Solid ECN - Fundamental Analysis

NZ Dollar Rises Amid Positive Job Data, Rate Cut Delay​


The New Zealand dollar climbed to approximately $0.61, recovering from its lowest point in 11 weeks thanks to unexpectedly local solid employment figures, which lessened the likelihood of immediate interest rate reductions. The unemployment rate in New Zealand increased slightly to 4% in the last quarter from 3.9% in the previous quarter, better than the Reserve Bank's prediction of 4.2%. Consequently, the market now expects the Reserve Bank of New Zealand (RBNZ) to begin decreasing interest rates in August, a delay from the initial expectation of May.

RBNZ's Chief Economist, Paul Conway, recently argued against the early rate cut predictions, stating that inflation remains excessively high despite efforts to control it through stringent policies. In the year's final three months, New Zealand's inflation rate grew by 0.5% from the previous quarter, a decrease from the 1.8% rise seen in the third quarter. The yearly inflation rate also dropped to 4.7% in the last quarter from 5.6% in the quarter before, marking the lowest rate since mid-2021.​

Yen Recovers Amid Dollar Pullback and Fed Policies​


The Japanese yen has stabilized at around 148 to the dollar, recovering from its lowest point in two months. This improvement comes as the dollar weakens, a change driven by investors evaluating the Federal Reserve's future financial strategies. Despite this, the US's better-than-anticipated economic performance and Federal Reserve Chairman Jerome Powell's firm stance have kept the dollar strong.

This situation has placed pressure on other significant currencies. At the same time, there's ongoing uncertainty about whether the Bank of Japan will stop its hostile interest rate policy within the year. This uncertainty persists as decisions are postponed, influenced by recent reports showing Japan's economic difficulties. The country's manufacturing sector is performing below expectations, and consumer spending is not increasing as much as hoped.​

Dollar Index Stabilizes; Fed Rate Cut Odds Dip​


Solid ECN - The dollar index hovered around 104 on Thursday, decreasing for two consecutive days. This happened as investors analyzed recent comments from Federal Reserve officials to understand future interest rate changes. The Boston Fed President Susan Collins mentioned that the Federal Reserve is cautiously evaluating the latest data and forecasts. She indicated that adjusting the policy might be suitable later this year.

Currently, the market expects a less than 20% possibility of a rate decrease by the Fed in March. This expectation has significantly dropped from the beginning of the year when it was closer to two-thirds. Investors are now waiting for new data on jobless claims this Thursday to check the state of the job market. While the dollar maintained its recent downturn against most major currencies, it performed well against the Japanese yen.​

Czech Republic's Unemployment Hits 4% in January 2024​

Solid ECN - In January 2024, the unemployment rate in the Czech Republic climbed to 4%, slightly higher than the expected 3.9% and an increase from 3.7% the month before. This rate is the highest since April 2021, with the unemployed population rising by 16,319 from the previous month to 295,546, and up 12,487 compared to the same period last year. At the same time, job openings fell by 5,006 from December, reaching 266,783, which is 14,358 fewer than in January of the previous year.​

Oil Prices Surge Amid Middle East Tensions​


Solid ECN - WTI crude oil prices went up to more than $74 per barrel on Thursday, marking the fourth consecutive day of gains amid rising tensions in the Middle East, which heightened concerns over possible disruptions in oil supply. Despite a ceasefire proposal from Hamas, Israeli Prime Minister Benjamin Netanyahu turned it down on Wednesday night. However, US Secretary of State Antony Blinken mentioned there was still a chance for negotiations.

Market participants are also cautious about the potential for additional US military responses to Iranian forces and their allies. On the consumption front, it was reported that US gasoline stocks dropped significantly by 3.15 million barrels in the last week, a much more significant decrease than the anticipated 140,000 barrels. In contrast, US crude oil inventories saw an increase of 5.5 million barrels, surpassing the expected rise of 1.895 million.​

Silver Prices Dip Amid Fed Rates & Demand Outlook​


Silver prices fell below $22.5 for each ounce, marking the lowest point in two weeks. This drop was mainly because the hope for lower Federal Reserve interest rates diminished. Jerome Powell and other officials emphasized that any reduction in interest rates would be gradual and unlikely to start in March. Furthermore, recent U.S. jobs and services data, which was better than expected, suggested that the cost of borrowing might remain high until late spring. This situation made investments that don't produce income, like silver, less attractive.

