dollar. The latest PCE inflation data from the U.S. has fueled expectations that the Federal Reserve might begin lowering interest rates as early as next year, potentially starting in March.
At the same time, market players are predicting that the European Central Bank (ECB) might also reduce borrowing costs next year, potentially in line with the Fed's actions. However, it's worth noting that many ECB policymakers are not in favor of this prediction. Over the course of the year, the euro has seen an approximate 3% increase in value.
Solid ECN – The Australian dollar stays near $0.68, its highest in five months. This is due to US data hinting at Federal Reserve rate cuts next year. Analysts think the Reserve Bank of Australia will cut rates later than others. It hasn't raised rates as much as other banks. Australian inflation is sticking around longer. RBA Governor Michele Bullock said last month that lowering inflation from around 5.5% to below 3% will take time. It's mostly due to local demand. Markets expect the RBA to cut rates only by late 2024.
Solid ECN – The Japanese yen has recently seen an uptick, reaching approximately 142.2 against the dollar. This boost is largely due to comments made by Kazuo Ueda, the Governor of the Bank of Japan, hinting at improvements in inflation. Ueda expressed that Japan’s economy is slowly but surely moving away from a low-inflation state and inching towards the price stability target. However, he also noted that the chances of this happening are not yet high enough.
Ueda further stated that if the positive feedback loop between wages and prices strengthens and the likelihood of sustainably achieving the 2% inflation target increases enough, the board may contemplate altering its monetary policy. Earlier in the month, the BOJ decided to stick with its ultra-accommodative monetary policy and refrained from making any statements about potential adjustments towards policy normalization in the coming year.
In terms of economic data, Japan’s unemployment rate for November remained steady at 2.5%, which was in line with market predictions.
At the end of December, iron ore prices soared past $140 per tonne in Tianjin. This is the highest in 18 months. Prices are expected to end the year 20% higher. This surge is driven by strong demand for industrial metals. Chinese government support has been a key factor since reopening from pandemic lockdowns. A notable move was in August when China suspended its annual steel production cap. This boosted the demand for iron ore. The People's Bank of China (PBoC) introduced several stimulus and monetary easing policies. These efforts are in line with Beijing's commitment to boost infrastructure and manufacturing in 2024. This price hike in iron ore comes even as China faces reduced property demand and lower construction activities due to major developer defaults.
Understanding EURJPY’s Movement in the Ichimoku Cloud
Solid ECN – The EURJPY currency pair is presently undergoing a test of the Ichimoku cloud. Last week, the pair managed to cross above the cloud successfully. The subsequent decline post-breakout could potentially be viewed as a consolidation phase.
However, should the pair’s decline persist below the cloud, the bullish bias would be rendered invalid, indicating a false Ichimoku signal.
From a technical perspective, as long as the pair remains within the channel and above the 50% Fibonacci support level, the short-term trend is bullish. In this scenario, the target could be the upper band of the flag channel.
This analysis is subject to market conditions and should be used in conjunction with other indicators.
Decoding Divergence: A Deep Dive into Gold Chart Patterns
Solid ECN – Upon first glance at the Gold chart, we notice the awesome oscillator bars signaling divergence. However, it appears that the divergence signal led to the consolidation phase. As a result, the XAUUSD price is currently ranging above $2,045. The ADX’s style line in black is retreating below the 40 level, indicating that the market’s momentum may slow down. Consequently, the gold price might remain within a narrow range until the holidays end.
The lower line of the bullish flag serves as support. If the bottom line is breached, the gold price could dip to the resistance area of the Ichimoku cloud. However, as long as the price continues to range inside the channel, the market maintains its bullish stance. In this scenario, the next target could be the 61.8% Fibonacci resistance, followed by the $2,090 mark.
