. Daily FX Analysis - Euro's Economic Challenges, USD/JPY Downtrend, GBP/JPY Surge Unveiled

Daily FX Analysis – Euro’s Economic Challenges, USD/JPY Downtrend, GBP/JPY Surge Unveiled

Daily FX Analysis – Euro’s Economic Challenges, USD/JPY Downtrend, GBP/JPY Surge Unveiled

06 Dec 2023

Introduction

In today’s market overview, we delve into the dynamic landscape of global financial markets, spotlighting key developments across various currencies and commodities. The report navigates through the resilience of gold amidst cautious investor sentiment, the downward pressure on oil prices influenced by surging U.S. crude exports, and the rebound of natural gas futures following a recent selloff. Additionally, we analyze the Euro’s fundamental backdrop, the short-term downtrend of USD/JPY, and the noteworthy appreciation of the Australian Dollar post the GDP data release. The report encapsulates a comprehensive analysis of these market movements, offering insights for investors and stakeholders navigating the complexities of the current economic environment.

Markets In Focus Today – EUR/USD

Navigating the Euro’s Economic Landscape: A Fundamental Exploration

The euro began the day with a stagnant start, showing little movement after a series of consecutive daily closures in negative territory. The European currency faces headwinds from discouraging economic indicators within the euro area, with composite and services PMIs remaining in contractionary territory. Additionally, the European Central Bank (ECB) survey reveals a growing pessimism about economic growth over the next 12 months. Further contributing to the downside pressure on the euro is the unexpected positive surprise in US ISM services PMIs, although JOLTs openings fell short, hitting the lowest level for 2023. ECB officials have taken on a more dovish stance recently, a sentiment that is reflected in the money market’s pricing of the ECB’s rate path. Later today, market attention will turn to eurozone retail sales, with expectations for potential market movements. However, the primary driver of volatility is anticipated to be the ADP employment change, foreshadowing Friday’s highly anticipated Non-Farm Payrolls (NFP) report. Investors will also be keenly observing remarks from the ECB’s Nagel, as his speech is expected to offer additional insights into the central bank’s current thinking and approach.

Technical   Overview With Chart :

Moving Averages :

Exponential :

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

Simple :

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

RSI (Relative Strength Index) : 46.69 | Neutral Zone | Neutral

Stochastic   Oscillator : 8.53 | 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 : 1.07557 | Take Profit : 1.05620 | Stop Loss : 1.08140

USD/JPY

“Analyzing USD/JPY: Chart Signals Indicate Continuation of Short-Term Downtrend”

Kelvin Wong, a senior market analyst at Oanda, notes that the short-term downtrend of USD/JPY remains intact, as indicated by technical analysis. The currency pair’s price movements have consistently followed a minor descending channel since its peak on November 13. Wong highlights that a recent retest near the upper boundary of this channel on December 1 triggered a bearish reaction. Additionally, a short-term bearish momentum reading on the hourly relative strength index momentum indicator adds to the overall downward sentiment. Wong suggests that a break below the 145.90 level could initiate a medium-term downtrend, with subsequent support anticipated in the 144.80-144.95 range. As of now, USD/JPY is experiencing minimal change, hovering around 147.09.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 147.77 | Negative Crossover | Bearish
  • MA 20 : 148.50 | Negative Crossover | Bearish
  • MA 50 : 148.66 | Negative Crossover | Bearish

Simple :

  • MA 10 : 147.86 | Negative Crossover | Bearish
  • MA 20 : 149.06 | Negative Crossover | Bearish
  • MA 50 : 149.44 | Negative Crossover | Bearish

RSI (Relative Strength Index) : 38.85 | Neutral Zone | Neutral

Stochastic   Oscillator : 17.77 | Buy Zone | Bullish

Resistance   And Support Levels :

  • R1 : 150.92 R2 : 152.15
  • S1 : 146.308 S2 : 144.822

Overall Sentiment : Bearish Market Direction : Sell

Trade Suggestion : Limit Buy : 146.308 | Take Profit : 144.822 | Stop Loss : 147.486

GBP/JPY

“GBP/JPY Surges Nearly 2% in Anticipation of UK CPI Release Tomorrow”

The GBP/JPY pair experienced a substantial rise, closely approaching 2%, following positive developments in US CPI. However, attention now shifts to the UK as market participants await the release of UK inflation data scheduled for 7 am UK time tomorrow. Anticipations include a significant drop in headline inflation, coupled with a somewhat less pronounced yet still encouraging decline in the core measure. In the event of inflation figures aligning with or falling below expectations, the current upward momentum might encounter resistance, potentially stabilizing around the 188.80 level last observed in 2015. Moreover, with the RSI approaching overbought territory, a pullback could be imminent, especially if tomorrow’s inflation report fails to surpass expectations. On the upside, a notable level to watch is around 195.30, marking a complete retracement of the significant decline witnessed from 2015 to 2016. Support levels are identified at 184.00, followed by 180.00 in case of a reversal.

