US Stocks Smashed After Hawkish Fed Cut – Nasdaq Down 3.5%

It was a sea of red on Wall Street today as the Federal Reserve delivered a more hawkish rate cut than expected. While the Fed reduced rates by 25 basis points, adjustments to the dot plot and accompanying statements now indicate only two cuts in 2025, down from the previously anticipated three. The markets have reacted sharply. US stock indices were hit hard, with the Dow falling 2.58%, the S&P dropping 2.95%, and the Nasdaq closing 3.56% lower.

The US dollar surged following the Fed’s announcement, with the DXY index gaining over 1% on the day. Treasury yields also climbed to multi-week highs, with the 2-year yield rising by 10.4 basis points to 4.348% and the benchmark 10-year increasing by 11.3 basis points to 4.512%.

Oil prices were relatively stable, with weaker US inventories offsetting the Fed’s hawkish tone. Brent crude slipped 0.36% to $72.93, and WTI fell 0.11% to $70.03. In contrast, gold prices plummeted in response to the stronger dollar, with the precious metal closing the New York session down 2.25% at $2,587.44 an ounce.

Greenback Surges Higher After Hawkish Fed

The US dollar surged across the board in the wake of the Fed’s 25-basis point rate cut, which came with a distinctly hawkish tilt. The DXY index is up more than 1% on the day, trading at levels not seen since November 2022. Major currencies are approaching or breaking into new ranges, with the AUD, CAD, CHF, and NZD already trading at annual lows against the dollar.

In the coming sessions, traders will closely monitor the euro and pound sterling, both of which are at key technical levels. Breaks at these levels during the Asian market open could trigger even stronger moves in subsequent sessions.

More Central Banks in Focus Today

The market remains on edge following the Federal Reserve’s announcement and is now gearing up for a busy day ahead, with further central bank updates likely to sustain elevated volatility.

The Asian session begins with New Zealand GDP figures released early in the day, followed by the Bank of Japan’s key rate decision. The BOJ is widely expected to hold rates steady, but any shift in guidance could prompt sharp market movements.

Attention will then turn to the UK as the Bank of England announces its Official Bank Rate midway through the London session. While no change in rates is anticipated, sterling is expected to remain volatile around the announcement.

Later in the New York session, US data releases—including Final GDP, weekly unemployment claims, and the Philly Fed Manufacturing Index—are scheduled. However, the impact of the Federal Reserve’s hawkish stance is expected to dominate market sentiment throughout the day.

The post General Market Analysis – 19/12/24 first appeared on IC Markets | Official Blog.

Global Markets:

•  Asian Stock Markets : Nikkei down 0.07%, Shanghai Composite down 0.51%, Hang Seng down 0.20% ASX up 0.78%
• Commodities : Gold at $2668.35 (-0.04%), Silver at $30.84 (-0.38%), Brent Oil at $74.09 (-0.16%), WTI Oil at $70.4 (-0.39%)
• Rates : US 10-year yield at 4.401, UK 10-year yield at 4.4400, Germany 10-year yield at 2.2430

News & Data:

• (USD) Core Retail Sales m/mI 0.2% vs 0.4% expected
• (USD) Retail Sales m/m 0.7% vs 0.6% expected
• (CAD) CPI m/m 0.0% vs 0.1% expected
• (CAD) Median CPI y/y 2.6% vs 2.4% expected
• (CAD) Trimmed CPI y/y 2.7% vs 2.6% expected

Markets Update:

Asia-Pacific markets were mixed on Wednesday, following Wall Street losses and ahead of the Federal Reserve’s rate decision. Investors in Asia also reviewed Japan’s latest trade data before the Bank of Japan’s rate decision later this week.

Japan’s exports increased 3.8% year-on-year in November, surpassing the expected 2.8% growth, while imports fell 3.8%, much more than the anticipated 1% rise. As a result, Japan posted a trade deficit of ¥117.6 billion ($765.2 million), larger than the expected deficit of ¥688.9 billion. Japan’s Nikkei 225 index dropped 0.4%, and the Topix was down 0.05%.

South Korea’s Kospi rose by 1%, though the Kosdaq was down 0.3%. In Australia, the S&P/ASX 200 dipped 0.06%, closing at 8,309.4. Meanwhile, Hong Kong’s Hang Seng index gained 0.6%, and mainland China’s CSI 300 was up 0.5%.

Markets are also awaiting a rate decision from the People’s Bank of China on Friday, as the country’s loan prime rates (LPR) guide both corporate and household lending.

In the U.S., trading on Tuesday saw the Dow Jones Industrial Average fall for the ninth consecutive day, its longest losing streak since 1978, dropping 267.58 points, or 0.61%. The S&P 500 lost 0.39%, and the Nasdaq Composite dropped 0.32%. This decline follows a shift into technology stocks, as the broader market remains strong with the S&P 500 and Nasdaq hitting recent record highs.

Upcoming Events: 

• 01:30 PM GMT – USD Building Permits
• 01:30 PM GMT – USD Housing Starts
• 01:30 PM GMT – USD Current Acount
• 07:00 PM GMT – USD Federal Funds Rate

The post Wednesday 18th December 2024: Asia-Pacific Markets Mixed as Investors Eye Fed and BOJ Rate Decisions first appeared on IC Markets | Official Blog.

IC Markets Asia Fundamental Forecast | 18 December 2024

What happened in the Asia session?

It was a fairly quiet session as markets await the highly anticipated outcome of the final FOMC meeting of this year – the dollar index (DXY) drifted around 106.90 while spot prices for gold floated above $2,640/oz. Meanwhile, WTI oil rose steadily off Tuesday’s lows but failed to climb above the $70-mark. Trading activity is bound to pick up in a meaningful way as the day progresses.

What does it mean for the Europe & US sessions?

Inflationary pressures in the U.K. have dissipated for most parts of 2024 but prices accelerated in October with headline and core CPI increasing at an annual rate of 2.3% and 3.3% respectively. The forecast for November points to a second successive month of acceleration for both headline and core CPI and should prices rise higher than originally anticipated, the pound is likely to see strong tailwinds before the start of the European trading hours.

Price pressures in the Euro Area have dissipated significantly throughout 2024 with headline CPI easing to an annual rate of 1.7% in September while the core moderated to 2.7%. However, headline CPI has accelerated for two consecutive months since September as it jumped to 2.3% in November while the core remained unchanged at 2.7%, based on preliminary estimates. The final inflation reading for November is expected to show unchanged figures and could provide a near-term relief for the Euro which has seen intense selling pressures drive it under 1.0500 once again.

The Dollar Index (DXY)

Key news events today

FOMC Statement (7:00 pm GMT)

FOMC Press Conference (7:30 pm GMT)

What can we expect from DXY today?

The final FOMC meeting of this year concludes on Wednesday where the Federal Reserve is likely to announce a third successive rate cut with analysts expecting a 25-basis point reduction. However, the dollar remains strong as consumer and producer inflation have both accelerated over the last couple of months raising concerns that the battle against inflation is far from over. Traders will be looking to Fed Chairman Jerome Powell’s press conference for further insights on the outlook of future monetary policy action with market participants anticipating a ‘hawkish’ cut by the Fed. The greenback is all but certain to experience intense volatility at the release of the statement and also during the press conference.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to lower the Federal Funds Rate target range by 25 basis points to 4.50% to 4.75% on 7th November.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals are roughly in balance.
• The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while labour market conditions have generally eased, and the unemployment rate has moved up but remains low.
• Inflation has made further progress toward the Committee’s 2% objective but remains somewhat elevated.
• In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in June, the Committee slowed the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.
• The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.
• The next meeting runs from 17 to 18 December 2024.