However, silver did see some positive momentum from the anticipation of more support for China, the biggest consumer of silver, and the forecast of rising demand throughout the year. The Silver Institute's latest report predicted that the global demand for silver would hit 1.2 billion ounces in 2024, making it the second-highest demand level ever recorded, mainly due to industrial purchases.​

Canadian Dollar Falls Amid US Economic Strength​


The Canadian dollar dropped beyond 1.35 against the US dollar in early February, reaching its lowest point in over four weeks. This decline was influenced by solid economic reports from the US and firm statements from the Federal Reserve, which suggested that high interest rates in the US might persist, boosting the US dollar's strength. The ISM PMI indicated that service sector activity in the US was more substantial than expected in January, with high inflation levels, aligning with Federal Reserve Chair Powell's remarks that it's too early to claim success in controlling inflation.

On the other hand, Canada's PMI data showed its private sector shrinking, highlighting the need for the Bank of Canada to adopt a more supportive monetary policy. Additionally, oil prices were low due to speculation about a possible ceasefire between Hamas and Israel, which lessened worries about oil supply issues and decreased the flow of foreign currency, weakening support for the Canadian dollar, also known as the loonie.​

Brazil's Currency Hits 3-Month Low Amid Economic Woes​

Solid ECN - The Brazilian currency fell to 5 against the US dollar in February, hitting its lowest in three months, due to weak economic indicators showing that not much foreign money was coming into the country. The trade surplus for January was decent, but it didn't meet the expectations and was the smallest in almost a year. Moreover, the foreign direct investment in Brazil went down unexpectedly in December, when it was anticipated to rise, making the situation tighter for foreign money inflow.

At the same time, China is experiencing its worst deflation in 14 years as of January, leading to worries about reduced international demand for Brazil's main exports like iron ore, oil, and soybeans. Despite expectations, inflation in January decreased to 4.51%, slightly more than what the central bank aims for in 2024. This situation puts at risk the market's expectations for rate reductions by Brazil's central bank.​

Euro Rises Amid Rate Cut Cautions: ECB & Fed Update​


Solid ECN - The euro experienced a slight increase, going over $1.075, following a drop to a low of $1.072 on February 5th. This happened as the major central banks in Europe and the US took a careful stance on reducing interest rates. During a Financial Times interview on Wednesday, Isabel Schnabel, a member of the ECB's board, stressed the need for patience in deciding on changes to interest rates.

She pointed out the risk of inflation rising again as a concern. Additionally, ECB survey results showed that Eurozone consumers expect inflation to be at 3.2% over the next year as of December, the lowest expectation since February 2022. In the US, the anticipation for the Federal Reserve to lower interest rates soon diminished. This change in outlook was influenced by cautious remarks from Federal Reserve officials and the emergence of robust economic data.​

Pound Steady Amid UK, US Rate Cut Speculations​


Solid ECN - The British pound remained stable at $1.26, recovering from a seven-week low of $1.2515 on February 5th. This stability comes as investors recalibrated their expectations for imminent interest rate reductions in the UK and the US, prompted by careful comments from officials in both nations. Sarah Breeden, the Deputy Governor of the Bank of England, hinted at a new approach focusing more on maintaining the current interest rate levels instead of planning further hikes, suggesting the bank is not hurrying to lower rates.

