2023 Market Forecast by Solidecn

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October 19 Market Overview​

The Reserve Bank of Australia (RBA) has noted that there are distortions in the market prices. For example, the DXY is trading above its 50-year monthly average at around 99.00, and GBP/JPY is trading between 179.50 to 181.07, which is between its 36 and 37-year monthly averages. Last year, WTI traded at the 24-year monthly average when it was in the 70's. USD/JPY and EUR/USD need to align with DXY's 50-year monthly averages.

The SPX 500 is trading normally between its 1 and 10-year monthly averages. The speculation for XAU/USD and Gold, priced in all currencies, also trades between their 1 and 10-year monthly averages. However, these will not adjust to distorted locations and prices until the currency price trades normally again.

Central banks need to lower interest rates to normalize markets and currency prices. This is because the Federal Reserve's (Fed) increase of 500 points has caused distortions in market prices, especially since these increases did not reduce inflation.

The Fed's strategy to follow Volker was a complete failure. If the Fed had not increased rates, markets would be trading normally today and inflation would also be at normal levels and decrease faster than expected.

In terms of monetary policy, central banks consider inflation, interest rates, and exchange rates as import lines. The exchange rate should ideally be in the middle of import and export lines. Export lines include GDP, money supplies, and producer prices.

The position of the exchange rate is currently incorrect due to central bank increases which have distorted import/export prices and consequently, market prices.

Market normalization only occurs two weeks of every month when most vital GDP and inflation are released as import and export lines. GDP and inflation are running per month at differences of 0.10 to 0.20. At this rate, central banks may take until 2050 to normalize inflation at 2% while markets remain distorted and GDP remains low.

A major issue is the daily trade of interest rates at 2, 3, and 5 points. Central Banks raise by 500 points but offer daily trades at only 5 points. This problem won't see normalization anytime soon.

In terms of exports exceeding imports, the Swiss National Bank (SNB) is doing well compared to the Fed, Bank of Japan (BOJ), Bank of England (BOE), Reserve Bank of Australia (RBA), and Reserve Bank of New Zealand (RBNZ) where imports exceed exports.

Last week, EUR/USD and other EUR currencies were oversold but have since risen. This week, EUR/USD, EUR/JPY, and EUR/CHF are deeply oversold while EUR/AUD and EUR/NZD are overbought. GBP is trading similarly to EUR with GBP/USD, GBP/CHF, and GBP/JPY being deeply oversold.

There are issues as overbought EUR/AUD trades oversold to GBP/AUD, overbought EUR/NZD trades oversold to GBP/NZD, and oversold GBP/CAD trades oversold to EUR/CAD.

Next week we're watching for GBP/AUD at 1.9196 while GBP/NZD and EUR/NZD correct lower but fail to break any significant averages.

EUR/USD, GBP/USD, AUD/USD, NZD/USD are all not only massively oversold but close to extreme oversold. There's no concept of shorts for next week.

EUR/USD must trade at least to 1.0652 then trade above 1.0685 to easily target 1.0819 or higher.

GBP/USD has a minimum target at 1.2332; AUDUSD at 0.6539; NZDUSD has a minimum target between 0.6047 and 0.6214.

The anchor pairs must bring us back to normal trading again which means wider ranges, more profitable trades, and more currencies to trade.

The USD/JPY pair has a target of 148.07 for next week. The long-term targets are 144.27, 136.53, 131.99, and 128.60. It’s important to note that the 128.60 level in January was at 122.00, and this line has increased by about 60 pips each month for the past nine months.

The USD/JPY pair has the potential to move by 1000 pips in a day, but this isn’t seen as a significant move. Currently, USD/JPY is trading with daily movements of only around 50 to 70 pips, indicating significant distortions.

For the EUR/JPY pair, there’s a significant drop to 156.21, and for GBP/JPY it’s 180.62. GBP/JPY is expected to lead the way for all JPY cross pairs. Keep an eye on AUD/JPY next week for potential long and short positions at 94.32 and NZD/JPY at 87.61.

USD/CAD is trading in an overbought condition as usual and continues to aim for the long-term target in the 1.3100 range. The best strategy is to only trade short in order to follow the trend.​

 

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USDJPY​

The currency pair USDJPY, which stands for "US Dollar vs Japanese Yen", is currently in a phase of consolidation. This means that the currency pair is not making significant moves up or down, but is rather staying within a certain range. The specific range in this case is centered around the price of 149.75.

