FundYourFX Weekly Newsletter – Jan 15 – 19, 2024

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. U.S. Inflation Surprises with Sharp Rise: The Consumer Price Index (CPI) in the U.S. escalated to 3.4% year-over-year, surpassing previous figures and expectations. The core CPI, despite a slight cooling, remained higher than anticipated at 3.9%, down from 4%.

  2. World Bank Issues Global Growth Alert: Amidst concerns regarding interest rates and Middle Eastern geopolitics, the World Bank projects a global growth rate of just 2.4% – the most sluggish pace since the pandemic.

  3. Microsoft’s OpenAI Investment Under EU Scrutiny: The European Commission announces a review of Microsoft’s multi-billion-dollar investment in OpenAI, examining potential implications under merger regulations.

  4. Bitcoin Volatility Follows SEC Social Media Hack: After a breach of the SEC’s Twitter account led to false reports of a Bitcoin ETF approval, the cryptocurrency experienced significant price fluctuations.

  5. Apple Faces Third Broker Downgrade: Following recent valuation concerns, Redburn joins Barclays and Piper Sandler in downgrading Apple’s stock to neutral.

  6. Japanese Yen Continues Downtrend: The yen faces further decline in early 2024, as markets speculate on the Bank of Japan’s potential shift away from negative interest rates.

  7. Amazon Announces Major Job Cuts: The tech and e-commerce behemoth Amazon has reduced its workforce in Prime Video and MGM Studios, contributing to over 27,000 layoffs since 2022.

  8. Fourth Quarter Earnings Season Commences: As per FactSet, the S&P 500 is poised for a 1.3% growth in Q4 earnings, marking a consecutive quarter of financial gains.

  9. Eurozone Unemployment Hits Record Low: Unemployment in the Eurozone falls to an unprecedented 6.4% in November, potentially influencing the European Central Bank’s approach to interest rate adjustments.

  10. Saudi Arabia Reduces Oil Prices: In a notable move, Saudi Arabia has significantly cut its official oil selling prices.

Market Analysis

• Oil Prices Climb Amid Gulf Tensions: In the wake of escalated geopolitical unrest in the Gulf, oil prices witnessed a 2.15% hike, reaching $72.75 per barrel. This surge follows air strikes by the US and UK against Iran-backed Houthi rebels in Yemen, a response to Iran’s seizure of a tanker in the Gulf of Oman – itself a retaliatory act for a previous US seizure. WTI crude eyes a push beyond yesterday’s peak of $73.80, aiming for $75, buoyed by China’s rising crude imports, which hit a record 11.28 million barrels per day in 2023, up 11% year-over-year. However, failure to breach this threshold could expose prices to downward pressure, potentially retreating to around $72.15 per barrel.

Economic Highlights

• Inflation Challenges Rate Cut Optimism: U.S. CPI inflation exceeded expectations, reaching 3.4%, up from the forecasted 3.2%, casting doubts on the likelihood of a rate cut in March. Contrarily, core inflation, which excludes volatile items, ascended moderately to 3.9% – the slowest increase since May 2021. This suggests the inflation slowdown narrative may still be valid, keeping March rate cut hopes alive among investors. Despite a general hawkish stance from officials post-report, Fed’s Goolsbee noted inflation was almost in line with expectations, hinting at possible room for rate adjustments. The dollar index experienced a turbulent session, initially spiking to 102.40 but subsequently retreating to 102, wavering above a support level of 101.60.

Upcoming Events to Watch

• UK CPI Data Release: UK inflation, currently at a cooled 3.9% in November, is under close watch for further declines. The rate is nearly double the Bank of England’s 2% target. Market expectations for 2024 BoE rate cuts have been scaled back to around 116 basis points, a significant reduction from the earlier forecast of five 25 basis point cuts.
• Morgan Stanley and Goldman Sachs Q4 Earnings (Jan 16): These financial giants are scheduled to announce their Q4 earnings. The focus is on recovery in investment banking activities, following a tough nine months in 2023. Key aspects include dealmaking trends, bad loans, and NIM.
• China’s Key Economic Data Release (Jan 17): China is set to publish crucial economic figures, including GDP, retail sales, and industrial production. Amid concerns about the country’s economic health, these data points, especially after the World Bank’s recent revision of China’s GDP growth to 4.5%, will be closely scrutinized.
• US Retail Sales Update: The spotlight is on the upcoming U.S. retail sales data, anticipated to show a 0.3% month-over-month increase. This data will be crucial in shaping narratives around the U.S. economic trajectory and the Fed’s potential rate cut decisions.
• Davos World Economic Forum: This global gathering, set for this week, will see leaders from various sectors discussing pressing issues. The forum’s focus on key risks such as climate change, technology, geopolitics, and AI misinformation is particularly pertinent in an election year.

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

The EUR/USD chart shows a clear upward trend since October last year, following an ascending channel pattern. Traders should exercise patience and watch for potential buying opportunities. Expectations are for price movements to bounce back at demand levels and decrease near supply zones. The RSI, at 51, suggests a balanced market momentum.

GBP/USD

The GBP/USD pair shows signs of weakening bullish momentum. It finds initial support at 1.259, with a further support level at 1.243. Resistance is encountered at 1.289, with a stronger barrier at 1.304. The RSI, at 60, indicates mild bullish sentiment. However, a decrease in upward momentum and increased selling pressure suggest that if the uptrend breaks and the price stabilizes below 1.272, there’s a potential for a drop to the 1.268 range, and possibly to 1.260 if selling intensifies.

XAU/USD

Gold ended the week on a positive note, closing above its opening price, signaling a potential rally that could extend up to 2150. It is in a moderate bullish trend, finding support at 2030 and additional support at 1986. Resistance is expected at 2073, with a significant challenge to the uptrend at 2145. The RSI at 52 indicates a neutral market momentum. The upcoming week might witness a retest of the local support level, possibly followed by further upward movement.

XUS500

The S&P 500 is exhibiting a moderately bullish trend, with support established at 4703 and an additional support level at 4618. The index is encountering resistance at 4805, and a breakthrough could lead to further resistance around 4900. The RSI, currently at 64, suggests a moderately bullish momentum, hinting that the index might be approaching overbought territory.

Thank you for reading! Wishing you successful trades ahead!

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