Today's trading session saw the GBPUSD climb sharply. The pair broke through the top boundary of its bullish trend, indicating strong buying interest. At the same time, the RSI indicator moved into an area typically considered overbought, while the Awesome Oscillator pointed towards a possible divergence. These signals hint at a potential downward adjustment in the GBPUSD's price in the next trading session. It's expected that the pair might give back a portion of its recent gains, possibly retesting the 23.6% Fibonacci level and then maybe the 38.2% level.
Moreover, these levels could act as appealing entry points for buyers looking to capitalize on the uptrend, suggesting the bullish momentum may persist.
Analyzing Yuan’s Recent Rally: PBOC Strategies and Market Responses
The offshore yuan steadied around 7.15 per dollar, hovering near its strongest levels in four months as the People’s Bank of China stressed the need to keep the currency stable in a quarterly policy implementation report. The central bank said it would “resolutely correct pro-cyclical market activities, deal with behaviors that disrupt market orders, prevent overshooting risks in the currency and avoid the formation of one-sided and self-reinforced market expectations.” The yuan rallied recently as PBOC has been setting stronger-than-expected midpoint rates, in what analysts attributed to an official attempt to support the currency. Investors now look ahead to Chinese manufacturing activity data this week for further guidance. Meanwhile, latest data showed that industrial profits in the country continued to shrink in November, but at the slowest pace in almost a year.
These support zones also offer attractive bid prices for bullish traders to establish new long positions, potentially continuing the bullish trend.
GBPJPY Update: Bullish Flag Dynamics and Key Resistance Levels
The GBPJPY currency pair recently reached the R2 resistance level but then dropped back to the middle of its bullish flag pattern. This pattern indicates a generally upward trend, with R1 serving as a key support level. If the currency pair breaks above the R2 level, its next goal might be reaching R3, which is in line with the top edge of the flag.
As long as the R1 level remains unbroken, it supports the upward trend. However, if this support level is breached, there's a chance that the GBPJPY pair could fall towards the lower boundary of the flag, a movement further backed by the monthly pivot point.
A Shift in the Dollar: Weak Data Sparks Talk of Rate Cuts
On Tuesday, the dollar index stabilized at around 103.1, marking its lowest point in three months. It's poised to close November with a near 3% decline, the most significant monthly fall in a year. This downturn follows weak economic indicators, fueling speculation that the Federal Reserve might halt interest rate hikes and possibly reduce rates next year.
Market predictions suggest a 25% likelihood of rate cuts by March 2024, increasing to 45% by May. Looking forward, investors are keenly awaiting the release of PCE prices, the Fed's preferred inflation measure, alongside personal income, spending data, and the ISM Manufacturing PMI for more clues. This week also features speeches from several Fed officials at different events. The dollar has weakened notably, especially against the yen and antipodean currencies.
Ripple is currently experiencing a bearish trend, staying below the 0.609 pivot, which suggests a continuing downward movement. The upper band of the bullish flag is acting as resistance. As the price remains under R1, there's growing expectation that it might head towards S1 (0.58).
If the price breaks through S1, sellers might then aim for the next level, S2.
The Oil Market's Recent Dip: OPEC+ Strategy and Economic Factors
On Tuesday, WTI crude futures saw a slight uptick, trading around $75 per barrel after experiencing losses in four straight sessions. This change comes amid worries about potential further delays in the upcoming OPEC+ meeting, which may result in continuing the existing oil production policy.
Saudi Arabia is advocating for a cut in production quotas to stabilize the market, yet no agreement has been reached so far. The meeting, initially scheduled for November 26, has been pushed to November 30 because of disagreements over output quotas, particularly involving Nigeria and Angola. Since September 27th, there has been a more than 15% decline in the oil market, attributed to abundant supplies and global economic uncertainties.
U.S. Natural Gas Futures Dip Amid High Storage and Production
U.S. natural gas futures are hovering around $2.9/MMBtu, a level close to their lowest in twelve weeks. This pricing trend is primarily due to high storage levels, unprecedented production rates, and a dip in demand. Recent data from the U.S. Energy Information Administration (EIA) revealed a modest withdrawal of 7 billion cubic feet from gas storage in the week ending November 17. This figure is notably smaller than the 60 billion cubic feet withdrawal during the same period last year and falls short of the five-year average decline of 53 billion cubic feet.