If the price were to break out of this consolidation range on the upside, it could potentially lead to an increase in the value of the USDJPY pair. The target for this potential increase is at 150.13. This means that if the price breaks out upwards from the consolidation range, it could potentially rise to 150.13.

On the other hand, if the price were to break out of the consolidation range on the downside, it could potentially lead to a decrease in the value of the USDJPY pair. However, this decrease could be followed by a correction, which is a short-term move in the opposite direction of the prevailing trend. The target for this potential correction is at 149.00.

After reaching this correction target, it's possible that the price could then rise to 150.75. This means that even if the price breaks out downwards from the consolidation range and reaches the correction target of 149.00, it could then reverse direction and rise to 150.75.​

 

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EURUSD​

Stable Interest Rates and Outlook: The ECB is expected to keep interest rates and its outlook stable in its upcoming meeting. The current interest rate level is seen as contributing substantially to achieving the inflation target.

Impact of Higher Oil Prices: Questions may arise about the impact of higher oil prices due to a potential crisis in the Middle East. The effects could vary, with possible inflation increase on one hand, and loss of purchasing power for households and businesses on the other.

Decline in Inflation Rate: A long-term decline in the inflation rate is expected, with uncertainty about the speed. Factors such as a weak economy could accelerate the decline, while stronger wage increases could slow it down.

Eurozone PMI Data: A flash estimate of Eurozone PMI data will be published next week, with no immediate improvement in sentiment expected for October. However, an increase in growth momentum in the Eurozone is anticipated from the first half of 2024.
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Technical​

The currency pair is currently trending downwards within a bearish channel, and the Relative Strength Index (RSI) is on the verge of dipping below the midpoint of 50. If the bears manage to close below the bullish channel (indicated in blue), we can expect the downward trend to persist, with targets set at Support 1 (S1) and subsequently Support 2 (S2).

On the other hand, Resistance 1 (R1) is set at 1.06. If the currency pair closes above this resistance level on the 4-hour chart, it would indicate a continuation of the bullish trend that began earlier this month.​

 

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EURUSD

The Euro to US Dollar exchange rate is currently below the indicator’s signal lines. It’s moving above something called the Ichimoku Cloud, which usually means the exchange rate might increase.

We expect it to first reach the lower edge of the Cloud at 1.0550, and then rise to 1.0675. Another sign that it might rise is if it bounces off the lower edge of the ‘bullish channel’. However, if it breaks through the lower edge of the Cloud and goes below 1.0525, this could mean it will drop further to 1.0430.​

 

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EURGBP

The EURGBP currency pair has been increasing in value for six consecutive days, reaching its highest point in over five months. This rise is part of a larger upward trend that started on August 23, 2023, when the value was at 0.8492.

This trend has been boosted by weaker than expected retail sales in the UK in September. The value has surpassed a significant level at 0.8735 but may face some resistance as the market is overbought and traders might start taking profits, which could lead to a period of stability.

Despite this, the pair is set to make substantial gains this week, indicating that the upward trend is still strong. Any short-term stability should ideally be above the previous high of September 26 and the 200-day moving average (0.8705 / 0.8695) to maintain the upward momentum.

However, be cautious if the value drops significantly and closes below 0.8678 as this could weaken the upward trend and make further declines more likely.

The resistance levels to watch are: 0.8735; 0.8792; 0.8808; 0.8863. The support levels to watch are: 0.8705; 0.8695; 0.8678; 0.8662.​

 

[SOLIDECN]

Euro Stays the Same as Everyone Waits for the Big Bank Meeting​

The Euro isn't changing much. It's still a little bit less than 1.06 dollars. It's hard for it to go higher right now. People are also watching what's happening in places far away in the Middle East. They're worried things might get worse there. This worry makes it tough for the Euro to start going up a lot.

In the United States, they're getting more money back for lending it (this is called high "yields" on something named "Treasuries"), and things are uncertain. So, for now, people like the US dollar more. But, the Euro is trying to stay strong. It's reacting well even when things get tough, and it's not going down just because stock markets might be going down.

There's not much news today. The only big thing is how confident people in Europe feel about buying things. There's no big news or talks from the United States today.

