2023 Market Forecast by Solidecn.com

Commercial Content Analysts
621

Recession Looms Over Eurozone: PMI Indices Disappoint, EURUSD Dips

The economy in Europe is slowing down, which is causing worries about a possible recession in Germany and the entire eurozone.

The PMI indices, which are often used by investors to predict economic trends, have shown disappointing results for October. Instead of the hoped-for improvement, they indicate that the recession is getting worse.

The German services sector was particularly disappointing. Its index dropped from 50.3 to 48.0, indicating a contraction rather than growth. This was much weaker than the expected 50.1.

In France, the services index was 46.1, which is better than the expected 44.9 but still quite low.

Because of these results, the PMI for the whole euro area dropped to 47.8, the lowest it’s been since February 2021.

The manufacturing sector in the euro area also showed a faster contraction, with its index falling from 43.4 to 43.0 instead of rebounding to 43.6 as expected.

The composite index dropped from 47.2 to 46.5, which is the biggest drop since October 2020. This was unexpected and led to a sell-off in the single currency.

After this data was released, the EURUSD lost almost 0.5% and moved sharply away from 1.07. Sellers increased pressure after the pair touched its 50-day moving average, which is an indicator of medium-term trends.

If it closes below 1.07, it suggests that the recent recovery from 1.05 levels was just a correction and not a trend change.

In terms of fundamentals, Europe is having a hard time growing due to rising interest rates and fluctuating energy prices. These conditions have caused the ECB to stop raising rates earlier than the Fed. It’s possible that, like in the previous cycle of rate hikes after the global financial crisis, the ECB might start easing earlier than the Fed. This is a significant factor that’s putting pressure on the euro against the dollar, especially now that carry trade has become a key market driver.

622

Crude Oil

The U.S. oil industry, known as “Big Oil”, is seeing growth in production and mergers. Active drilling rigs increased to 502 for oil and 122 for gas last week, marking a second week of growth. Daily oil production has hit a record 13.2 million barrels per day.

Crude oil stocks are 4% lower than last year, possibly encouraging more investment in oil production. The U.S. government’s decision to buy oil for its Strategic Petroleum Reserve may have also played a part.

Chevron is buying Hess for $60 billion, following Exxon Mobil’s acquisition of Pioneer Natural Resources for $58 billion. The easing of sanctions on Venezuela could benefit U.S. oil producers with operations there.

Long-term factors like Middle East conflicts and potential supply disruptions are encouraging investment in U.S. oil production. Despite this, OPEC+ countries are limiting production to maintain prices.

This could signal a shift from focusing on profits to a battle for market share, a challenging task given years of record interest rates. However, major players with substantial capital reserves and strong government lobbying power are now involved.

Crude oil prices are currently testing the lower boundary of a bullish channel, with the Stochastic oscillator indicating an oversold market condition. If prices manage to settle below this critical level, we could see a continuation of the downward trend, potentially reaching the S2 support level around $83.

623

Eurozone’s Inflation Slowdown: A Simplified Insight

Eurozone inflation is slowing down, affecting many sectors and making things less expensive compared to the European Central Bank’s (ECB) goals. However, overall inflation is still higher than what the ECB wants. If this trend continues, it may take until next September for the yearly inflation rate to stabilize at 2%. Rising global tensions might push up energy costs, making everything else pricier and slowing the reduction in overall inflation.

Here’s what happened in September: Yearly inflation dropped to 4.3% from 5.2% in August and 9.9% last year. Costs for things like energy went down, and prices for factory goods (excluding energy) and services rose less than before. Charts show that this slowdown is widespread, with most sectors experiencing inflation below the ECB’s target recently.

Let’s break it down by sectors using October last year as a reference:

  1. Most sectors, except energy, still have higher yearly inflation than the ECB’s target as of September 2023.

  2. Good news: Recent data shows food and factory goods (excluding energy) prices are rising slower.

  3. Bad news: Energy costs might be going up again, which is worrying because it affects everything from household budgets to business costs, and overall inflation.