Huw Pill, the chief economist, mentioned that no potential rate decrease is expected soon, highlighting that the decision to ease monetary policy will depend on timing. Additionally, recent RICS and Halifax data show the UK's housing market is strong. Earlier in the month, UK officials decided to keep interest rates at their highest in nearly 16 years, with hints that reductions might be considered later in the year.​

Euro Stability Amid ECB Rate Cut Speculation​


Solid ECN - The euro stayed near $1.077, avoiding a recent low of $1.072 from February 5th, as market expectations for early European Central Bank (ECB) rate reductions cooled. This shift followed cautious statements from several ECB officials about easing financial policies. The likelihood of an ECB rate cut in April dipped below 50% after key figures like Philip Lane, the chief economist, and Pierre Wunsch, the head of the Belgian central bank, stressed the importance of confirming that inflation is moving towards the 2% goal before slashing interest rates.

Moreover, ECB member Robert Holzmann mentioned the possibility of not cutting rates at all this year or the end. On another note, the US dollar strengthened from jobless solid claims data, suggesting the Federal Reserve might proceed cautiously with any policy changes.​

EU Gas Prices Drop to New Low Amid Warm Winter​

Solid ECN - Natural gas prices in Europe fell to a new low of €26 per megawatt-hour, marking the lowest point since July, after dropping 7.5% the week before. This decrease is due to warmer weather predictions, high levels of stored gas, and more gas being supplied by Norway. Also, as the cold season in Europe is ending, gas prices are dropping even further.

By February 10th, the European Union had 67% of its gas storage complete, with Germany at 73%, Italy at 61%, and France at 54%. Norway's gas deliveries to Europe and Britain increased following a temporary halt at the Nyhamna gas plant. Additionally, market watchers are paying attention to an upcoming vote in the US House of Representatives that might undo a pause on approving liquified natural gas (LNG) exports set by the Biden administration.​

UK Pound Stays Firm Amid Rate Cut Speculation​


Solid ECN - The British pound remained stable at $1.26, recovering from a seven-week low of $1.2515 on February 5th, after investors adjusted their early predictions for interest rate reductions in the UK and US. This change followed cautious comments from officials in both nations. Bank of England's Deputy Governor, Sarah Breeden, suggested that the bank is now more focused on how long to keep interest rates stable instead of lowering them. This indicates that the bank is not in a hurry to cut rates.

On the other hand, Chief Economist Huw Pill mentioned that any rate reduction might not happen soon, pointing out that deciding when to ease monetary policy is crucial and not guaranteed. Furthermore, recent economic reports from RICS and Halifax show that the UK's housing market continues to be strong. Earlier in the month, UK officials decided to keep interest rates at their highest in nearly 16 years, hinting at the possibility of a decrease later in the year.​

Aussie Dollar Low Amid RBA Rate Decision Speculation​


Solid ECN - The Australian dollar stayed around $0.65, close to its lowest point in twelve weeks, as market players considered the recent remarks from the central bank. Michele Bullock, the Governor of the Reserve Bank of Australia, mentioned that bringing inflation down to 2.5% isn't necessary to reduce the cash rate.

Yet, she also noted that the RBA hasn't dismissed the chance of raising interest rates further, nor has it confirmed such a move. Analysts at CBA have predicted a total of 75 basis points in rate cuts for this year, with more expected in 2025. This comes as the RBA kept interest rates unchanged during its February meeting but indicated that rates might still go up if inflation stays high. The central bank pointed out that inflation dropped more than anticipated in the last quarter of the year, yet it's still unclear when inflation will fall back into the desired range of 2-3%.​

NZ Dollar Drops Amid Rate Hike Speculation​


Solid ECN - The New Zealand dollar dropped to approximately $0.612, losing some of its recent gains as investors became wary before an upcoming speech by the central bank, which might impact future interest rate decisions. Adrian Orr, the Governor of the Reserve Bank of New Zealand, is set to speak on Friday. Last week, the Kiwi saw a 1.4% increase amid thoughts that interest rates might increase due to persistent inflation and a strong job market.