Next 24 Hours Bias

Weak Bearish

Gold (XAU)

Key news events today

FOMC Statement (7:00 pm GMT)

FOMC Press Conference (7:30 pm GMT)

What can we expect from Gold today?

The final FOMC meeting of this year concludes on Wednesday where the Federal Reserve is likely to announce a third successive rate cut with analysts expecting a 25-basis point reduction. However, the dollar remains strong as consumer and producer inflation have both accelerated over the last couple of months raising concerns that the battle against inflation is far from over. Traders will be looking to Fed Chairman Jerome Powell’s press conference for further insights on the outlook of future monetary policy action with market participants anticipating a ‘hawkish’ cut by the Fed. This precious metal will no doubt face extreme volatility at the release of the statement and also during the press conference.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie extended its downward slide as it fell 0.5% on Tuesday. This currency pair remains under pressure and was drifting towards 0.6320 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.6300

Resistance: 0.6380

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35% on 10th December, marking the ninth consecutive pause.
• Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. However, measures of underlying inflation are around 3.5%, which is still some way from the 2.5% midpoint of the inflation target.
• The most recent forecasts published in the November Statement on Monetary Policy (SMP) do not see inflation returning sustainably to the midpoint of the target until 2026 but the Board is gaining some confidence that inflationary pressures are declining in line with these recent forecasts with risks remaining in place.
• Growth in output has been weak as the economy grew by only 0.8% in the September quarter over the past year. Outside of the COVID-19 pandemic, this was the slowest pace of growth since the early 1990s.
• A range of indicators suggest that labour market conditions remain tight; while those conditions have been easing gradually, some indicators have recently stabilised. The unemployment rate was 4.1 per cent in October, up from 3.5 per cent in late 2022.
• Wage pressures have eased more than expected in the November SMP. The rate of wages growth as measured by the Wage Price Index was 3.5% over the year to the September quarter, a step down from the previous quarter, but labour productivity growth remains weak.
• Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment. To date, longer term inflation expectations have been consistent with the inflation target and it is important that this remains the case.
• The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions, paying close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
• The next meeting is on 18 February 2025.

Next 24 Hours Bias

Weak Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

Just like its Pacific neighbour, the Kiwi continued to its free-fall as it declined nearly 0.55% overnight. This currency pair stabilized around 0.5740 at the beginning of the Asia session but overhead pressures remain firmly in place – these are the support and resistance levels for today.

Support: 0.5740

Resistance: 0.5810

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 4.25% on 27 November, marking the third consecutive rate cut.
• The Committee assessed that annual consumer price inflation has declined and is now close to the midpoint of the MPC’s 1 to 3% target band; inflation expectations are also close to target and core inflation is converging to the midpoint.
• Economic activity remains subdued and output continues to be below its potential. With excess productive capacity in the economy, inflation pressures have eased. If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year.
• Domestic economic activity remains below trend, as a result of weakness in demand for durable goods consumption and investment. This has been reflected in falling activity in interest rate sensitive sectors such as construction, manufacturing, and retail trade. In contrast, some services sectors have continued to grow.
• Consistent with feedback from business visits, high frequency indicators suggest that the economy has stabilised in recent months. Economic growth is expected to recover from the December quarter, in part due to lower interest rates, but there is uncertainty around the exact timing and speed of the recovery.
• Wage growth is slowing, consistent with inflation returning to the target midpoint while employment levels and job vacancies have declined, reflecting subdued economic activity; unemployment is expected to continue rising in the near term.
• Expectations of future inflation, the pricing intentions of firms, and spare productive capacity are consistent with the inflation target being sustainably achieved, providing the context and the confidence for the Committee to further ease monetary policy restraint.
• The next meeting is on 19 February 2025.

Next 24 Hours Bias

Weak Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

After rising for six straight trading days, USD/JPY suffered its first down day as it eased nearly 0.6%, shedding almost 60 pips in the process. This currency pair found its footing around 153.50 as Asian markets came online with continued yen weakness keeping this pair elevated – these are the support and resistance levels for today.

Support: 152.00

Resistance: 154.60

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 31st October, by a unanimous vote, to set the following guideline for money market operations for the intermeeting period:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.25%.
  2. The Bank will embark on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
• The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is likely to be at around 2.5% for fiscal 2024 and then be at around 2% for fiscal 2025 and 2026.
• While the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices are expected to wane, underlying CPI inflation is expected to increase gradually, since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify.
• Comparing the projections with those presented in the previous Outlook for Economic Activity and Prices (Outlook Report), the projected real GDP growth rates are more or less unchanged. The projected year-on-year rate of increase in the CPI (all items less fresh food) for fiscal 2025 is somewhat lower due to factors such as the recent decline in crude oil and other resource prices.
• Japan’s economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• The next meeting is on 19 December 2024.

Next 24 Hours Bias

Medium Bullish

The Euro (EUR)

Key news events today

CPI (10:00 am GMT)

What can we expect from EUR today?

Inflationary pressures in the Euro Area have dissipated significantly throughout 2024 with headline CPI easing to an annual rate of 1.7% in September while the core moderated to 2.7%. However, headline CPI has accelerated for two consecutive months since September as it jumped to 2.3% in November while the core remained unchanged at 2.7%, based on preliminary estimates. The final inflation reading for November is expected to show unchanged figures and could provide a near-term relief for the Euro which has seen intense selling pressures drive it under 1.0500 once again.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 12 December to mark the third successive rate cut.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 3.15%, 3.40% and 3.00% respectively.
• The disinflation process is well on track and most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis.
• Staff see headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded EU Emissions Trading System becomes operational. For inflation excluding energy and food, staff project an average of 2.9% in 2024, 2.3% in 2025 and 1.9% in both 2026 and 2027.
• Staff now expect a slower economic recovery than in the September projections. Although growth picked up in the third quarter of this year, survey indicators suggest it has slowed in the current quarter – the economy is expected to grow by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027
• The Eurosystem no longer reinvests all of the principal payments from maturing securities purchased under the pandemic emergency purchase programme (PEPP), reducing the PEPP portfolio by €7.5 billion per month on average and the Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024.
• The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises sustainably at its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission.
• The next meeting is on 30 January 2025.

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Ongoing weakness in the franc caused USD/CHF to initially surge towards 0.8974 before pulling back towards 0.8920 on Tuesday. This currency pair was hovering around 0.8930 at the beginning of the Asia session but it should remain elevated as the day progresses – these are the support and resistance levels for today.

Support: 0.8880

Resistance: 0.8975

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 50 basis points, going from 1.00% to 0.50% on 12 December, marking for the fourth consecutive reduction.
• Underlying inflationary pressure has decreased again this quarter.
• Inflation in the period since the last monetary policy assessment has again been lower than expected as it decreased from 1.1% in August to 0.7% in November; both goods and services contributed to this decline.
• In the shorter term, the new conditional inflation forecast is below that of September: 1.1% for 2024, 0.3% for 2025 and 0.8% for 2026, based on the assumption that the SNB policy rate is 0.5% over the entire forecast horizon.
• GDP growth in Switzerland was only modest in the third quarter of 2024 with growth in the services sector was again somewhat stronger, while value added in manufacturing declined.
• There was a further slight increase in unemployment, and employment growth was subdued while the utilisation of overall production capacity was
• normal.
• The SNB anticipates GDP growth of around 1% this year while currently expecting growth of between 1.0% and 1.5% for 2025.
• The SNB will continue to monitor the situation closely, and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 20 March 2025.