  4. Services are mixed: Some areas are more expensive than last year, while others are cheaper. Most are still pricier than the ECB’s target.

  5. Core inflation (excluding energy, food, alcohol, and tobacco) looks promising, with prices recently increasing at a rate slightly below the target.

In simple terms, while the cost of living in the Eurozone is rising slower, it’s still more expensive than what’s considered ideal, and global events might make things costlier soon.

624

Gold

The price of gold has retreated from the $2,000 mark and is currently testing the $1,949 support level. This decline was anticipated as the RSI and Stochastic indicators were in the overbought zone.

A closer look at the 4-hour chart provides a clearer picture of gold’s price action. The precious metal formed a hammer candlestick pattern at the pivot point ($1,962), and the stochastic oscillator is nearing the overbought zone, indicating a potential exit from this area. The RSI indicator remains above 50.

Considering current market data, technical indicators, and key levels, if the price can maintain above $1,949, it’s likely that the XAUUSD price will rise to R3 ($2,025).

Conversely, if bears manage to push the price below $1,949, we could see a continued decline towards the upper line of the bearish channel around $1,900.

625

EURUSD

The EURUSD currency pair is currently testing a crucial pivot point at 1.057, with the Relative Strength Index (RSI) indicating a potential bearish shift. For the downward trend to persist, it’s essential for the pair to close below this pivot point.

Bullish Scenario

Please note that the resistance for this week is situated at 1.064. Following a breakout from the bearish channel, it’s critical for the bulls to secure a close above this level to confirm the breakout and potentially trigger further price increases.

This analysis provides key insights for forex traders monitoring the EURUSD pair, helping them make informed decisions based on pivot points and RSI indicators.

626

Bitcoin

Currently, the Bitcoin to USD (BTCUSD) pair is experiencing a high buying pressure, as indicated by the Relative Strength Index (RSI) exceeding 80. This suggests a saturation of buyers in the market, and the price may not increase significantly before it begins to drop.

Market experts at FxNews advise caution for those considering increasing their holdings of this cryptocurrency. They recommend waiting for the price to stabilize above the support level of $32,000 before making additional purchases. This is due to the potential overvaluation of assets that are heavily bought, leading to a possible price correction.

627

EURAUD

For the past four months, the EURAUD has been trading within a range between 1.6200 and 1.7100, suggesting that it might currently be in a range trading mode. This week, the price faced difficulty surpassing recent peaks just below 1.6900, reaching a high of 1.6845 on Monday. These levels could pose resistance if tested again, before reaching the 2-year high at 1.7065. On Wednesday, the price dipped but didn’t reach the 100-day Simple Moving Averages (SMA) near 1.6550, which could provide support in case of another sell-off.

Looking further down, potential support levels could be found at previous lows of 1.6445 and 1.6320, followed by a potential support zone between 1.6235 and 1.6265. The close grouping of the 10-, 21-, 34-, 55- and 100-day Simple Moving Averages (SMA) between 1.6550 and 1.6710 further supports the perspective of range trading.

628

Silver

The price of silver is currently testing the pivot point at 23.14, with the Relative Strength Index (RSI) maintaining a position above the 50 level. The XAGUSD’s inability to close below the S1 support level of 22.59 suggests that the price movement range since October 23 is likely a correction to the upward trend that began earlier this month.

The pivot point serves as a hurdle for the bulls. To drive the price towards R1 (23.9), they must ensure a close above the pivot point.

Conversely, the S1 level (22.5) acts as a safeguard against further price decline. If this level is breached, the bears could potentially target S2 (21.8) next.

629

EURUSD Pair Analysis: Bulls Eye R1, Bears Target Bearish Channel

The EURUSD currency pair is currently testing the S1 support and the upper line of the previously broken channel. A close above the pivot could signal a bullish trend, with R1 as the potential target.

Conversely, if the S1 support is broken, the pair could re-enter the bearish channel, continuing the selling bias. Stay updated for more EURUSD market trends.