ANZ analysts predict the Reserve Bank of New Zealand will raise interest rates by a quarter point in February and April, bringing the policy rate to 6%. Investors also note a worldwide trend among major central banks to delay expected rate reductions, particularly in the US and Europe. According to traders, there's about a 44% probability that the RBNZ will hike rates on February 28.​

Oil Prices Steady at $77 Amid Global Tensions​


Solid ECN - WTI crude oil prices are stable at about $77 per barrel after rising 6.3% last week due to tensions between countries. Meetings in Beirut hinted at possible improvements in the Gaza situation, but the Houthi group in Yemen announced a new ship attack on the Red Sea, showing ongoing dangers. At the same time, Israel launched air attacks in Gaza's Rafah, rejecting a ceasefire offer from the previous week.

However, an ample supply of oil worldwide and doubts about demand, especially from China, have limited any further increase in oil prices.​

FTSE MIB Hits 14-Year High; Tod's Shares Surge​

On Monday, the FTSE MIB index increased by roughly 1%, reaching 31,456.7, a level it hasn't seen since May 2008, inspired by positive developments from Wall Street. Investors were mainly watching the quarterly earnings reports, especially from companies in the manufacturing sector, while also paying attention to the future direction of monetary policy as they awaited inflation figures from the US.

In Milan, the luxury shoe brand Tod's shares jumped 18% after the announcement that private equity firm L Catterton plans to purchase a 36% stake from the Della Valle family to take the company personally. Other notable gainers included Saipem (up by 5.9%), Telecom Italia (up by 2.9%), and Brunello Cucinelli (up by 2.8%). Conversely, Saras, an oil refining company, saw its shares fall almost 4% following the news that commodity trading giant Vitol intended to buy out the Moratti family's share and take the company private, with the share price falling below the offer price of 1.75 euros per share.​

US Inflation Rate Drops to 2.9% in January 2024​

Solid ECN - It's likely that the US's yearly inflation rate dropped to 2.9% in January 2024, marking the lowest rate since March 2021, after a short rise to 3.4% in December. Expectedly, the cost of consumer goods might increase by 0.2% from December, which aligns with the adjusted growth seen in the last two months.

Furthermore, the yearly rate of core inflation, which excludes food and energy prices, is predicted to decrease to 3.7%, the smallest since April 2021, down from 3.9% in December. The monthly core inflation rate is expected to stay constant at 0.3%. This comes as inflation continues to decrease from its peak of 9.1% in June 2022, the highest since the early 1980s.​

USDJPY Bullish Trend Continuation​


Solid ECN - The USDJPY pair is trading above the 23.6% Fibonacci level, around 149.54. The bulls have broken above the 148.8 resistance, signaling a continuation of the bullish trend. The Awesome Oscillator bar turned green in today's trading session, and the RSI indicator also signals bullishness by hovering above the 50 level. Therefore, it is likely that the USDJPY price will see further gains, with the next bullish target potentially being the 151.9 resistance.

The 38.2% Fibonacci level supports the above-mentioned scenario. If the USDJPY price falls below this level, the scenario should be invalidated accordingly.

This is a technical analysis perspective, and actual market conditions may vary. Always consider multiple factors when making trading decisions.​

EURUSD Technical Analysis: Bears Failed to Crosse the Cloud​


Solid ECN - The EURUSD currency pair is trading below the Ichimoku cloud, with the price at 1.076 at the time of writing. The bullish momentum that started from 1.072 could not extend beyond the 50% Fibonacci resistance level, the 1.0805 mark. Interestingly, the technical indicators are bearish, with the RSI indicator hovering below the 50 level, and the Awesome Oscillator bars are in red and on the verge of flipping below the signal level.
According to the technical data we receive from the EURUSD 4-hour chart, it is likely for the pair’s price to decline and return below the bearish flag. If this scenario comes into play, the first target could be the recent lower lows, the 1.07228.

Conversely, suppose the bulls stabilize the price above the 50% Fibonacci. In that case, the bearish scenario should be invalidated, and the EURUSD price could climb to %78.6, in conjunction with the upper line of the bearish channel.

This is a technical analysis perspective, and actual market conditions may vary. Always consider multiple factors when making trading decisions.​