Next 24 Hours Bias

Weak Bearish

The Pound (GBP)

Key news events today

CPI (7:00 am GMT)

What can we expect from GBP today?

Inflationary pressures in the U.K. have dissipated for most parts of 2024 but prices accelerated in October with headline and core CPI increasing at an annual rate of 2.3% and 3.3% respectively. The forecast for November points to a second successive month of acceleration for both headline and core CPI and should prices rise higher than originally anticipated, the pound is likely to see strong tailwinds before the start of the European trading hours.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 8 to 1 to reduce the Bank Rate by 25 basis points, to 4.75% on 7 November 2024 – one member preferred to maintain the Bank rate at 5.0%.
• The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes, and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024.
• Twelve-month CPI inflation fell to 1.7% in September but is expected to increase to around 2.5% by the end of the year as weakness in energy prices falls out of the annual comparison; services consumer price inflation has declined to 4.9%.
• CPI inflation is expected to increase to around 2.75% by the second half of 2025 as weakness in energy prices falls out of the annual comparison, revealing more clearly the continuing persistence of domestic inflationary pressures.
• The MPC’s latest projections for activity and inflation are also set out in the accompanying November Report; this forecast is based on the second case where CPI inflation is projected to fall back to around the 2% target in the medium term as a margin of slack emerges later in the forecast period that acts against second-round effects in domestic prices and wages.
• GDP had grown by 0.5% in 2024 Q2, 0.2% weaker than had been expected in the August Report, and 0.1% weaker than the earlier outturn had indicated at the time of the MPC’s previous meeting. Through the second half of 2024, GDP was projected to grow at a somewhat slower rate than in Q2 – headline GDP growth is expected to fall back to its recent underlying pace of around 0.25% per quarter over the second half of this year.
• The combined effects of the measures announced in Autumn Budget 2024 are provisionally expected to boost the level of GDP by around 0.75% at their peak in a year’s time, relative to the August projections, while the Budget is provisionally expected to boost CPI inflation by just under 0.5% at the peak.
• Annual private sector regular average weekly earnings growth has continued to fall but remained elevated at 4.8% in the three months to August; the MPC judges that the labour market continues to loosen, although it appears relatively tight by historical standards.
• Based on the evolving evidence, a gradual approach to removing policy restraint remains appropriate but monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further.
• The Committee continues to monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 19 December 2024.

Next 24 Hours Bias

Weak Bullish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

After easing steadily throughout most parts of this year, consumer inflation in Canada remained sticky in November as median- and trimmed-CPI printed higher than their respective forecasts on Tuesday. The Loonie strengthened briefly as USD/CAD pulled back towards 1.4250 but the move was short-lived. This currency pair rebounded strongly as it surged past 1.4300 to hit an overnight high of 1.4323 – these are the support and resistance levels for today.

Support: 1.4180

Resistance: 1.4340

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 50 basis points bringing it down to 3.25% while continuing its policy of balance sheet normalization on 11 December; this marked the fifth consecutive meeting where rates were reduced.
• Canada’s economy grew by 1% in the third quarter, somewhat below the Bank’s October projection, and the fourth quarter also looks weaker than projected. Third-quarter GDP growth was pulled down by business investment, inventories and exports.
• The unemployment rate rose to 6.8% in November as employment continued to grow more slowly than the labour force while wage growth showed some signs of easing, but remains elevated relative to productivity.
• Headline CPI has declined significantly from 2.7% in June to 1.6% in September while shelter costs inflation remains elevated but has begun to ease; the preferred measures of core inflation are now below 2.5%.
• CPI inflation has been about 2% since the summer, and is expected to average close to the 2% target over the next couple of years. Since October, the upward pressure on inflation from shelter and the downward pressure from goods prices have both moderated as expected.
• Looking ahead, the GST holiday will temporarily lower inflation but that will be unwound once the GST break ends. In addition, the possibility the incoming US administration will impose new tariffs on Canadian exports to the United States has increased uncertainty and clouded the economic outlook
• With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, the Governing Council decided to reduce the policy rate by a further 50 basis points to support growth and keep inflation close to the middle of the 1-3% target range.
• The Governing Council has reduced the policy rate substantially since June and going forward, they will be evaluating the need for further reductions in the policy rate one decision at a time.
• The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
• The next meeting is on 29 January 2025.

Next 24 Hours Bias

Weak Bearish

Oil

Key news events today

EIA Crude Oil Inventories (3:30 pm GMT)

What can we expect from Oil today?

Crude oil prices extended its downward slide as WTI oil initially plunged nearly 2% on Tuesday. However, this benchmark reversed sharply to climb towards $70 after falling as low as $68.80 per barrel. Following which, the API stockpiles reported a larger-than-expected decline in weekly inventories as 4.7M barrels of crude were drawn from storage, notably higher than the forecast of a 1.9M-drawdown. Should the EIA inventories also register a higher-than-anticipated draw, these latest inventory data points could provide a near-term floor for crude prices.

Next 24 Hours Bias

Weak Bearish

The post IC Markets Europe Fundamental Forecast | 18 December 2024 first appeared on IC Markets | Official Blog.

DXY (US Dollar Index):

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could potentially make a bearish continuation toward the 1st support

Pivot: 107.06

Supporting reasons: Identified as an overlap resistance close to the 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 106.12
Supporting reasons: Identified as a pullback support close to the 61.8% Fibonacci retracement, indicating a potential level where price could find support once more.

1st resistance: 108.07
Supporting reasons: Identified as a swing-high resistance, indicating a potential area that could halt any further upward movement.

EUR/USD:

Potential Direction: Bearish

Overall momentum of the chart: Bearish

Price could potentially make a bearish reaction off the pivot and drop toward the 1st support 

Pivot: 1.0536
Supporting reasons: Identified as an overlap resistance that aligns with the 50% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 1.0432

Supporting reasons: Identified as an overlap support close to 61.8% Fibonacci retracement, indicating a potential level where price could find support once more.

1st resistance: 1.0614
Supporting reasons:  Identified as an overlap resistance close to the 50% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

EUR/JPY:

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could potentially make a bearish continuation toward the 1st support 

Pivot: 162.38
Supporting reasons: Identified as an overlap resistance close to the 78.6% Fibonacci projection, indicating a potential area where selling pressures could intensify.

1st support: 160.35

Supporting reasons: Identified as a pullback support, indicating a potential level where price could find support once more.

1st resistance: 164.88
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

EUR/GBP:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could potentially make a bullish breakout the pivot and rise toward the 1st resistance

Pivot: 0.8268
Supporting reasons: Identified as a potential breakout point, indicating a potential area where buying momentum pressures could intensify.

1st support: 0.8224

Supporting reasons:  Identified as a swing low support, indicating a potential level where price could find support once more.

1st resistance: 0.8336
Supporting reasons: Identified as an overlap resistance that aligns with the 78.6% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

GBP/USD:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could potentially make a bullish continuation towards the 1st resistance.

Pivot: 1.2604

Supporting reasons: Identified as an overlap support that aligns with the 61.8% Fibonacci retracement, indicating a potential area where buying interests could pick up to resume the uptrend.

