. Daily FX Analysis - BoJ, Fed, and USD/CAD Surprises.

Daily FX Analysis – BoJ, Fed, and USD/CAD Surprises.

Daily FX Analysis – BoJ, Fed, and USD/CAD Surprises.

20 Dec 2023

Introduction

In today’s forex market focus, significant movements and dynamics are observed across major currency pairs. From the impact of the Bank of Japan’s policy decision on USD/JPY dynamics to the Euro’s response amid expectations of Fed rate cuts, and the surprising stability in Canadian inflation affecting USD/CAD, the market presents a landscape of opportunities and challenges. Additionally, the New Zealand dollar has surged to five-month highs, driven by dovish central bank outlooks and the prospect of lower interest rates. Let’s delve into the technical overviews and trade suggestions for key pairs, shedding light on the current sentiments and potential market directions.

Markets In Focus Today – USD/JPY

USD/JPY Dynamics and BoJ’s Impact on 2024 Outlook

The Bank of Japan’s decision to maintain its current policy and delay signaling a potential interest rate increase in January has impacted USD/JPY dynamics for 2024. Governor Kazuo Ueda’s emphasis on a low likelihood of a rate hike, dependent on future economic data, has posed challenges for JPY’s long positions. The unwinding of these positions has propelled the USD/JPY pair upward, with a recovery from 142.25 to the mid-145s. The option market reflects concerns, particularly in higher strike prices like 147.00 with expiries in January and February. The BoJ’s impact on USD/JPY is significant, with market sentiment poised for potential shifts after the March 19 and April 26 policy announcements in early 2024.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 144.03 | Negative Crossover | Bearish
  • MA 20 : 145.39 | Negative Crossover | Bearish
  • MA 50 : 147.03 | Negative Crossover | Bearish

Simple :

  • MA 10 : 143.76 | Negative Crossover | Bearish
  • MA 20 : 145.82 | Negative Crossover | Bearish
  • MA 50 : 148.39 | Negative Crossover | Bearish

RSI (Relative Strength Index): 38.34 | Neutral Zone | Neutral

Stochastic   Oscillator : 32.22 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 150.92 R2 : 152.15
  • S1 : 146.92 S2 : 145.68

Overall Sentiment: Bearish Market Direction: Sell

Trade Suggestion: Limit Buy: 141.917 | Take Profit: 138.60 | Stop Loss: 142.50

EUR/USD

EUR/USD Dynamics Amid Fed Rate Cut Expectations

The euro (EUR) faced a 0.19% decline against the U.S. dollar (USD), settling at $1.0958. The U.S. Federal Reserve’s hints at potential rate cuts have impacted the currency pair’s dynamics. Market focus remains on economic data supporting anticipated rate adjustments and the upcoming release of the core Personal Consumption Expenditures (PCE) price index. The euro’s movement against the dollar hinges on data confirming the need for rate cuts, influencing the overall market sentiment.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.09 | Positive Crossover | Bullish
  • MA 20 : 1.09 | Positive Crossover | Bullish
  • MA 50 : 1.08 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.09 | Positive Crossover | Bullish
  • MA 20 : 1.09 | Positive Crossover | Bullish
  • MA 50 : 1.08 | Positive Crossover | Bullish

RSI (Relative Strength Index): 60.17 | Neutral Zone | Neutral

Stochastic   Oscillator : 81.11 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 1.10 R2 : 1.11
  • S1 : 1.06 S2 : 1.05

Overall Sentiment: Bullish Market Direction: Buy

Trade Suggestion: Limit Buy: 1.09 | Take Profit: 1.11 | Stop Loss: 1.08

USD/CAD

USD/CAD Dynamics Post Canadian Inflation Data

The U.S. dollar (USD) weakened against the Canadian dollar (CAD), with USD/CAD trading 0.4% lower at 1.3340. This shift followed unexpected stability in Canada’s annual inflation rate at 3.1% in November, contrary to forecasts of a decrease to 2.9%. Core inflation measures, including CPI-median and CPI-trim, remained robust. The unexpected inflation strength reduced market expectations of a Bank of Canada interest rate cut in the near term, with money markets now indicating a 40% chance of easing in March. The Canadian dollar found additional support from a 1.3% increase in oil prices and a weakened U.S. dollar against major currencies.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.34 | Negative Crossover | Bearish
  • MA 20 : 1.35 | Negative Crossover | Bearish
  • MA 50 : 1.36 | Negative Crossover | Bearish

Simple :

  • MA 10 : 1.35 | Negative Crossover | Bearish
  • MA 20 : 1.35 | Negative Crossover | Bearish
  • MA 50 : 1.37 | Negative Crossover | Bearish

RSI (Relative Strength Index): 26.87 | Neutral Zone | Neutral

Stochastic   Oscillator : 5.85 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 1.38 R2 : 1.39
  • S1 : 1.35 S2 : 1.34

Trade Suggestion: Limit Buy: 1.33 | Take Profit: 1.31 | Stop Loss: 1.34

NZD/USD

New Zealand Dollar Surges to Five-Month Highs

The New Zealand dollar (kiwi) climbed above $0.625, reaching its highest level in five months. This upward movement was supported by the dovish outlooks of the U.S. Federal Reserve and the Bank of Japan, which exerted pressure on the U.S. dollar and the yen, consequently benefiting other major currencies, including the Kiwi. The New Zealand dollar also gained traction from rising commodity prices due to supply disruptions caused by the Red Sea attacks. Additionally, the prospect of lower interest rates contributed to an optimistic demand outlook. Domestically, the head of New Zealand’s central bank acknowledged the unexpected weakness in recent growth data, leading to speculations of an earlier cash rate reduction. Markets are now anticipating an RBNZ rate cut as early as May next year. In the previous month, the Reserve Bank of New Zealand (RBNZ) kept the cash rate at 5.5% but hinted at the potential need for another rate hike if inflation remains persistent.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 0.62 | Positive Crossover | Bullish
  • MA 20 : 0.62 | Positive Crossover | Bullish
  • MA 50 : 0.61 | Positive Crossover | Bullish

Simple :

  • MA 10 : 0.62 | Positive Crossover | Bullish
  • MA 20 : 0.62 | Positive Crossover | Bullish
  • MA 50 : 0.60 | Positive Crossover | Bullish

RSI (Relative Strength Index): 72.58 | Neutral Zone | Neutral

Stochastic   Oscillator : 90.68 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 0.62 R2 : 0.63
  • S1 : 0.59 S2 : 0.58

Overall Sentiment: Bullish Market Direction: Buy

Trade Suggestion: Limit Buy: 0.62 | Take Profit: 0.63 | Stop Loss: 0.61

Elsewhere In The Forex Market

EUR/USD: 1.0959 (-0.0021, -0.19%) USD/JPY: 143.57 (-0.25, -0.17%) GBP/USD: 1.2662 (-0.0068, -0.54%) USD/CAD: 1.3333 (+0.0002, +0.02%) AUD/USD: 0.6770 (+0.0009, +0.14%) USD/MXN: 17.0671 (+0.0011, +0.01%) USD/INR: 83.157 (+0.003, 0.00%)

Key Economic Events & Data Release Today:

8:32PM(IST)-USD-CB Consumer Confidence