. Daily FX Analysis - Dollar, Nikkei, Aussie, CAD Turmoil

Daily FX Analysis – Dollar, Nikkei, Aussie, CAD Turmoil

Daily FX Analysis – Dollar, Nikkei, Aussie, CAD Turmoil

13 Dec 2023

Introduction

“In today’s financial landscape, the Indian rupee remains resilient amidst broader weakness in Asian currencies. The Reserve Bank of India (RBI) takes proactive measures, intervening in the currency market to curb potential depreciation. Despite modest changes, the rupee holds its ground at 83.3850 against the US dollar. Meanwhile, global factors, including the dollar index and US Treasury yields, influence the currency dynamics. As investors await the Federal Reserve’s policy decision, the rupee’s trading range is expected to reflect recent stability, with insights into the RBI’s strategic interventions shaping market sentiments.”

Markets In Focus Today – EUR/USD

“EUR/USD Rally Curtailed: Sticky U.S. Inflation Data Casts Shadow Ahead of Fed Meeting”

The Dollar Index experienced a 0.22% decline, paring back earlier losses triggered by U.S. CPI data revealing persistent core inflation, deterring hopes of a dovish turn from the Federal Reserve in its Wednesday policy announcement. Despite core CPI holding at a 4% year-on-year rate, real weekly earnings surged by 0.5% on the month, the most significant increase since June, excluding the extremes of the 2020 pandemic. The subdued bounce in Treasury yields and the dollar post-CPI release indicated that markets still leaned towards a potential March rate cut, with futures pricing it as nearly a coin toss, reflecting 112 basis points of cuts by the end of 2024. While less aggressive than recent peak rate cut expectations, this scenario stalled rebounds in EUR/USD and sterling near their 10-day moving averages in anticipation of the Federal Reserve, European Central Bank (ECB), and Bank of England (BOE) meetings throughout Wednesday and Thursday. EUR/USD saw a 0.24% increase, supported by a weaker dollar, declining energy prices, positive signs in Germany’s ZEW expectations index, and tighter bund-Treasury yields spreads. However, sustained gains above the 200-day moving average and kijun at 1.0825/37 are required to reinforce the significant speculative long position. USD/JPY dropped by 0.4%, although it recovered from Tuesday’s lows, as prices sought equilibrium following the November-December plunge. The consolidation phase between ongoing 146 and 147 expiries was observed, with the falling 10-day moving average capping Monday’s high at around 146.30 on Wednesday. The overarching sell signal from the 32-year double-top in 2022/23 and the expected reversal of the Fed rate hike cycle favor short positions unless prices surpass key resistance at 147.76. Sterling remained flat, impacted by slowing UK wage growth and political uncertainty. Looking beyond the Federal Reserve meeting, attention shifted to U.S. retail sales, as well as the ECB and BOE meetings on Thursday, both viewed as precursors to anticipated rate cuts in March and June, respectively.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 1.08 | Negative Crossover | Bearish
  • MA 20 : 1.08 | Negative Crossover | Bearish
  • MA 50 : 1.08 | Positive Crossover | Bullish

Simple :

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

RSI (Relative Strength Index) : 48.03 | Neutral Zone | Neutral

Stochastic   Oscillator : 19.84 | Neutral Zone | Neutral

Resistance   And Support Levels :

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

Overall Sentiment : Neutral Market Direction : Sell

Trade Suggestion : Limit Buy : 1.75 | Take Profit : 1.66 | Stop Loss : 1.80

USD/JPY

The Nikkei closed 0.25% higher, driven by gains in technology stocks.

Japan’s Nikkei Stock Average rose 0.25% to close at 32926.35, tracking Wall Street’s gains overnight. With tonight’s FOMC decision looming, a refreshed “dot plot” and revisions to the Summary of Economic Projections will provide ample fodder for market interpretation, says Vishnu Varathan, head of economics & strategy, Asia and Oceania Treasury Department, at Mizuho Bank, in an email. Among best performers on the benchmark index, Disco Corp. climbed 9.9%, Advantest rose 5.6% and Tokyo Electron was up 4.7%. USD/JPY was at 145.55, compared with 145.40 as of Tuesday’s Tokyo stock-market close. The 10-year JGB yield was down 5 bps at 0.685%.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 146.31 | Negative Crossover | Bearish
  • MA 20 : 147.28 | Negative Crossover | Bearish
  • MA 50 : 148.07 | Negative Crossover | Bearish

Simple :

  • MA 10 : 146.30 | Negative Crossover | Bearish
  • MA 20 : 147.59 | Negative Crossover | Bearish
  • MA 50 : 149.05 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 40.45 | Neutral Zone | Neutral

Stochastic   Oscillator : 51.53 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 150.92 R2 : 152.15
  • S1 : 144.762 S2 : 141.460

Overall Sentiment : Bearish Market Direction : Sell

Trade Suggestion : Limit Buy : 144.762 | Take Profit : 141.460 | Stop Loss : 145.800

AUD/USD

The Australian Dollar continues to face downward pressure.