630

Market Trends: Navigating Equity Dips and Economic Signals

Last week, European and US stock markets kept falling, marking six weeks of losses. The main worries were about companies’ earnings not being as good as hoped and their future outlooks seeming less positive as we move into the year’s last quarter. In the US, the markets also dipped, hitting their lowest point since May, showing they’re not as strong as they were earlier in the year.

On Friday, the prices of oil and gold jumped suddenly. This happened when the news came out about Israeli forces moving into Gaza, which made gold prices go over $2,000 an ounce for the first time since May. Even though Brent crude oil’s price went up past $90 a barrel, it ended the week lower.

The hope is that the careful steps taken in Gaza will increase pressure on Hamas without causing more trouble along Israel’s northern border. European markets, which had closed by the time of the Gaza events on Friday, are expected to start a bit stronger, considering the military actions have been limited so far.

It’s easy to think the drop in stock markets last week was just because of the uncertain situation in the Middle East. But it was also because of companies not doing as well as expected and lowering their future earnings outlooks, which led to some big drops in their stock prices. This pattern might keep up this week, with all eyes on updates from big companies like HSBC, BP, Shell, and Apple.

Meanwhile, economic reports from Europe and the UK didn’t show much good news, but the US did better, with people waiting to see if central banks will change their plans based on recent data. The US Federal Reserve probably won’t ease up on its policies soon, and another interest rate increase by the end of the year is still possible. But the Bank of England seems done raising rates for now, with people guessing when the next rate cut might happen in 2024.

In the UK, the number of approved mortgages and other spending data for September might show that people are still careful about spending. And in Germany, after the European Central Bank decided not to change interest rates, inflation is expected to go down in October, and the economy might shrink a bit in the third quarter.

631

Gold prices hit $2000 as Middle East tension escalates

As tensions rise in the Middle East, gold prices have shot up over $2000 due to increased fighting on the ground.

While all eyes are on the shifting situation, gold has jumped over the crucial $2000 level because of the growing battles. At the same time, oil prices have stabilized above $83, as people investing in the market are on alert for any interruptions in supply from this key oil-producing area. This week is also important because big banks like the Federal Reserve, the Bank of England, and the Bank of Japan will make decisions on interest rates, which could shake up the markets even more. Investors and market experts around the world are paying close attention to these developments as they influence the economy.

632

EURJPY Technical Analysis

EURJPY is testing the Ichimoku cloud, a key resistance. Our analysis suggests a bullish market, with a strategy to go long. Currently, it’s trading in a bearish channel below the 158.6 pivot. A close above the pivot will confirm bullishness.

If it remains below the pivot, the short-term target is S1 support.

633

EURGBP

The EURGBP pair has broken the bearish trendline on the daily chart, indicating a bullish bias. The 4H chart shows it trading above the Ichimoku cloud and weekly pivot, suggesting potential gains.

However, a close below S1 support (0.869) would negate this bullish scenario.

634

EURAUD

The EURAUD pair is currently navigating within a daily bullish channel and is testing the monthly pivot point at 1.6555. If the bulls maintain their position above this pivot point and within the bullish channel, it’s plausible that the EURAUD could ascend to the mid-line of the bullish channel, which is near the R2 support level at 1.712.

However, if the bears manage to close below the pivot point, it would invalidate the bullish scenario. It’s important to note that a closure below the pivot point does not necessarily signal a trend reversal. The support level is at 1.621, and a breach of this level would be required to indicate a trend reversal.

635

USD/JPY Market Sentiment: Bullish Post-BoJ, Eyes on Fed

Tuesday’s trading session saw the USD/JPY currency pair surge, reclaiming territory above the pivotal 150.00 mark. This upswing effectively diminishes the losses witnessed in the preceding two days. The yen displayed a broad weakening, a direct response to the Bank of Japan’s reaffirmation of its ultra-easy monetary policy aimed at bolstering the domestic economy. In a notable policy adjustment, the BoJ subtly altered its stance on yield curve control, now referencing the 1% cap on the 10-year Japanese government bond yield as a guiding figure rather than a strict limit.