Everyone is really thinking about a big meeting for the European Central Bank coming on Thursday. They're pretty sure the bank won't change the interest rates (the cost of borrowing money). But they're very curious about what the bank's boss, President Lagarde, will say about how things are going with money and prices going up (that's called inflation).

For today, no one thinks anything surprising will happen. The value of money between the Euro and the dollar probably won't change much. If the Euro can stay at or above 1.06 dollars, that's good. But things can always change because of what's happening in the Middle East.​

 

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Bitcoin’s Rollercoaster Ride: Predictions from the Pros​

As Bitcoin’s wild ride keeps everyone guessing, big names are dropping hints about where it might head next. Currently, Bitcoin is at $30,377, a tiny bit higher than yesterday.

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The Dollar’s Dive: Schiff’s Scary Prediction​

Peter Schiff, a money expert, thinks trouble’s brewing for the US dollar. He predicts a long-lasting money slump and prices going up too fast, which isn’t good news for folks with dollars. But for Bitcoin, it might be a silver lining.

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Saylor Says Bitcoin’s a Winner​

Then there’s Michael Saylor, a big Bitcoin fan, showing off how well his Bitcoin plan has worked. His company, MicroStrategy, loves Bitcoin so much; they bought more, now owning a stash worth a whopping $4.68 billion. This big move might be giving Bitcoin’s price a nudge up.

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Kiyosaki’s Crystal Ball: Gold Glitters, Bitcoin Booms​

Robert Kiyosaki, the guy who wrote “Rich Dad Poor Dad,” thinks Bitcoin could shoot up to an amazing $135,000. He’s also big on gold, expecting it to do pretty well.

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Predicting Bitcoin’s Next Move​

Looking at Bitcoin’s recent price chart, there are some key numbers to watch. It’s swinging around $29,208, with the next big hurdle at $31,207. If it breaks through that, it could head for $32,440 or even $34,473. But if it starts slipping, it might drop to around $29,174 or lower.

 

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GBJPY

GBPJPY is seeing a drop, like it's sliding down a hill after leaving a climbing trail. The Stochastic indicator is hinting that this isn't the time for the value to go up. The GBPJPY isn't rising above 182.9, and it seems pretty determined to stay low, possibly even heading down to 176 next.

But here's something to think about: if the GBPJPY starts to climb unexpectedly and passes a key level (the pivot), this downward slide might just turn around. Those who believe it's going to rise (the optimists!) are hoping it might reach as high as 187.9.​

 

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Gold​

Gold prices have stopped rising just below a five-month high on Monday. The rapid increase in prices slowed down as it got close to the $2000 mark. After a strong push back on Friday, it's clear that the $2000 area is a big hurdle. This has led traders to take some profits from the over 7% increase in the last two weeks.

Daily indicators suggest that this pause was expected, although the slight drop shows that buyers are still interested in pushing the price above $2000.

Due to unrest in the Middle East, traders are looking for safer options. The possibility of conflict escalating increases the demand for gold, which continues to drive up its price.

The slight drop in price has stabilized above the rising 5-day moving average ($1960). Any further drops are expected to stay above $1945 (the halfway point between $2080 and $1810), indicating a normal correction and keeping the overall upward trend intact.​

 

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EURUSD

The eurusd graph indicates a sharp decline, potentially in five distinct stages. We're currently experiencing a temporary rise in the fourth stage. The third stage seems finished, and now we're in a phase of slight recovery.

The price is moving along a track at 1.07, corresponding to a key financial marker known as the 38.2 Fibonacci level. Our hope is for prices to adhere to this boundary and then plummet swiftly to round off the fifth stage. We anticipate the price might settle around 1.03000 when the fifth stage ends. Our projection is that the euro will become more robust as 2023 progresses.

Inflation rates in Europe are dipping, and the prediction is that the European Central Bank (ECB) will maintain the current interest rates throughout 2023. Expenses, especially for fuel, are surging due to turmoil in the Middle East. If these expenses stabilize, the euro is likely to fortify against other currencies.

Upcoming crucial updates this week: On EURO 23rd October, we expect news on French and German manufacturing and services. October 25th will bring insights into the German business climate and a speech from ECB President Lagarde. October 26th will feature announcements on interest rates, the ECB's financial strategy, and a major press event.