Solid ECN – The value of the Japanese yen fell to 142.5 against the US dollar. This happened when the Bank of Japan's meeting summary revealed discussions. They discussed when to end their extensive stimulus program. While some board members aren't in a hurry to act. One member believes the bank has enough room to assess if a positive wage-inflation cycle is in place. BOJ Governor Kazuo Ueda recently said Japan's economy may soon overcome low inflation. He said it may also reach its price stability goal. Yet, he believes this chance is still not very high. Ueda said if wages and prices get better and hitting the 2% inflation goal looks possible, the board may change its money policy.
Solid ECN – Bitcoin has a shift below the Ichimoku cloud. The price is currently testing the cloud as resistance. The price is ranging inside the bearish channel. The RSI indicator hovers below the median line. We expect the bitcoin price decline to $40,600 area if the market ranges inside the flag.
Bitcoin is experiencing a notable shift, now positioned below the Ichimoku cloud. Presently, its price is testing the cloud, facing it as a resistance level. In the midst of this, we're seeing the price moving within a bearish channel. Concurrently, the RSI indicator remains below the median line, signaling a cautious market sentiment.
Should the market continue to range within this flag pattern, we anticipate a potential decline in Bitcoin's price towards the $40,600 area.
The USDCNH currency pair is currently hovering near the Ichimoku Kinko Hyo, while the RSI indicator presents a level of uncertainty. Despite mixed signals from technical indicators, the market is trending upwards. The bullish channel, which began in mid-November 2023, supports this current trend. The bulls are now eyeing the 7.1577 to 7.1637 resistance zone. If the USDCNH can demonstrate strength above the cloud, the price is expected to rise to the upper band of the bullish flag.
On the other hand, the lower band of the flag underpins the bullish scenario. However, if this level is breached below, the above scenario should be accordingly invalidated. In such a case, the price could drop to 7.1117, and potentially even to 7.09669.
In today’s trading, the price of Silver dipped to the Ichimoku cloud. The divergence in the awesome oscillator hints at a possible trend reversal or the start of price consolidation. The current bullish trend is supported by the 38.2% Fibonacci retracement level. If the bears push the price below this level, we could see the Silver price decline extend to 23.6%.
On the other hand, if the awesome oscillator bars gain momentum above the signal level and the RSI indicator moves above the median line, we might see the bullish wave continue. In this scenario, the price could rise to test the 61.8% support level again. Keep an eye on these indicators for potential market movements!
US Oil Trades Near $80.5, Bulls Eye 50% Fibonacci
Solid ECN – US oil is currently trading at around $80.5 per barrel. The upward momentum has eased near the 38.2% Fibonacci level, yet the bulls have successfully maintained the oil price above the simple moving average.
Notably, there is one bearish signal: the divergence in the Awesome Oscillator. Consequently, we can anticipate the price potentially dipping to the lower band of the bullish flag, with the 38.2% level acting as resistance.
Solid ECN –The NZX 50, New Zealand’s benchmark index, experienced a significant surge, gaining 90.25 points or 0.77% to close at 11,768.68 last Thursday. This marked the fourth consecutive session of growth, pushing the index to its highest point in over four months. This upward trend was observed amidst a relatively calm trading environment as the holiday season approached, with most sectors witnessing gains.
The positive sentiment was largely driven by the recent global stock market rally, with expectations of interest rate cuts in 2024 by major central banks, including the US Federal Reserve. Additionally, there is growing optimism that the Reserve Bank of New Zealand (RBNZ), known for its hawkish stance, might adopt a more dovish approach in the coming year. This could potentially involve a significant rate cut aimed at stimulating the sluggish economy, a move that could occur earlier than the central bank’s late 2025 projection.
In China, New Zealand’s primary trading partner, the two largest cities, Beijing and Shanghai, have recently lowered downpayment ratios and relaxed some housing qualifications for lower mortgages. This move has had a positive impact on the NZX 50.
Among the companies listed on the NZX 50, Restaurant Brands NZ saw a substantial increase of 5.3%, while Seeka Ltd. rose by 3.7%. Other notable performers included Delegat Group Ltd., Gentrack Group Ltd., and Winton Land Ltd., which gained 3.2%, 2.6%, and 1.9% respectively.