Technical   Overview With Chart :

Moving Averages :

Exponential :

  • MA 10 : 186.24 | Negative Crossover | Bearish
  • MA 20 : 186.06 | Negative Crossover | Bearish
  • MA 50 : 184.85 | Positive Crossover | Bullish

Simple :

  • MA 10 : 186.76 | Negative Crossover | Bearish
  • MA 20 : 186.56 | Negative Crossover | Bearish
  • MA 50 : 184.15 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 47.06 | Neutral Zone | Neutral

Stochastic   Oscillator : 24.97 | Neutral Zone | Neutral

Resistance   And Support Levels :

  • R1 : 188.40 R2 : 189.79
  • S1 : 183.89 S2 : 182.49

Overall Sentiment : Neutral Market Direction : Sell

Trade Suggestion : Limit Buy : 184.760 | Take Profit : 181.254 | Stop Loss : 187.617

AUD/USD

“Australian Dollar Rises Following Positive GDP Data”

The Australian dollar showed signs of recovery, reaching towards $0.66 and offsetting recent losses as investors absorbed the latest gross domestic product (GDP) report. The third-quarter GDP data revealed a 0.2% quarter-on-quarter expansion, falling short of expectations at 0.4% and marking the slowest growth in a year. On an annual basis, Australia’s economy recorded a 2.1% growth in the September quarter, surpassing forecasts of 1.8%. The Aussie had faced downward pressure earlier in the week following the Reserve Bank of Australia’s decision to maintain the policy rate at 4.35%, aligning with market expectations. The central bank highlighted its intention to assess the impact of interest rate increases on demand, inflation, and the labor market, emphasizing the need for time. The RBA acknowledged uncertainties surrounding household consumption outlook but recognized a moderation in inflation and easing conditions in the labor market.

Technical   Overview With Chart :

Moving Averages :

Exponential :

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

Simple :

  • MA 10 : 0.66 | Negative Crossover | Bearish
  • MA 20 : 0.65 | Positive Crossover | Bullish
  • MA 50 : 0.64 | Positive Crossover | Bullish

RSI (Relative Strength Index) : 56.25 | Neutral Zone | Neutral

Stochastic   Oscillator : 56.20 | Neutral Zone | Neutral

Resistance   And Support Levels :

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

Overall Sentiment : Bullish Market Direction : Sell

Trade Suggestion : Limit Buy : 0.65524 | Take Profit : 0.63492 | Stop Loss : 0.66279

Elsewhere In The Forex Market

The U.S. dollar approached a two-week high against a basket of currencies on Wednesday as investors assessed U.S. economic data indicating a slowing labor market, fueling expectations that the Federal Reserve might cut rates next year. In Asia, focus shifted to China, where the yuan extended losses following Moody’s credit outlook cut for the Asian giant. The dollar index (DXY), measuring the U.S. currency against six rivals, was down 0.029% at 103.93, after a 0.3% overnight climb. Despite this dip, the index has gained 0.5% this month, recovering from its steepest monthly decline in a year in November. Tuesday’s data revealed a more than 2-1/2-year low in U.S. job openings in October, suggesting that higher interest rates were dampening demand for workers. The upcoming November jobs data, due this Friday, is expected to provide additional insights into the labor market ahead of the Fed’s policy meeting next week. Traders have priced in a 99.7% chance of the Fed maintaining rates next week, but a 56% chance of a rate cut in March, according to CME’s FedWatch tool. The market has also factored in at least 125 basis points worth of cuts in the coming year. Investors, reassessing the extent of rate cuts next year, contributed to a recent boost in the dollar. However, opinions vary on when these cuts might occur, with some speculating the Fed may hold off until the second quarter. The offshore Chinese yuan eased 0.11% to $7.1647 per dollar following Moody’s credit outlook cut for China. Major Chinese banks reportedly intensified U.S. dollar selling after the Moody’s statement. The euro was up 0.02% at $1.0797, and sterling rose 0.13% to $1.261. The Australian dollar rose 0.53% to $0.659, while the New Zealand dollar increased 0.62% to $0.617. In cryptocurrencies, bitcoin eased 0.69% to $43,591.23, having earlier surged above $44,000. Bitcoin’s gains this year, reaching 150%, are fueled by optimism for the potential approval of exchange-traded spot bitcoin funds (ETFs) by a U.S. regulator.

Key Economic Events & Data Release Today:

4:30PM(IST)-GBP-BOE Gov Bailey Speaks 6:45PM(IST)-USD-NFP 8:30PM(IST)-CAD-BOC Rate Statement, Overnight Rate