The Australian dollar maintained its recent decline, hovering around $0.655, as caution prevailed in the market ahead of upcoming interest rate decisions from major central banks this week. Reserve Bank of Australia (RBA) Governor Michele Bullock stated earlier in the week that the central bank is adopting a cautious approach to monetary policy and will closely monitor incoming data. She added that Australia is not lagging behind in the global fight against inflation. Market expectations suggest that the RBA has completed its tightening cycle, but there is anticipation of a slower return of inflation to target in Australia compared to other major economies. On the economic data front, a report revealed that Australian consumer sentiment experienced the second-worst year on record in 2023, influenced by a surge in the cost of living and high interest rates. Additionally, business sentiment declined in November across various industries, reflecting a more pessimistic outlook.

Technical   Overview With Chart :

Moving Averages :

Exponential :

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

Simple :

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

RSI (Relative Strength Index) : 51.96 | Neutral Zone | Neutral

Stochastic   Oscillator : 21.28 | Neutral Zone | Neutral

Resistance   And Support Levels :

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

Overall Sentiment : Neutral Market Direction : Sell

Trade Suggestion : Limit Buy : 0.65394 | Take Profit : 0.63492 | Stop Loss : 0.66

USD/CHF

The Canadian Dollar is currently trading at its lowest level for the month of December.

The Canadian dollar traded around the 1.36 per USD mark, marking its lowest level since the beginning of the month. This decline is attributed to falling oil prices. Crude oil prices experienced a significant drop due to global growth concerns, leading to a decrease in demand that surpassed production cuts. This reduction in demand for oil contributed to a weakened Canadian dollar. On the policy front, Bank of Canada Governor Tiff Macklem hinted at the possibility of a future rate hike. He emphasized that there are currently no considerations for easing measures, given the persistent inflation above the target threshold. Meanwhile, U.S. inflation data highlighted ongoing consumer price pressures, with the monthly measure increasing by 0.1% in November.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 0.88 | Negative Crossover | Bearish
  • MA 20 : 0.88 | Negative Crossover | Bearish
  • MA 50 : 0.89 | Negative Crossover | Bearish

Simple :

  • MA 10 : 0.87 | Positive Crossover | Bullish
  • MA 20 : 0.88 | Negative Crossover | Bearish
  • MA 50 : 0.89 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 39.08 | Neutral Zone | Neutral

Stochastic   Oscillator : 50.71 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 0.90 R2 : 0.91
  • S1 : 0.87 S2 : 0.85

Overall Sentiment : Bearish Market Direction : Sell

Trade Suggestion : Limit Buy : 0.86 | Take Profit : 0.85 | Stop Loss : 0.865

Elsewhere In The Forex Market

The Indian rupee remained relatively unchanged on Wednesday, diverging from the weakness observed in other Asian currencies. The Reserve Bank of India (RBI) likely intervened to prevent excessive losses in the domestic currency. As of 10:20 a.m. IST, the USD/INR pair was at 83.3850, showing minimal movement from its previous close at 83.3875. Traders reported that the RBI sold U.S. dollars at the beginning of the trading session to curb the depreciation of the rupee. The dollar index inched up to 103.88, while several Asian currencies experienced declines ranging from 0.1% to 0.5%. The rupee’s trading range was narrow, with yesterday’s high and low differing by under 5 paisa. Analysts anticipate a similar trading range for the day. U.S. Treasury yields retreated slightly on Tuesday following consumer inflation data that aligned with expectations. The core Consumer Price Index (CPI) increased by 0.3% month-on-month in November, in line with October’s 0.2% growth. The headline CPI edged up by 0.1% month-on-month in November, contrary to expectations of no change compared to October. In light of the inflation data, ING Bank expressed doubts that the Federal Reserve would signal any significantly dovish stance. The Fed is expected to maintain steady interest rates in its policy decision later in the day, with investors closely watching forward-looking projections for insights into the future trajectory of policy rates. Market expectations, as indicated by CME’s FedWatch tool, suggest the possibility of rate cuts beginning as early as March or May next year. Despite the potential for the rupee to hit new lows, central bank intervention is seen as limiting the extent of the fall, according to Anrob Biswas, head of FX research at SMC Global Securities.

Key Economic Events & Data Release Today:

7:00PM(IST)-USD-Core PPI m/m, PPI m/m