1st support: 1.2502

Supporting reasons: Identified as a swing low support, indicating a potential level where price could find support once more.

1st resistance: 1.2798
Supporting reasons: Identified as an overlap resistance close to the 61.8 Fibonacci retracement, indicating a potential area that could halt any further upward movement.

GBP/JPY:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price could potentially make a bearish continuation toward the 1st support 

Pivot: 195.84
Supporting reasons: Identified as a pullback resistance close to the 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 192.44
Supporting reasons: Identified as an overlap support, indicating a key level where price could find support once more.

1st resistance: 198.21
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

USD/CHF:

Potential Direction: Bullish

Overall momentum of the chart: Bullish

Price could potentially make a bullish bounce the pivot and rise toward the 1st resistance

Pivot: 0.8879
Supporting reasons: Identified as a pullback support close to the 38.2% Fibonacci retracement, indicating a potential area where buying pressures could intensify.

1st support: 0.8803

Supporting reasons: Identified as a pullback support close to the 61.8% Fibonacci retracement, indicating a potential level where price could find support once more.

1st resistance: 0.8974
Supporting reasons: Identified a swing high resistance, indicating a potential area that could halt any further upward movement.

USD/JPY:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price could potentially make a bearish continuation toward the 1st support 

Pivot: 154.45
Supporting reasons: Identified as a pullback resistance close to the 78.6% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 152.43
Supporting reasons: Identified as a pullback support close to the 38.2% Fibonacci retracement, indicating a potential level where price could find support once again.

1st resistance: 156.57
Supporting reasons: Identified as a swing high resistance, indicating a potential area that could halt any further upward movement.

USD/CAD:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price is rising towards the pivot and could potentially make a bearish reversal off this level to pull back towards the 1st support.

Pivot: 1.4336

Supporting reasons: Identified as an overlap resistance, indicating a potential level where selling pressures could intensify.

1st support: 1.4178
Supporting reasons: Identified as an overlap support that aligns close to a 23.6% Fibonacci retracement, indicating a key level where price could find support.

1st resistance: 1.4507
Supporting reasons: Identified as a multi-swing-high resistance, indicating a potential area that could halt any further upward movement.

AUD/USD:

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price has made a bearish reversal off the pivot and could potentially fall towards the 1st support.

Pivot: 0.6346

Supporting reasons: Identified as an overlap resistance, suggesting a key area where selling pressures have intensified.

1st support: 0.6285
Supporting reasons: Identified as a multi-swing-low support, suggesting a potential area where price could find support once more.

1st resistance: 0.6381
Supporting reasons: Identified as an overlap resistance close to a 23.6% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

NZD/USD

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price has made a bearish reversal off the pivot and could potentially fall towards the 1st support.

Pivot: 0.5756

Supporting reasons: Identified as a pullback resistance, indicating a key area where selling pressures have intensified.

1st support: 0.5727
Supporting reasons: Identified as a support that aligns with a 161.8% Fibonacci extension, suggesting a key support area where price could find support.

1st resistance: 0.5781
Supporting reasons: Identified as a swing-high resistance that aligns with a 23.6% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

US30 (DJIA):

Potential Direction: Bullish
Overall momentum of the chart: Bearish

Price has made a bullish bounce off the pivot and could potentially rise towards the 1st resistance.

Pivot: 43,493.60

Supporting reasons: Identified as a pullback support, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 43,059.45

Supporting reasons: Identified as a swing-low support, indicating a potential level where price could find support once again.

1st resistance: 43,828.07

Supporting reasons: Identified as an overlap resistance that aligns close to a 23.6% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

DE40 (DAX):

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price is trading close to the pivot and could potentially make a bearish break through this level to fall towards the 1st support.

Pivot: 20,202.28
Supporting reasons: Identified as a potential breakout level where selling pressures could intensify.

1st support: 19,902.14

Supporting reasons: Identified as a pullback support that aligns close to a 38.2% Fibonacci retracement, indicating a key level where price could find support.

1st resistance: 20,400.90
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

US500 (S&P 500): 

Potential Direction: Bearish
Overall momentum of the chart: Neutral

Price could rise towards the pivot and potentially make a bearish reversal off this level to pull back towards the 1st support.

Pivot: 6,099.30

Supporting reasons: Identified as a swing-high resistance that aligns with the all-time high, indicating a potential area where selling pressures could intensify.

1st support: 6,026.60

Supporting reasons: Identified as an overlap support that aligns close to a 23.6% Fibonacci retracement, indicating a potential level where price could find support once more.

1st resistance: 6,147.73
Supporting reasons: Identified as a resistance that aligns with a 161.8% Fibonacci extension, indicating a potential area that could halt any further upward movement.

BTC/USD (Bitcoin):

Potential Direction: Bullish
Overall momentum of the chart: Bullish

Price is falling towards the pivot and could potentially make a bullish bounce off this level to rise towards the 1st resistance.

Pivot: 102,886.76

Supporting reasons: Identified as an overlap support that aligns with a 38.2% Fibonacci retracement, indicating a potential area where buying interests could pick up to resume the uptrend.

1st support: 99,345.84
Supporting reasons: Identified as an overlap support that aligns with a 61.8% Fibonacci retracement, indicating a potential level where price could find support once again.

1st resistance:  107,849.06
Supporting reasons: Identified as a swing-high resistance that aligns close to the all-time high, indicating a potential area that could halt any further upward movement.

ETH/USD (Ethereum):

Potential Direction: Bullish
Overall momentum of the chart: Bullish

Price is falling towards the pivot and could potentially make a bullish bounce off this level to rise towards the 1st resistance.

Pivot: 3,760.69

Supporting reasons: Identified as an overlap support that aligns close to a 50% Fibonacci retracement, indicating a potential area where buying interests could pick up to stage a rebound.

1st support: 3,501.55
Supporting reasons: Identified as an overlap support, indicating a potential level where price could find support once more.

1st resistance: 4,046.02
Supporting reasons:  Identified as a multi-swing-high resistance, indicating a potential area that could halt any further upward movement.

WTI/USD (Oil):

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price is rising towards the pivot and could potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 70.46
Supporting reasons: Identified as an overlap resistance that aligns close to a 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 69.13
Supporting reasons: Identified as an overlap support that aligns close to a 50% Fibonacci retracement, indicating a key level where price could find support once again.

1st resistance: 71.48
Supporting reasons: Identified as a multi-swing-high resistance that aligns close to a 127.2% Fibonacci extension, indicating a potential area that could halt any further upward movement.

XAU/USD (GOLD):

Potential Direction: Bearish

Overall momentum of the chart: Bearish

Price could potentially make a bearish continuation toward the 1st support

Pivot: 2666.19
Supporting reasons: Identified as a pullback resistance, indicating a potential area where selling pressures could intensify.

1st support: 2613.44

Supporting reasons: Identified as an overlap support, indicating a potential level where price could find support.

1st resistance: 2720.46

Supporting reasons: Identified as a swing high resistance, indicating a potential area that could halt any further upward movement.

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The post Wednesday 18th December 2024: Technical Outlook and Review first appeared on IC Markets | Official Blog.

IC Markets Asia Fundamental Forecast | 18 December 2024

What happened in the U.S. session?

