FundYourFX Weekly Newsletter – Dec 11 – 15, 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. US Labor Market Shows Signs of Cooling: Indicators including ADP payrolls, JOLTS job openings, and Challenger job cuts suggest a slowdown in the US labor market, with weaker than expected jobs data emerging.

2. Moody’s Cuts China’s Outlook to Negative: Amidst economic slowdown, Moody’s revises China’s credit outlook downward, citing increasing economic challenges.

3. DAX Reaches New Heights: The German index, DAX, hits an unprecedented all-time high of 16533, driven by expectations of an early ECB rate cut next year.

4. Oil Prices Dip to 5-Month Low: Falling below $70.00 for the first time since June, oil prices decline sharply following OPEC+’s decision on voluntary cuts and a dimming demand outlook.

5. Apple’s Market Cap Surpasses $3 Trillion: Achieving a market cap over $3 trillion for the first time since August, Apple’s shares rally, reaching a four-month high.

6. Gold Soars to Record $2135: The metal’s price spikes, driven by market anticipation of Federal Reserve rate cuts in the coming year.

7. Exxon Mobil to Boost Share Buyback Program: The energy corporation plans to increase its share repurchase to $20 billion between 2024 and 2025, expecting significant earnings from cost reduction strategies.

8. Bitcoin Ascends to $44k: The cryptocurrency reaches a 19-month peak, fueled by optimism over a spot Bitcoin ETF and expectations of a dovish Federal Reserve policy.

9. Google Unveils AI Model Gemini: Google introduces Gemini, its most advanced AI model yet, reportedly surpassing the capabilities of ChatGPT 3.5.

10. Japanese Yen Rises as USD/JPY Hits 3-Month Low: The yen strengthens markedly against the USD, reacting to the Bank of Japan’s hints at a potential shift from its longstanding ultra-loose monetary policy.

Market Analysis

• Europe’s Economic Woes Intensify Amid Recession Fears: The EU’s latest GDP figures confirm a downturn, with German industrial output unexpectedly dropping by 0.4% in October, defying forecasts of a 0.1% rise. This decline highlights growing recession concerns in the Eurozone. Goldman Sachs now forecasts that the ECB will reduce rates at every meeting starting April, rather than implementing a single 25 basis point cut. Despite a recent upturn, the euro struggles to maintain strength above $1.08, with key levels at $1.0836 and $1.0732 being closely watched.

Economic Highlights

• US Jobless Claims Reflect Mixed Labor Market Signals: Recent data shows a marginal increase in US jobless claims, rising by 1K to 220K, with the previous week’s figure revised up by 1K to 219K. Despite this uptick, continuing claims fell by 64K to 1.861 million, suggesting underlying resilience in the job market. These modest changes do not indicate a significant shift in policy outlook ahead of the NonFarm payroll report. Concurrently, the dollar, affected by an AI-driven rally, fell 0.45% to 103.6, with key support at yesterday’s low of 103.27 and resistance around 104.

Upcoming Events to Watch

• Federal Reserve Rate Decision (Dec 13): The Federal Reserve is set to announce its rate decision, with expectations leaning towards maintaining current interest rates. Market speculation, pricing in a 60% chance of a rate cut by March, will focus on the Fed’s guidance. Despite this anticipation, the Fed remains cautious, deeming it premature to discuss rate cuts. Investors will be attuned to any dovish remarks, which could hint at a potential early cut next year.

• ECB Rate Decision (Dec 14): The European Central Bank, meeting on Thursday, is likely to hold interest rates steady at a record 4%. With inflation easing to 2.4%, close to the ECB’s target, attention turns to when rate cuts might commence. Markets anticipate rate reductions as early as March, with significant cuts expected through 2024. Any dovish signals could weaken the USD.

• BoE Rate Decision: The Bank of England is expected to maintain interest rates at 5.25% in its upcoming decision. Amid inflation rates exceeding targets and a rebound in service sector activity, the market predicts the BoE’s first rate cut might be delayed until June, later than the ECB and Fed. Governor Andrew Bailey emphasizes the commitment to achieving the 2% inflation target.

• China Retail Sales/Industrial Output: After Moody’s recent downgrade of China’s credit outlook, upcoming retail sales and industrial output data are under scrutiny. October showed a mixed recovery, with consumer and industrial activity outperforming expectations despite trade challenges and a property sector slowdown. Comparisons to last year’s restrictive COVID policies may paint a more favorable picture.

• Eurozone PMIs: Focus shifts to Eurozone PMI data following a rise to a four-month high in November, albeit still in contraction. Another month of contraction could indicate a recession in the final quarter, while improvement might suggest a milder downturn. Weak PMI results could reinforce expectations of an ECB rate cut, potentially impacting the euro and stock markets.

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 has seen a notable pullback but remains above the 50-day SMA, keeping the uptrend alive. The RSI has dropped to around 47, indicating a more balanced market. The pair recently broke through the 1.0802 support level. If it manages to climb back above this point, we could see a push towards 1.093. Despite the bullish trend, traders should be cautious as a potential ABC correction pattern might lead to further declines.

GBP/USD

GBP/USD continues its upward trend, staying well above the 50-day SMA. The RSI has slightly decreased to 57.14, suggesting that the bullish momentum is still present but not as strong. The pair is currently navigating between the 1.2715 resistance and the 1.2570 support level. Holding above this support could lead to new highs, but breaking below it might result in a decline towards 1.243.

XAU/USD

Gold recently experienced a sharp rise, almost reaching record highs, but faced resistance at the 2078 level. It’s now trading just above the key $2,000 mark. The RSI stands at 59, indicating continued bullish momentum. However, the inability to surpass the resistance might lead to a period of consolidation or a possible retest of lower support levels.

XUS500

The S&P 500 is challenging its highest point of 2023, maintaining a position well above its 50-day SMA, signaling an ongoing uptrend. With an RSI at 67, the index is nearing overbought territory, but there’s still potential for further growth before hitting that limit. Key resistance levels to watch are around 4648 and 4719, while support can be found near 4514 and 4446.

Thank you for reading! Wishing you successful trades ahead!

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