Inflation Projections and Economic Data Weigh on Yen

The BoJ’s upward revision of inflation forecasts for the fiscal years 2024 and 2025 hints at a gradual setup for exiting its loose monetary policy. However, this adjustment has not been enough to rally support for the yen, especially against a backdrop of disappointing Japanese industrial and retail data for September.

US Dollar Demand and Fed Expectations Fuel Rally

On the other side of the pair, the US dollar is finding robust support, spurred by the market’s belief in the Federal Reserve’s commitment to its tight monetary policy, including the possibility of further rate hikes in 2023. Remarks from Fed Chair Jerome Powell about persistently high inflation and the potential for additional rate increases have kept US bond yields near the 5.0% mark, underpinning the dollar’s strength.

Caution Ahead of FOMC Meeting

Despite the bullish momentum, there’s caution in the air as speculation about potential Japanese intervention to curb yen depreciation persists. Traders are also adopting a wait-and-see approach in anticipation of the Federal Open Market Committee’s (FOMC) meeting. The Fed’s decision, due on Wednesday, is expected to hold steady, but any signals on future rate adjustments will be pivotal for the currency pair.

Bullish Indicators and Resistance Challenges

From a technical standpoint, the USD/JPY’s resilience below the 200-period Simple Moving Average on the 4-hour chart has set a bullish tone. Daily chart oscillators are gaining positive momentum, suggesting room for further upside. However, traders should watch for resistance near the daily highs around 150.35-150.40, with the year-to-date peak and the 151.00 mark as key levels to breach for continued ascent.

Support Levels to Monitor on Pullbacks

Conversely, a retreat below 150.00 could find solid ground near the 100-period SMA on the 4-hour chart at approximately 149.60-149.55. A decisive drop below this could open the path to 149.00 and potentially challenge the bullish outlook. Should selling pressure intensify, the pair may test the monthly low around 147.30-147.25, recorded on October 3, which would tilt the market sentiment towards the bears.

636

GBPUSD

GBPUSD shows a bullish signal, breaking above the 1.216 level. With the RSI above 50, it may rise towards the 1.225 resistance, hinting at a possible trend reversal.

637

GBPJPY

The GBPJPY pair has broken through the bearish channel on the daily chart and is currently trading above the pivot point of 182.9. The Relative Strength Index (RSI) indicator is hovering above the 50 level, suggesting that the bulls have regained control.

Looking closer at the GBPJPY 4-hour chart, we can see that the bulls are facing a barrier at 183.7. If the GBPJPY price can break this level, it will clear the path towards R2.

However, if the price fails to breach this resistance, it could result in the GBPJPY price returning to the bearish channel depicted on the daily chart.

638

GBPAUD

The GBPAUD currency pair has demonstrated a robust breakout from its previous bearish trendline during today’s trading session. This pivotal movement has not only captured the attention of traders but has also signaled a potential shift in the underlying market dynamics. The currency pair’s ability to sustain a close above the critical pivot point of 1.917 further boosts the case for a bullish outlook.

The Relative Strength Index (RSI) confrims this bullish sentiment. Currently, the RSI is indicating upward momentum, suggesting that the buying pressure is outpacing selling pressure. This technical alignment could very well pave the way for the GBPAUD price to ascend towards the next notable resistance level at 1.931.

639

Gold

Gold is currently undergoing a test of its support level at $1,970. Interestingly, it’s trading below the pivot point in the market. The Relative Strength Index (RSI) is showing signs of divergence, indicating a potential correction in the price of gold. This correction could possibly extend to a level of $1,934.

640

Crude Oil

Crude oil is currently showing a bearish trend, consistently trading within a bearish channel. The Relative Strength Index (RSI) is attempting to cross the crucial 50 mark, a movement that could indicate potential market shifts. However, it’s not a guaranteed sign of a bullish reversal.

The oil price is testing a significant resistance at $83.2. The result of this test could offer insights into future price trends. A break above this resistance might suggest a shift in market sentiment, while failure to do so could reinforce the bearish trend.

The oil market remains bearish as long as the price stays within this channel, indicating that sellers currently have the upper hand. If the bearish momentum persists, the oil price might drop to $80. However, this is a prediction and actual market movements can vary.