Consumer spending in the U.S. increased for the third consecutive month as sales jumped 0.7% MoM in November, edging past the estimate of 0.6%. In addition, October’s sales figures were revised higher from 0.4% to 0.5%. The latest data points to robust consumer spending during the holiday shopping season with the largest gains recorded in categories such as motor vehicles and part dealers; non-store retailers; and sporting goods, hobby, musical instrument, and bookstores. Despite stronger-than-anticipated retail sales, the dollar index (DXY) edged lower from 106.95 to a session low of 106.75 before reversing to recover all the initial losses as it hit the 107-level.

What does it mean for the Asia Session?

As Asian markets digest the U.S. sales figures, the DXY was hovering around 107 while spot prices for gold were drifting lower towards $2,630/oz extending the downward slide from last Thursday. Crude oil prices briefly dipped under $69 per barrel overnight before recovering to climb steadily towards the $70-mark. This commodity has faced strong headwinds since the beginning of the week as it shed more than 3.5% at its lowest point so far.

The Dollar Index (DXY)

Key news events today

FOMC Statement (7:00 pm GMT)

FOMC Press Conference (7:30 pm GMT)

What can we expect from DXY today?

The final FOMC meeting of this year concludes on Wednesday where the Federal Reserve is likely to announce a third successive rate cut with analysts expecting a 25-basis point reduction. However, the dollar remains strong as consumer and producer inflation have both accelerated over the last couple of months raising concerns that the battle against inflation is far from over. Traders will be looking to Fed Chairman Jerome Powell’s press conference for further insights on the outlook of future monetary policy action with market participants anticipating a ‘hawkish’ cut by the Fed. The greenback is all but certain to experience intense volatility at the release of the statement and also during the press conference.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to lower the Federal Funds Rate target range by 25 basis points to 4.50% to 4.75% on 7th November.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals are roughly in balance.
• The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while labour market conditions have generally eased, and the unemployment rate has moved up but remains low.
• Inflation has made further progress toward the Committee’s 2% objective but remains somewhat elevated.
• In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in June, the Committee slowed the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.
• The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.
• The next meeting runs from 17 to 18 December 2024.

Next 24 Hours Bias

Weak Bearish

Gold (XAU)

Key news events today

FOMC Statement (7:00 pm GMT)

FOMC Press Conference (7:30 pm GMT)

What can we expect from Gold today?

The final FOMC meeting of this year concludes on Wednesday where the Federal Reserve is likely to announce a third successive rate cut with analysts expecting a 25-basis point reduction. However, the dollar remains strong as consumer and producer inflation have both accelerated over the last couple of months raising concerns that the battle against inflation is far from over. Traders will be looking to Fed Chairman Jerome Powell’s press conference for further insights on the outlook of future monetary policy action with market participants anticipating a ‘hawkish’ cut by the Fed. This precious metal will no doubt face extreme volatility at the release of the statement and also during the press conference.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie extended its downward slide as it fell 0.5% on Tuesday. This currency pair remains under pressure and was drifting towards 0.6320 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.6300

Resistance: 0.6380

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35% on 10th December, marking the ninth consecutive pause.
• Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. However, measures of underlying inflation are around 3.5%, which is still some way from the 2.5% midpoint of the inflation target.
• The most recent forecasts published in the November Statement on Monetary Policy (SMP) do not see inflation returning sustainably to the midpoint of the target until 2026 but the Board is gaining some confidence that inflationary pressures are declining in line with these recent forecasts with risks remaining in place.
• Growth in output has been weak as the economy grew by only 0.8% in the September quarter over the past year. Outside of the COVID-19 pandemic, this was the slowest pace of growth since the early 1990s.
• A range of indicators suggest that labour market conditions remain tight; while those conditions have been easing gradually, some indicators have recently stabilised. The unemployment rate was 4.1 per cent in October, up from 3.5 per cent in late 2022.
• Wage pressures have eased more than expected in the November SMP. The rate of wages growth as measured by the Wage Price Index was 3.5% over the year to the September quarter, a step down from the previous quarter, but labour productivity growth remains weak.
• Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment. To date, longer term inflation expectations have been consistent with the inflation target and it is important that this remains the case.
• The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions, paying close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
• The next meeting is on 18 February 2025.

Next 24 Hours Bias

Weak Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

Just like its Pacific neighbour, the Kiwi continued to its free-fall as it declined nearly 0.55% overnight. This currency pair stabilized around 0.5740 at the beginning of the Asia session but overhead pressures remain firmly in place – these are the support and resistance levels for today.

Support: 0.5740

Resistance: 0.5810

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 4.25% on 27 November, marking the third consecutive rate cut.
• The Committee assessed that annual consumer price inflation has declined and is now close to the midpoint of the MPC’s 1 to 3% target band; inflation expectations are also close to target and core inflation is converging to the midpoint.
• Economic activity remains subdued and output continues to be below its potential. With excess productive capacity in the economy, inflation pressures have eased. If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year.
• Domestic economic activity remains below trend, as a result of weakness in demand for durable goods consumption and investment. This has been reflected in falling activity in interest rate sensitive sectors such as construction, manufacturing, and retail trade. In contrast, some services sectors have continued to grow.
• Consistent with feedback from business visits, high frequency indicators suggest that the economy has stabilised in recent months. Economic growth is expected to recover from the December quarter, in part due to lower interest rates, but there is uncertainty around the exact timing and speed of the recovery.
• Wage growth is slowing, consistent with inflation returning to the target midpoint while employment levels and job vacancies have declined, reflecting subdued economic activity; unemployment is expected to continue rising in the near term.
• Expectations of future inflation, the pricing intentions of firms, and spare productive capacity are consistent with the inflation target being sustainably achieved, providing the context and the confidence for the Committee to further ease monetary policy restraint.
• The next meeting is on 19 February 2025.

Next 24 Hours Bias

Weak Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

After rising for six straight trading days, USD/JPY suffered its first down day as it eased nearly 0.6%, shedding almost 60 pips in the process. This currency pair found its footing around 153.50 as Asian markets came online with continued yen weakness keeping this pair elevated – these are the support and resistance levels for today.

Support: 152.00

Resistance: 154.60

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 31st October, by a unanimous vote, to set the following guideline for money market operations for the intermeeting period:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.25%.
  2. The Bank will embark on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
• The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is likely to be at around 2.5% for fiscal 2024 and then be at around 2% for fiscal 2025 and 2026.
• While the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices are expected to wane, underlying CPI inflation is expected to increase gradually, since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify.
• Comparing the projections with those presented in the previous Outlook for Economic Activity and Prices (Outlook Report), the projected real GDP growth rates are more or less unchanged. The projected year-on-year rate of increase in the CPI (all items less fresh food) for fiscal 2025 is somewhat lower due to factors such as the recent decline in crude oil and other resource prices.
• Japan’s economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• The next meeting is on 19 December 2024.

Next 24 Hours Bias

Medium Bullish

The Euro (EUR)

Key news events today

CPI (10:00 am GMT)

What can we expect from EUR today?

Inflationary pressures in the Euro Area have dissipated significantly throughout 2024 with headline CPI easing to an annual rate of 1.7% in September while the core moderated to 2.7%. However, headline CPI has accelerated for two consecutive months since September as it jumped to 2.3% in November while the core remained unchanged at 2.7%, based on preliminary estimates. The final inflation reading for November is expected to show unchanged figures and could provide a near-term relief for the Euro which has seen intense selling pressures drive it under 1.0500 once again.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 12 December to mark the third successive rate cut.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 3.15%, 3.40% and 3.00% respectively.
• The disinflation process is well on track and most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis.
• Staff see headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded EU Emissions Trading System becomes operational. For inflation excluding energy and food, staff project an average of 2.9% in 2024, 2.3% in 2025 and 1.9% in both 2026 and 2027.
• Staff now expect a slower economic recovery than in the September projections. Although growth picked up in the third quarter of this year, survey indicators suggest it has slowed in the current quarter – the economy is expected to grow by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027
• The Eurosystem no longer reinvests all of the principal payments from maturing securities purchased under the pandemic emergency purchase programme (PEPP), reducing the PEPP portfolio by €7.5 billion per month on average and the Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024.
• The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises sustainably at its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission.
• The next meeting is on 30 January 2025.