US Stock Futures Analysis: Steady End to Strong Year
Solid ECN – US stock futures remained stable on Thursday, as investors reflected on a year marked by robust gains in equities. The previous trading day saw the Dow increase by 0.3%, while the Nasdaq Composite rose slightly by 0.16%. The S&P 500 also saw a modest gain of 0.14%, approaching record levels. In this upward trend, eight out of the 11 S&P sectors closed higher, with real estate, healthcare, and consumer staples leading the charge.
The market's upward momentum is largely driven by the anticipation that the Federal Reserve will reduce interest rates next year. Bit Digital, an American bitcoin mining company, experienced an 18.6% surge in its shares. This followed its announcement to double its mining operations by 2024. Coherus BioSciences also enjoyed a significant 23.4% jump in its stock value after receiving US FDA approval for its new drug delivery device to fight infections.
Looking forward, both the Dow and S&P 500 are set to conclude the year with substantial gains, over 13% and 24% respectively. Meanwhile, the Nasdaq Composite has impressively rallied by 44.3% this year. This steady performance in US stock futures analysis reflects a year of consistent growth in the stock market.
Solid ECN – The Aussie dollar is currently seeing a 20-pip dip from yesterday's high in this trading session. At the moment, the pair is testing the Ichimoku cloud on the 1-hour chart, while technical indicators are showing mixed signals.
Should the AUDUSD price stay above its current level, the uptrend is likely to persist. In such a scenario, the price could soar to 0.6900, which was the all-time high in May 2023.
It's important to note that the lower band of the bullish flag is key. As long as the price remains within the flag, the uptrend remains intact.
The Swiss franc strengthened past 0.85 against the USD in late December, marking its highest level since August 2011. It is poised to register an 8.5% increase against the dollar this year, influenced by differing interest rate outlooks from the Swiss National Bank (SNB) and the Federal Reserve. The Fed's latest meeting revealed dovish projections, further amplified by new data indicating a slowdown in US inflation, which put pressure on the greenback.
In Switzerland, despite a slowdown in inflation, the SNB has noted that the potential for price growth to increase justifies maintaining higher interest rates for now. Inflation in Switzerland was last reported at 1.4% in November. However, the central bank anticipates a rise towards its 2% target in the second and third quarters of 2024. This forecast leads investors to expect that any reductions in interest rates by the SNB will likely occur well after the Fed's similar actions.
The sustained prospect of higher interest rates from the SNB has also propelled the franc to a record high against the Euro, the currency used in neighboring countries.
The Canadian dollar rose past 1.33 against the USD in December, reaching its highest level since early August. This increase is due to ongoing high inflation in Canada, leading to expectations that the Bank of Canada might take a more aggressive approach in its monetary policy. In November, the main inflation rate was at 3.1%, higher than the expected 2.9%. The closely watched core rate, which removes certain items, was at 3.5%, also higher than predicted.
This data supports the central bank's concern about continuing high inflation, suggesting they might keep their strict monetary policy and possibly raise interest rates. This is different from the more cautious approach of the Federal Reserve, which helped the Canadian dollar gain value against the US dollar.
Early reports for November show that Canada's economy grew compared to the previous month. However, updated figures for October indicate the economy didn't grow much, which is in line with the Bank of Canada's predictions for the economy.
Solid ECN – The S&P Global Russia Manufacturing PMI rose to 54.6 in December 2023, up from 53.8 in November. This increase marks the sector's quickest expansion since January 2017, driven by continued improvements in output and new order growth. The rate of job creation accelerated, reaching its highest point in three months. Additionally, backlogs of work decreased for the second consecutive month. Purchasing activity grew at a substantial rate, the second-strongest since August 2006.
In terms of pricing, input cost inflation slowed to a six-month low. This was due to increased supplier prices and unfavorable exchange rate movements. However, output cost inflation remained relatively stable and was among the weakest in the past six months. Finally, business sentiment weakened, falling to a three-month low.