Currently, U.S. gas stockpiles stand about 7% above the usual levels for this time of year. The EIA points to robust natural gas production and milder winter temperatures as the key reasons for these ample inventories. The warmer weather has led to a reduced need for heating, with forecasts predicting a 4% decrease in heating degree days compared to the last decade's average. This is expected to result in a 2% reduction in space heating consumption, compared to the five-year average. Adding to the supply situation, November has seen an average gas output of 107.6 billion cubic feet per day, an increase from the previous record of 104.2 billion in October.
In October 2023, Germany saw a continued decrease in the cost of imported goods, marking the eighth month of this trend. The reduction in import prices was 13.0%, slightly less than the anticipated 13.4%. This ongoing drop stems largely from the high prices experienced in 2022 due to the conflict in Ukraine. The biggest decrease was in energy imports, which were 43.5% cheaper than the previous year. This includes significant reductions in the prices of natural gas, hard coal, electricity, mineral oil products, and crude oil. Intermediate goods and agricultural products also saw price drops, as well as both durable and non-durable consumer goods, albeit to a lesser extent. On the flip side, the cost of capital goods actually went up a bit.
For a catchy and visually appealing representation of this topic, I would suggest an image that creatively illustrates the decline in import prices in Germany. It could depict a downward graph or arrow, symbolizing the price reduction, set against a backdrop of key items such as energy sources and consumer goods. The overall tone should be informative yet engaging.
GBPUSD Sees Strong Uptrend, Caution Advised for Long Positions
The GBPUSD currency pair recently began a stronger upward movement, surpassing its previous bullish trend. As of now, it's trading near 1.2703, with the RSI indicator indicating an overbought condition for nearly a day. Our previous technical analysis of GBPUSD cautioned that the pair was overbought, advising against long positions for retail traders. This advice remains relevant and applicable.
For investors considering going long, the 1.260 level presents a good and fair entry point, should there be any price adjustments in the GBPUSD pair.
On Wednesday, the Euro struggled to maintain its strength above the 1.1000 level against the US Dollar, ultimately retreating to around 1.0990 as trading began in Europe. Conversely, the US Dollar, referred to as the Greenback, is wavering around 102.70, despite recovering from earlier dips in the 102.50-102.45 range, as indicated by the USD Index (DXY).
The current monetary policy landscape remains stable for now. However, investors are speculating about potential interest rate reductions by the Federal Reserve (Fed) and the European Central Bank (ECB) come spring 2024.
Attention in the Eurozone is now turning towards Germany’s forthcoming release of preliminary inflation data for November. Meanwhile, in the US, the spotlight is on several key economic indicators, including the advanced Q3 GDP Growth Rate, preliminary figures for Goods Trade Balance, and Mortgage Applications as monitored by the MBA. The day in North America will conclude with the publication of the Fed’s Beige Book.
Adding to this, Cleveland Fed’s Loretta Mester, a hawkish figure and 2024 voter, is scheduled to speak, potentially offering further insights into future economic policies.
Euro Stabilizes Amid Eurozone Inflation and Strong US Job Market
Solid ECN - The euro maintained a steady value near $1.09. This happened as market players absorbed new information. The Eurozone showed an increase in its inflation rate. At the same time, the US job market was doing well. These developments reduced the need for the European Central Bank and the US Federal Reserve to lower interest rates.
In December, the Euro Area saw its inflation rate go up to 2.9%. This was just below the expected 3%. The main reason for this increase was the cost of energy. The core inflation rate, which excludes energy, also slowed down. It reached 3.4%, the lowest since March 2022.
In the US, the job scene was positive. There were 216,000 new jobs added last month. This was more than the expected 170,000. The unemployment rate stayed the same at 3.7%. However, there was a slight dip in the activity rate. It fell to 62.5%, the lowest since February.
Pound Steadiness, Consumer Borrowing Spike, and House Price Rise
Solid ECN - The UK's currency, the pound, remained stable at $1.27. This stability came as market players analyzed new economic figures and their effect on global financial policies. A recent report from the US showed an unexpected jump in job creation, suggesting the Federal Reserve might not lower interest rates soon, possibly not even in March. Meanwhile, UK consumer borrowing saw a significant boost, with an increase of £2.0 billion - the most since March 2017 and higher than the £1.4 billion predicted.
Additionally, the number of loans for buying homes in the UK was higher than expected, reaching 50.1K. In other news, Britain's service sector showed stronger growth in December than initially thought, and the mood among businesses was the most optimistic in seven months. Finally, UK house prices went up by 1.7% compared to last year, the first rise in nine months.