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Ongoing weakness in the franc caused USD/CHF to initially surge towards 0.8974 before pulling back towards 0.8920 on Tuesday. This currency pair was hovering around 0.8930 at the beginning of the Asia session but it should remain elevated as the day progresses – these are the support and resistance levels for today.

Support: 0.8880

Resistance: 0.8975

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 50 basis points, going from 1.00% to 0.50% on 12 December, marking for the fourth consecutive reduction.
• Underlying inflationary pressure has decreased again this quarter.
• Inflation in the period since the last monetary policy assessment has again been lower than expected as it decreased from 1.1% in August to 0.7% in November; both goods and services contributed to this decline.
• In the shorter term, the new conditional inflation forecast is below that of September: 1.1% for 2024, 0.3% for 2025 and 0.8% for 2026, based on the assumption that the SNB policy rate is 0.5% over the entire forecast horizon.
• GDP growth in Switzerland was only modest in the third quarter of 2024 with growth in the services sector was again somewhat stronger, while value added in manufacturing declined.
• There was a further slight increase in unemployment, and employment growth was subdued while the utilisation of overall production capacity was
• normal.
• The SNB anticipates GDP growth of around 1% this year while currently expecting growth of between 1.0% and 1.5% for 2025.
• The SNB will continue to monitor the situation closely, and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 20 March 2025.

Next 24 Hours Bias

Weak Bearish

The Pound (GBP)

Key news events today

CPI (7:00 am GMT)

What can we expect from GBP today?

Inflationary pressures in the U.K. have dissipated for most parts of 2024 but prices accelerated in October with headline and core CPI increasing at an annual rate of 2.3% and 3.3% respectively. The forecast for November points to a second successive month of acceleration for both headline and core CPI and should prices rise higher than originally anticipated, the pound is likely to see strong tailwinds before the start of the European trading hours.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 8 to 1 to reduce the Bank Rate by 25 basis points, to 4.75% on 7 November 2024 – one member preferred to maintain the Bank rate at 5.0%.
• The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes, and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024.
• Twelve-month CPI inflation fell to 1.7% in September but is expected to increase to around 2.5% by the end of the year as weakness in energy prices falls out of the annual comparison; services consumer price inflation has declined to 4.9%.
• CPI inflation is expected to increase to around 2.75% by the second half of 2025 as weakness in energy prices falls out of the annual comparison, revealing more clearly the continuing persistence of domestic inflationary pressures.
• The MPC’s latest projections for activity and inflation are also set out in the accompanying November Report; this forecast is based on the second case where CPI inflation is projected to fall back to around the 2% target in the medium term as a margin of slack emerges later in the forecast period that acts against second-round effects in domestic prices and wages.
• GDP had grown by 0.5% in 2024 Q2, 0.2% weaker than had been expected in the August Report, and 0.1% weaker than the earlier outturn had indicated at the time of the MPC’s previous meeting. Through the second half of 2024, GDP was projected to grow at a somewhat slower rate than in Q2 – headline GDP growth is expected to fall back to its recent underlying pace of around 0.25% per quarter over the second half of this year.
• The combined effects of the measures announced in Autumn Budget 2024 are provisionally expected to boost the level of GDP by around 0.75% at their peak in a year’s time, relative to the August projections, while the Budget is provisionally expected to boost CPI inflation by just under 0.5% at the peak.
• Annual private sector regular average weekly earnings growth has continued to fall but remained elevated at 4.8% in the three months to August; the MPC judges that the labour market continues to loosen, although it appears relatively tight by historical standards.
• Based on the evolving evidence, a gradual approach to removing policy restraint remains appropriate but monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further.
• The Committee continues to monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 19 December 2024.

Next 24 Hours Bias

Weak Bullish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

After easing steadily throughout most parts of this year, consumer inflation in Canada remained sticky in November as median- and trimmed-CPI printed higher than their respective forecasts on Tuesday. The Loonie strengthened briefly as USD/CAD pulled back towards 1.4250 but the move was short-lived. This currency pair rebounded strongly as it surged past 1.4300 to hit an overnight high of 1.4323 – these are the support and resistance levels for today.

Support: 1.4180

Resistance: 1.4340

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 50 basis points bringing it down to 3.25% while continuing its policy of balance sheet normalization on 11 December; this marked the fifth consecutive meeting where rates were reduced.
• Canada’s economy grew by 1% in the third quarter, somewhat below the Bank’s October projection, and the fourth quarter also looks weaker than projected. Third-quarter GDP growth was pulled down by business investment, inventories and exports.
• The unemployment rate rose to 6.8% in November as employment continued to grow more slowly than the labour force while wage growth showed some signs of easing, but remains elevated relative to productivity.
• Headline CPI has declined significantly from 2.7% in June to 1.6% in September while shelter costs inflation remains elevated but has begun to ease; the preferred measures of core inflation are now below 2.5%.
• CPI inflation has been about 2% since the summer, and is expected to average close to the 2% target over the next couple of years. Since October, the upward pressure on inflation from shelter and the downward pressure from goods prices have both moderated as expected.
• Looking ahead, the GST holiday will temporarily lower inflation but that will be unwound once the GST break ends. In addition, the possibility the incoming US administration will impose new tariffs on Canadian exports to the United States has increased uncertainty and clouded the economic outlook
• With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, the Governing Council decided to reduce the policy rate by a further 50 basis points to support growth and keep inflation close to the middle of the 1-3% target range.
• The Governing Council has reduced the policy rate substantially since June and going forward, they will be evaluating the need for further reductions in the policy rate one decision at a time.
• The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
• The next meeting is on 29 January 2025.

Next 24 Hours Bias

Weak Bearish

Oil

Key news events today

EIA Crude Oil Inventories (3:30 pm GMT)

What can we expect from Oil today?

Crude oil prices extended its downward slide as WTI oil initially plunged nearly 2% on Tuesday. However, this benchmark reversed sharply to climb towards $70 after falling as low as $68.80 per barrel. Following which, the API stockpiles reported a larger-than-expected decline in weekly inventories as 4.7M barrels of crude were drawn from storage, notably higher than the forecast of a 1.9M-drawdown. Should the EIA inventories also register a higher-than-anticipated draw, these latest inventory data points could provide a near-term floor for crude prices.

Next 24 Hours Bias

Weak Bearish

The post IC Markets Asia Fundamental Forecast | 18 December 2024 first appeared on IC Markets | Official Blog.

The market is preparing for potentially significant moves later today as we await the latest interest rate update from the FOMC. FX traders are closely watching the Euro for opportunities to capitalize on any surprise updates from the Fed, as it could provide a cleaner trade compared to other major currencies that also have central bank rate decisions in the coming days.

The FOMC is widely expected to cut interest rates by 25 basis points. Anything other than that result will likely trigger substantial market moves. However, most anticipate that any volatility will stem from changes in the dot plot and/or forward guidance from Jerome Powell and the rest of the committee.

