. Daily FX Analysis - Central Banks Clash, Currencies Soar, USD/JPY Struggles.

Daily FX Analysis – Central Banks Clash, Currencies Soar, USD/JPY Struggles.

Daily FX Analysis – Central Banks Clash, Currencies Soar, USD/JPY Struggles.

15 Dec 2023

Introduction

Recent developments have painted a nuanced picture in the dynamic landscape of global currency markets. As the Federal Reserve adopts a dovish stance, its divergence from the Bank of England (BoE) and the European Central Bank (ECB) sparks significant movements. This analysis delves into the implications for key currency pairs, including EUR/USD, GBP/USD, AUD/USD, and USD/JPY, shedding light on the factors influencing their trajectories. Join us as we navigate the intricacies of central bank policies, economic indicators, and technical analyses, providing insights to help navigate the evolving foreign exchange landscape.

Markets In Focus Today – EUR/USD

EUR/USD Rises 1% as BoE and ECB Diverge from Fed’s Dovish Tone

The dollar index declined 1% on Thursday as the Bank of England (BoE) and the European Central Bank (ECB) chose not to follow the Federal Reserve’s dovish pivot. While U.S. retail sales and jobless claims briefly boosted the dollar, the disparity in monetary policy between the Fed’s dovishness and the BoE and ECB’s reluctance to discuss easing dominated. The UK’s core inflation drives the BoE’s decision to maintain higher rates at 5.7%, well above its target, while the ECB faces the challenge of its 4% rate trailing the BoE and Fed’s rates at 5.25% and 5.33%. EUR/USD surged 1%, nearing November’s trend high of 1.1017. The tightening of two-year bund-Treasury yield spreads this week aligns with EUR/USD trading just above 1.1000, indicating a notable impact of the divergent central bank stances on the currency pair.

Technical   Overview With Chart :

Moving Averages :

Exponential :

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

Simple :

  • MA 10 : 1.08 | Positive Crossover | Bullish
  • MA 20 : 1.09 | Positive Crossover | Bullish
  • MA 50 : 1.07 | Positive Crossover | Bullish

RSI (Relative Strength Index): 61.33 | Neutral Zone | Neutral

Stochastic   Oscillator : 73.81 | 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: 1.11360 | Stop Loss: 1.8

GBP/USD

GBP/USD Surges 1.11% After BoE Keeps Rates Unchanged

The British pound (GBP) experienced a notable 1.11% increase, reaching its highest level since August 22, following the Bank of England’s decision to leave interest rates unchanged. The central bank emphasized the need for interest rates to remain high for an extended period. This move propelled the pound to its best day since November 14. BofA’s Vamvakidis highlighted the central message that rates will stay elevated for an extended duration, countering market expectations of early cuts. The Bank of England’s firm stance contributed to the significant surge in GBP/USD, reflecting a shift in market dynamics and expectations regarding the trajectory of interest rates.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.26 | Positive Crossover | Bullish
  • MA 20 : 1.26 | Positive Crossover | Bullish
  • MA 50 : 1.25 | Positive Crossover | Bullish

Simple :

  • MA 10 : 1.26 | Positive Crossover | Bullish
  • MA 20 : 1.26 | Positive Crossover | Bullish
  • MA 50 : 1.24 | Positive Crossover | Bullish

RSI (Relative Strength Index): 66.17 | Neutral Zone | Neutral

Stochastic   Oscillator : 75.21 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 1.27 R2 : 1.29
  • S1 : 1.22 S2 : 1.21

Overall Sentiment: Bullish Market Direction: Buy

Trade Suggestion: Limit Buy: 1.27 | Take Profit: 1.30 | Stop Loss: 1.25

AUD/USD

Australian Dollar Holds Near 4.5-Month Highs Amid Chinese Economic Signals

The Australian dollar (AUD) remained close to its 4.5-month highs on Friday, receiving partial support from positive Chinese economic data indicating improvements. Against the US dollar, the Aussie (AUD/USD) rose by 0.4% to $0.6723, following a 0.6% overnight surge to $0.6728, marking its strongest level since July 31. The currency is on track for a weekly gain of 2.1%, with the next significant resistance anticipated at $0.6820. Chinese economic indicators for November revealed an acceleration in both the factory and retail sectors, contributing to the Aussie’s strength. However, certain data points fell short of expectations. The Australian dollar’s resilience is further fueled by global and domestic prospects of monetary easing, and maintaining bond gains in the market.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 0.66 | Positive Crossover | Bullish
  • MA 20 : 0.66 | Positive Crossover | Bullish
  • MA 50 : 0.65 | Positive Crossover | Bullish

Simple :

  • MA 10 : 0.66 | Positive Crossover | Bullish
  • MA 20 : 0.66 | Positive Crossover | Bullish
  • MA 50 : 0.65 | Positive Crossover | Bullish

RSI (Relative Strength Index): 66.11 | Neutral Zone | Neutral

Stochastic   Oscillator : 87.24 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 0.67 R2 : 0.68
  • S1 : 0.64 S2 : 0.63

Overall Sentiment: Bullish Market Direction: Buy

Trade Suggestion: Limit Buy: 0.67 | Take Profit: 0.68 | Stop Loss: 0.66

USD/JPY

USD/JPY Faces Bearish Outlook Post Dovish Fed Shift

The USD/JPY pair has lost nearly half its 2022 surge, with recent dovish signals from the Federal Reserve paving the way for a potential New Year decline. Currently trading near 2023’s midpoint at 139.57, the pair forms a double-top with October’s high of 151.92. The contrast between the Fed’s easing stance and the Bank of Japan’s (BoJ) potential tightening suggests further downward pressure. If the BoJ exits its negative rate policy in 2023, it could amplify losses, potentially leading to a full retracement of the 2023 uptrend from 127.21, nearly halving the entire 2020-2023 advance at 126.56. The USD/JPY faces a challenging period ahead, with a bearish outlook prevailing.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 144.46 | Negative Crossover | Bearish
  • MA 20 : 146.05 | Negative Crossover | Bearish
  • MA 50 : 147.48 | Negative Crossover | Bearish

Simple :

  • MA 10 : 144.87 | Negative Crossover | Bearish
  • MA 20 : 146.61 | Negative Crossover | Bearish
  • MA 50 : 148.70 | Negative Crossover | Bearish

RSI (Relative Strength Index): 28.32 | Neutral Zone | Neutral

Stochastic   Oscillator : 12.00 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 150.92 R2 : 152.15
  • S1 : 141.648 S2 : 138.841

Overall Sentiment: Bearish Market Direction: Sell

Trade Suggestion: Limit Buy: 141.648 | Take Profit: 138.841 | Stop Loss: 142.500

Elsewhere In The Forex Market

(EUR/USD: 1.0915, -0.0076, -0.69% USD/JPY: 142.34, +0.47, +0.33% GBP/USD: 1.2704, -0.0062, -0.49% USD/CAD: 1.3402, -0.0004, -0.03% AUD/USD: 0.6673, -0.0023, -0.35% USD/MXN: 17.2762, +0.0902, +0.52% USD/INR: 83.125, -0.179, -0.22%

Key Economic Events & Data Release Today:

7:00PM(IST)-USD-Empire State Manufacturing Index 8:30PM(IST)-USD-Flash Services PMI