Potential high points: 1.07; 1.07580; 1.083
Potential low points: 1.04; 1.036; 1.03​

 

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Recession Looms Over Eurozone: PMI Indices Disappoint, EURUSD Dips

The economy in Europe is slowing down, which is causing worries about a possible recession in Germany and the entire eurozone.

The PMI indices, which are often used by investors to predict economic trends, have shown disappointing results for October. Instead of the hoped-for improvement, they indicate that the recession is getting worse.

The German services sector was particularly disappointing. Its index dropped from 50.3 to 48.0, indicating a contraction rather than growth. This was much weaker than the expected 50.1.

In France, the services index was 46.1, which is better than the expected 44.9 but still quite low.

Because of these results, the PMI for the whole euro area dropped to 47.8, the lowest it’s been since February 2021.

The manufacturing sector in the euro area also showed a faster contraction, with its index falling from 43.4 to 43.0 instead of rebounding to 43.6 as expected.

The composite index dropped from 47.2 to 46.5, which is the biggest drop since October 2020. This was unexpected and led to a sell-off in the single currency.

After this data was released, the EURUSD lost almost 0.5% and moved sharply away from 1.07. Sellers increased pressure after the pair touched its 50-day moving average, which is an indicator of medium-term trends.

If it closes below 1.07, it suggests that the recent recovery from 1.05 levels was just a correction and not a trend change.

In terms of fundamentals, Europe is having a hard time growing due to rising interest rates and fluctuating energy prices. These conditions have caused the ECB to stop raising rates earlier than the Fed. It’s possible that, like in the previous cycle of rate hikes after the global financial crisis, the ECB might start easing earlier than the Fed. This is a significant factor that’s putting pressure on the euro against the dollar, especially now that carry trade has become a key market driver.​

 

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Crude Oil​

The U.S. oil industry, known as "Big Oil", is seeing growth in production and mergers. Active drilling rigs increased to 502 for oil and 122 for gas last week, marking a second week of growth. Daily oil production has hit a record 13.2 million barrels per day.

Crude oil stocks are 4% lower than last year, possibly encouraging more investment in oil production. The U.S. government's decision to buy oil for its Strategic Petroleum Reserve may have also played a part.

Chevron is buying Hess for $60 billion, following Exxon Mobil's acquisition of Pioneer Natural Resources for $58 billion. The easing of sanctions on Venezuela could benefit U.S. oil producers with operations there.

Long-term factors like Middle East conflicts and potential supply disruptions are encouraging investment in U.S. oil production. Despite this, OPEC+ countries are limiting production to maintain prices.

This could signal a shift from focusing on profits to a battle for market share, a challenging task given years of record interest rates. However, major players with substantial capital reserves and strong government lobbying power are now involved.

Crude oil prices are currently testing the lower boundary of a bullish channel, with the Stochastic oscillator indicating an oversold market condition. If prices manage to settle below this critical level, we could see a continuation of the downward trend, potentially reaching the S2 support level around $83.​

 

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Eurozone's Inflation Slowdown: A Simplified Insight​

Eurozone inflation is slowing down, affecting many sectors and making things less expensive compared to the European Central Bank's (ECB) goals. However, overall inflation is still higher than what the ECB wants. If this trend continues, it may take until next September for the yearly inflation rate to stabilize at 2%. Rising global tensions might push up energy costs, making everything else pricier and slowing the reduction in overall inflation.

Here's what happened in September: Yearly inflation dropped to 4.3% from 5.2% in August and 9.9% last year. Costs for things like energy went down, and prices for factory goods (excluding energy) and services rose less than before. Charts show that this slowdown is widespread, with most sectors experiencing inflation below the ECB's target recently.

Let's break it down by sectors using October last year as a reference:​

1. Most sectors, except energy, still have higher yearly inflation than the ECB's target as of September 2023.​
2. Good news: Recent data shows food and factory goods (excluding energy) prices are rising slower.​
3. Bad news: Energy costs might be going up again, which is worrying because it affects everything from household budgets to business costs, and overall inflation.​
4. Services are mixed: Some areas are more expensive than last year, while others are cheaper. Most are still pricier than the ECB's target.​
5. Core inflation (excluding energy, food, alcohol, and tobacco) looks promising, with prices recently increasing at a rate slightly below the target.​

In simple terms, while the cost of living in the Eurozone is rising slower, it's still more expensive than what's considered ideal, and global events might make things costlier soon.​

 

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Gold​

The price of gold has retreated from the $2,000 mark and is currently testing the $1,949 support level. This decline was anticipated as the RSI and Stochastic indicators were in the overbought zone.