The Euro has been trading in relatively tight ranges over the past week, and traders are hoping today’s Fed update will push the single currency into new ranges. The pair has dropped nearly 8% from peak to trough since its high in September, and traders are now looking for a less dovish update from the Fed for this trend to continue. If we do receive a less dovish message, the recent annual low at 1.0333 could come under pressure. Conversely, if the committee signals more rate cuts than expected heading into 2025, we could see a strong rally back into higher ranges, with the monthly high and trendline resistance on the hourly chart likely to provide strong initial resistance.

Key Levels:
Resistance 2: 1.0629 – December High and Trendline Resistance
Resistance 1: 1.0521 – 200-Day Moving Average

Support 1: 1.0362 – Trendline Support
Support 2: 1.0333 – 2024 Low

The post Trade the Euro on the FOMC Rate Decision first appeared on IC Markets | Official Blog.

US Markets Ease Ahead of Federal Reserve – Dow Down 0.6%

US stocks eased lower again in trading yesterday as investors looked ahead to today’s key Fed rate decision, with the Dow marking its ninth consecutive day of losses. The Dow fell 0.61% on the day, followed by the S&P, which dropped 0.39%, and the Nasdaq, which closed 0.32% lower. Treasury yields ended the session near flat, with the 2-year yield finishing at 4.245% and the 10-year at 3.99%. Currencies remained relatively quiet, but the dollar edged higher against most of the majors, with the DXY gaining 0.13% to reach 106.98. Oil prices fell further as investor concerns over future demand persisted, with Brent down 0.97% to $73.19 and WTI slipping 0.90% to $70.08. Meanwhile, gold continued to trade within recent ranges, easing 0.28% to $2,646.15.

All About the Fed Today

The long-awaited conclusion of the Federal Reserve Bank’s final meeting of the year is now just a few trading hours away, and traders are anticipating subdued markets ahead of the rate announcement. Expectations heavily favour a 25-basis-point cut today, and any deviation from this outcome is likely to trigger significant market movements. Excluding the unlikely scenarios of no change or a 50-point cut, volatility is expected to stem from any updates to the dot plot and forward guidance from the committee. The market is leaning towards a less dovish stance as it looks ahead to 2025 and the incoming Trump administration. Regardless of the outcome, traders anticipate immediate reactions following the rate decision and subsequent press conference, as markets digest the updates or continue recent trends if there are no surprises.

Famine and Feast Ahead for Traders

Today has the potential to be the most volatile trading day of the week, though most of the action is expected to take place in the final hours of trading following the Federal Reserve’s rate announcement. The macroeconomic calendar is relatively sparse during the Asian session, and markets are expected to remain muted. However, the European session features significant tier-1 data from the UK, with CPI figures set to be released. A deviation from the anticipated 2.6% increase could create heightened activity among sterling traders, particularly as it comes just a day ahead of the Bank of England’s rate decision. Despite this, most market participants expect rangebound conditions until the US session, when the Fed announcement is scheduled late in the day.

The post General Market Analysis – 18/12/24 first appeared on IC Markets | Official Blog.

The post Ex-Dividend 18/12/2024 first appeared on IC Markets | Official Blog.

Global Markets:

•  Asian Stock Markets : Nikkei down 0.07%, Shanghai Composite down 0.51%, Hang Seng down 0.20% ASX up 0.78%
• Commodities : Gold at $2668.35 (-0.04%), Silver at $30.84 (-0.38%), Brent Oil at $74.09 (-0.16%), WTI Oil at $70.4 (-0.39%)
• Rates : US 10-year yield at 4.401, UK 10-year yield at 4.4400, Germany 10-year yield at 2.2430

News & Data:

• (USD) Flash Services PMI 48.3 vs 49.4 expected
• (USD) Flash Manufacturing PMI 58.5 vs 55.7 expected

Markets Update:

Asia-Pacific markets opened mixed on Tuesday, reflecting Wall Street’s uneven performance as investors await the U.S. Federal Reserve’s decision. Australia’s S&P/ASX 200 gained 0.73%, while Japan’s Nikkei 225 and Topix rose slightly by 0.12% and 0.11%, respectively. In contrast, South Korea’s Kospi dropped 1%, and the Kosdaq declined by 0.92%.

In China, leaders have announced plans to raise the 2025 budget deficit to 4% of GDP to sustain economic growth at 5% for the coming year, according to Reuters. Following this, China’s CSI 300 increased by 1.1%, while Hong Kong’s Hang Seng Index remained relatively flat.

Overnight in the U.S., the Nasdaq Composite reached a record high, rising 1.24% to 20,173.89, driven by a tech rally. The S&P 500 also edged up 0.38% to 6,074.08. However, the Dow Jones Industrial Average dropped 110.58 points, or 0.25%, closing at 43,717.48. This marked its eighth consecutive loss, the longest since 2018.

Investors are now focused on the Federal Reserve’s Dec. 18 meeting, where a 25-basis-point rate cut is widely expected, with the CME FedWatch Tool indicating a 98.2% probability.

Meanwhile, Nvidia, a leading AI chipmaker, bucked the tech rally with a 1.7% decline, pushing its stock into correction territory after falling over 10% from its November peak.

Upcoming Events: 

• 01:30 PM GMT – USD Core Retail Sales m/m
• 01:30 PM GMT – USD Retail Sales m/m
• 01:30 PM GMT – CAD CPI m/m
• 01:30 PM GMT – CAD Median CPI y/y
• 01:30 PM GMT – CAD Trimmed CPI y/y

The post Tuesday 17th December 2024: Asia-Pacific Markets Mixed as Investors Eye Fed Decision  first appeared on IC Markets | Official Blog.

IC Markets Asia Fundamental Forecast | 17 December 2024

What happened in the Asia session?

It was a quiet session as the dollar index (DXY) floated around 106.80 while spot prices for gold remained capped under $2,660/oz. Trading activity could pick up as key data out of Europe and North America are due for release in the latter half of the day.

What does it mean for the Europe & US sessions?

After edging lower from May till August, the unemployment rate in the U.K. jumped from 4.0% to 4.3% in September while the claimant count change also soared from 10.1K to 26.7K. November’s estimates point to an unchanged unemployment rate but the claimant count is anticipated to increase by 28.2K. Another month of ‘soft’ employment figures will likely weigh on the pound before the start of the European trading hours.

After falling more than originally anticipated in November, the ZEW Economic Sentiment looks set to extend the downturn even further in December with market forecasts pointing to a decline from 12.5 to 11.8, especially after Monday’s flash results which showed Composite PMI activity in the Euro Area contracting for the fourth month in a row. Overhead pressures on the Euro remain firmly in place and this currency pair could slip under 1.0500 once more.

After easing steadily throughout most parts of this year, consumer inflation in Canada accelerated more than anticipated in October as measured by the various metrics such as median- and trimmed-CPI. However, the forecast for November suggests softer price increases in November, a result that could weaken the Loonie and lift USD/CAD during the U.S. trading hours.

The Dollar Index (DXY)

Key news events today

Retail Sales (1:30 pm GMT)

What can we expect from DXY today?

