FundYourFX Weekly Newsletter – Dec 18 – 22, 2023

Welcome to the Weekly Market Update!

We are here to provide you with the pivotal financial happenings and insights. Our focus is on the primary stories of the week, alongside a deep dive into market dynamics, economic milestones, events to monitor, and technical forecasts. Here’s the essential roundup to keep you savvy and ready for strategic financial moves.

Top Stories of the Week

• 1. Federal Reserve Signals Three Rate Cuts in Upcoming Year: Surpassing expectations, the Federal Reserve’s dovish stance propels the Dow Jones to a historic peak.
  2. COP28 Ratifies Historic Fossil Fuel Phase-Out Agreement: Nearly 200 nations at COP28 consent to a landmark deal to transition from fossil fuels, marking a significant global environmental commitment.
  3. China Faces Deflationary Pressure: The global economic powerhouse reports a Consumer Price Index drop of 0.5% year-over-year, sparking concerns about the stability of its economic recovery.
  4. Oil Prices Plunge to 5.5-Month Nadir: Oil prices tumble to $68 per barrel amid fears of oversupply and waning demand, with the International Energy Agency predicting a continued demand slump into 2024.
  5. Tesla Recalls 2.5 Million Vehicles Over Autopilot Concerns: The leading electric vehicle manufacturer recalls millions in the U.S. due to partial defects found in its Autopilot system.
  6. Alphabet Loses Legal Battle to Epic Games: In a landmark ruling, Alphabet Inc. faces a defeat in its monopoly case against the creators of Fortnite, Epic Games.
  7. European Central Bank Maintains Interest Rate at 4%: The ECB holds its interest rate at a historic high, dampening speculation about impending rate cuts.
  8. Apple’s Stock Value Reaches Unprecedented High: Apple Inc. sees its shares soar to $198, reaching a new record amid a widespread tech sector surge following the Federal Reserve’s interest rate decision.
  9. Bank of England Holds Steady on Interest Rates: Maintaining its rate at 5.25%, the Bank of England resists rate cut speculation, stating that discussions on rate reductions are premature.
  10. DAX Index Achieves All-Time High: Germany’s DAX index climbs to a record 17000, fueled by investor optimism following dovish shifts by the Federal Reserve and European Central Bank.

Market Analysis

• Oil Prices Surge on IEA Forecast and Weaker Dollar: Oil prices experienced a notable 2.6% increase to $71.65 per barrel, marking the first weekly gain in two months. This uptrend is driven by the International Energy Agency’s (IEA) optimistic demand projection for 2024, forecasting a rise of 1.1 million barrels per day – an adjustment of 130,000 barrels from earlier predictions. Concurrently, a weakening dollar contributes to the price hike. However, West Texas Intermediate (WTI) faced resistance near $72.50, aligning with the 20-Day Weighted Moving Average. A further push could establish $70 as a new support level.

Economic Highlights

• China Reduces Budget Deficit Target Amid Economic Challenges: China announces a lowered budget deficit goal of 3% of GDP for 2024, scaling down from the current 3.8%. This adjustment includes plans to issue special sovereign bonds, potentially totaling 1 trillion yuan ($140.16 billion), to enhance stimulus flexibility. The move comes as analysts anticipate the need for adaptable fiscal policies in response to ongoing economic hurdles. Recent downturns in property investment and lagging retail sales growth underline the urgency for added policy intervention. Concurrently, the USDCNY rate dipped to a new low since June, reaching 7.10.

Upcoming Events to Watch

• BoJ Rate Decision (Dec 19): The Bank of Japan is set to announce its rate decision, with widespread expectations of maintaining its negative interest rate. This follows recent market speculation about a possible hawkish shift, which briefly elevated the yen to a four-month peak. However, BoJ Governor Ueda’s comments suggesting a continued commitment to ultra-loose monetary policy have tempered these expectations.
• UK CPI Announcement (Dec 20): October’s Consumer Price Index in the UK showed a decrease to 4.6% year-over-year from September’s 6.7%, attributed to falling energy prices. As the Bank of England signals a challenging path to achieving the 2% inflation target, this release will be closely monitored for indications of continuing trends. A higher-than-expected inflation rate could reinforce the BoE’s stance on prolonged high-interest rates, potentially strengthening the pound against the euro and the US dollar.
• US Core PCE Release (Dec 22): The Personal Consumption Expenditures Price Index, favored by the Federal Reserve, is due out. With US inflation showing signs of easing, this data will be pivotal, especially after the Fed’s recent dovish turn at the FOMC meeting, hinting at three rate cuts in 2024. If inflation cools more than expected, it could spur predictions of more aggressive rate cuts next year.
• Micron Technology Earnings Report (Dec 20): Micron Technology is poised to announce its fiscal Q1 earnings, with Wall Street forecasting a loss per share of $1.02 against a backdrop of increased revenue predictions of $4.62 billion. The spotlight will be on future projections, with expectations of a brighter 2024 outlook driven by the recovering memory chip market. Shares are trading at their highest since February 2022, heightening interest in the upcoming results.
• Holiday Season Trading Trends: As the holiday season approaches, a typical reduction in trading volumes and liquidity is expected. This shift often leads to heightened volatility, with the potential for amplified market reactions to news, both positive and negative. Investors and traders should be prepared for larger price fluctuations during this period.

Technical Analysis

We have analyzed the most popular trading pairs and assets, including EUR/USD, GBP/USD, Gold, and US500. Our aim is to provide you with an insightful analysis of their trends and support/resistance levels, which will help you make informed decisions.

EUR/USD

EUR/USD is in a bullish trend, staying above the 50-day SMA. Although it hasn’t made new higher highs lately, suggesting a corrective phase in the uptrend. Key levels to watch are support at 1.0880 and resistance at 1.1000. The RSI, positioned between 50 and 65, indicates bullish momentum that’s not yet overextended.

GBP/USD

GBP/USD is in a robust uptrend, consistently above the 50-day SMA and forming higher highs and lows, as indicated by fractal patterns. Key levels are support at 1.2685 and resistance at 1.2830. The RSI is over 65, signifying strong bullish momentum, though it’s in overbought territory.

XAU/USD

Gold is currently correcting within its overall uptrend, staying above the 50-day SMA. The fractal patterns reveal lower lows, suggesting a slight pullback. Key levels to watch are support at around 1962 and resistance near 2078. The RSI, above 50, points to ongoing bullish sentiment, though it has retreated from previously overbought levels.

XUS500

The S&P 500 is exhibiting a robust bullish trend, well above its 50-day SMA. Fractal patterns show a strong trend with consistent higher highs and lows. The index is testing resistance near 4728, while support lies significantly lower at around 4648. The RSI has soared above 80, entering a very overbought zone, which calls for caution as this trend might face a deeper correction soon.

Thank you for reading! Wishing you successful trades ahead!

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