A closer look at the 4-hour chart provides a clearer picture of gold’s price action. The precious metal formed a hammer candlestick pattern at the pivot point ($1,962), and the stochastic oscillator is nearing the overbought zone, indicating a potential exit from this area. The RSI indicator remains above 50.

Considering current market data, technical indicators, and key levels, if the price can maintain above $1,949, it’s likely that the XAUUSD price will rise to R3 ($2,025).

Conversely, if bears manage to push the price below $1,949, we could see a continued decline towards the upper line of the bearish channel around $1,900.​

 

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EURUSD​

The EURUSD currency pair is currently testing a crucial pivot point at 1.057, with the Relative Strength Index (RSI) indicating a potential bearish shift. For the downward trend to persist, it’s essential for the pair to close below this pivot point.

Bullish Scenario

Please note that the resistance for this week is situated at 1.064. Following a breakout from the bearish channel, it’s critical for the bulls to secure a close above this level to confirm the breakout and potentially trigger further price increases.

This analysis provides key insights for forex traders monitoring the EURUSD pair, helping them make informed decisions based on pivot points and RSI indicators.​

 

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LTCUSD

Last week, the cryptocurrency market saw a notable uptick, and Litecoin (LTC) investors were among those who profited from this positive shift. The LTCUSD exchange rate climbed to a formidable resistance point at $71.15. This upward movement prompted bears to increase selling pressure, culminating in a long wick candlestick pattern on the final day’s candle.

The Relative Strength Index (RSI), an essential technical indicator, is approaching the overbought zone. But it’s not just about the RSI nearing this zone. The indicator is displaying a significant divergence, often an indication of a trend shift or a deceleration in the bullish bias. As a result, we anticipate LTCUSD to adjust its recent gains and maintain its price above the pivot point of $64, unless the LTCUSD bulls can surpass the $71 resistance in the forthcoming session.​

 

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Bitcoin

Currently, the Bitcoin to USD (BTCUSD) pair is experiencing a high buying pressure, as indicated by the Relative Strength Index (RSI) exceeding 80. This suggests a saturation of buyers in the market, and the price may not increase significantly before it begins to drop.

Market experts at FxNews advise caution for those considering increasing their holdings of this cryptocurrency. They recommend waiting for the price to stabilize above the support level of $32,000 before making additional purchases. This is due to the potential overvaluation of assets that are heavily bought, leading to a possible price correction.​

 

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EURAUD​

For the past four months, the EURAUD has been trading within a range between 1.6200 and 1.7100, suggesting that it might currently be in a range trading mode. This week, the price faced difficulty surpassing recent peaks just below 1.6900, reaching a high of 1.6845 on Monday. These levels could pose resistance if tested again, before reaching the 2-year high at 1.7065. On Wednesday, the price dipped but didn't reach the 100-day Simple Moving Averages (SMA) near 1.6550, which could provide support in case of another sell-off.

Looking further down, potential support levels could be found at previous lows of 1.6445 and 1.6320, followed by a potential support zone between 1.6235 and 1.6265. The close grouping of the 10-, 21-, 34-, 55- and 100-day Simple Moving Averages (SMA) between 1.6550 and 1.6710 further supports the perspective of range trading.​

 

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Silver

The price of silver is currently testing the pivot point at 23.14, with the Relative Strength Index (RSI) maintaining a position above the 50 level. The XAGUSD's inability to close below the S1 support level of 22.59 suggests that the price movement range since October 23 is likely a correction to the upward trend that began earlier this month.

The pivot point serves as a hurdle for the bulls. To drive the price towards R1 (23.9), they must ensure a close above the pivot point.

Conversely, the S1 level (22.5) acts as a safeguard against further price decline. If this level is breached, the bears could potentially target S2 (21.8) next.
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EURUSD Pair Analysis: Bulls Eye R1, Bears Target Bearish Channel

The EURUSD currency pair is currently testing the S1 support and the upper line of the previously broken channel. A close above the pivot could signal a bullish trend, with R1 as the potential target.

Conversely, if the S1 support is broken, the pair could re-enter the bearish channel, continuing the selling bias. Stay updated for more EURUSD market trends.​