Consumer spending in the U.S. looks set to rise for the third consecutive month with sales expected to increase 0.6% MoM in November. With the holiday shopping season already in full-swing following the Black Friday sales after Thanksgiving, retail sales should continue to grow steadily as the year comes to an end, providing the dollar with further tailwinds.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to lower the Federal Funds Rate target range by 25 basis points to 4.50% to 4.75% on 7th November.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals are roughly in balance.
• The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while labour market conditions have generally eased, and the unemployment rate has moved up but remains low.
• Inflation has made further progress toward the Committee’s 2% objective but remains somewhat elevated.
• In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in June, the Committee slowed the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.
• The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.
• The next meeting runs from 17 to 18 December 2024.

Next 24 Hours Bias

Weak Bearish

Gold (XAU)

Key news events today

Retail Sales (1:30 pm GMT)

What can we expect from Gold today?

Consumer spending in the U.S. looks set to rise for the third consecutive month with sales expected to increase 0.6% MoM in November. With the holiday shopping season already in full-swing following the Black Friday sales after Thanksgiving, retail sales should continue to grow steadily as the year comes to an end, providing the dollar with further tailwinds – a result that could weigh on gold in the near-term.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie stabilized around 0.6350 on Monday and was seen edging higher towards 0.6380 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.6345

Resistance: 0.6415

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35% on 10th December, marking the ninth consecutive pause.
• Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. However, measures of underlying inflation are around 3.5%, which is still some way from the 2.5% midpoint of the inflation target.
• The most recent forecasts published in the November Statement on Monetary Policy (SMP) do not see inflation returning sustainably to the midpoint of the target until 2026 but the Board is gaining some confidence that inflationary pressures are declining in line with these recent forecasts with risks remaining in place.
• Growth in output has been weak as the economy grew by only 0.8% in the September quarter over the past year. Outside of the COVID-19 pandemic, this was the slowest pace of growth since the early 1990s.
• A range of indicators suggest that labour market conditions remain tight; while those conditions have been easing gradually, some indicators have recently stabilised. The unemployment rate was 4.1 per cent in October, up from 3.5 per cent in late 2022.
• Wage pressures have eased more than expected in the November SMP. The rate of wages growth as measured by the Wage Price Index was 3.5% over the year to the September quarter, a step down from the previous quarter, but labour productivity growth remains weak.
• Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment. To date, longer term inflation expectations have been consistent with the inflation target and it is important that this remains the case.
• The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions, paying close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
• The next meeting is on 18 February 2025.

Next 24 Hours Bias

Weak Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

After falling sharply last week, the Kiwi found footing around 0.5760 on Monday to stem the downfall. This currency pair was seen rising steadily towards 0.5800 at the beginning of the Asia session- these are the support and resistance levels for today.

Support: 0.5740

Resistance: 0.5810

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 4.25% on 27 November, marking the third consecutive rate cut.
• The Committee assessed that annual consumer price inflation has declined and is now close to the midpoint of the MPC’s 1 to 3% target band; inflation expectations are also close to target and core inflation is converging to the midpoint.
• Economic activity remains subdued and output continues to be below its potential. With excess productive capacity in the economy, inflation pressures have eased. If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year.
• Domestic economic activity remains below trend, as a result of weakness in demand for durable goods consumption and investment. This has been reflected in falling activity in interest rate sensitive sectors such as construction, manufacturing, and retail trade. In contrast, some services sectors have continued to grow.
• Consistent with feedback from business visits, high frequency indicators suggest that the economy has stabilised in recent months. Economic growth is expected to recover from the December quarter, in part due to lower interest rates, but there is uncertainty around the exact timing and speed of the recovery.
• Wage growth is slowing, consistent with inflation returning to the target midpoint while employment levels and job vacancies have declined, reflecting subdued economic activity; unemployment is expected to continue rising in the near term.
• Expectations of future inflation, the pricing intentions of firms, and spare productive capacity are consistent with the inflation target being sustainably achieved, providing the context and the confidence for the Committee to further ease monetary policy restraint.
• The next meeting is on 19 February 2025.

Next 24 Hours Bias

Weak Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The yen continued to remain weak keeping USD/JPY elevated on Monday. This currency pair reached an overnight high of 154.47 before pulling back slightly, floating above the 154-level as Asian markets came online – these are the support and resistance levels for today.

Support: 153.40

Resistance: 154.90

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 31st October, by a unanimous vote, to set the following guideline for money market operations for the intermeeting period:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.25%.
  2. The Bank will embark on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
• The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is likely to be at around 2.5% for fiscal 2024 and then be at around 2% for fiscal 2025 and 2026.
• While the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices are expected to wane, underlying CPI inflation is expected to increase gradually, since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify.
• Comparing the projections with those presented in the previous Outlook for Economic Activity and Prices (Outlook Report), the projected real GDP growth rates are more or less unchanged. The projected year-on-year rate of increase in the CPI (all items less fresh food) for fiscal 2025 is somewhat lower due to factors such as the recent decline in crude oil and other resource prices.
• Japan’s economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• The next meeting is on 19 December 2024.

Next 24 Hours Bias

Medium Bullish

The Euro (EUR)

Key news events today

Germany ifo Business Climate (9:00 am GMT)

ZEW Economic Sentiment (10:00 am GMT)

What can we expect from EUR today?

After falling more than originally anticipated in November, the ZEW Economic Sentiment looks set to extend the downturn even further in December with market forecasts pointing to a decline from 12.5 to 11.8, especially after Monday’s flash results which showed Composite PMI activity in the Euro Area contracting for the fourth month in a row. Overhead pressures on the Euro remain firmly in place and this currency pair could slip under 1.0500 once more.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 12 December to mark the third successive rate cut.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 3.15%, 3.40% and 3.00% respectively.
• The disinflation process is well on track and most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis.
• Staff see headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded EU Emissions Trading System becomes operational. For inflation excluding energy and food, staff project an average of 2.9% in 2024, 2.3% in 2025 and 1.9% in both 2026 and 2027.
• Staff now expect a slower economic recovery than in the September projections. Although growth picked up in the third quarter of this year, survey indicators suggest it has slowed in the current quarter – the economy is expected to grow by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027
• The Eurosystem no longer reinvests all of the principal payments from maturing securities purchased under the pandemic emergency purchase programme (PEPP), reducing the PEPP portfolio by €7.5 billion per month on average and the Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024.
• The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises sustainably at its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission.
• The next meeting is on 30 January 2025.

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Continued weakness in the franc lifted USD/CHF to an overnight high of 0.8947. This currency pair eased at the beginning of the Asia session but it should remain elevated as the day progresses – these are the support and resistance levels for today.

Support: 0.8880

Resistance: 0.8950

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 50 basis points, going from 1.00% to 0.50% on 12 December, marking for the fourth consecutive reduction.
• Underlying inflationary pressure has decreased again this quarter.
• Inflation in the period since the last monetary policy assessment has again been lower than expected as it decreased from 1.1% in August to 0.7% in November; both goods and services contributed to this decline.
• In the shorter term, the new conditional inflation forecast is below that of September: 1.1% for 2024, 0.3% for 2025 and 0.8% for 2026, based on the assumption that the SNB policy rate is 0.5% over the entire forecast horizon.
• GDP growth in Switzerland was only modest in the third quarter of 2024 with growth in the services sector was again somewhat stronger, while value added in manufacturing declined.
• There was a further slight increase in unemployment, and employment growth was subdued while the utilisation of overall production capacity was
• normal.
• The SNB anticipates GDP growth of around 1% this year while currently expecting growth of between 1.0% and 1.5% for 2025.
• The SNB will continue to monitor the situation closely, and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 20 March 2025.

Next 24 Hours Bias

Weak Bearish

The Pound (GBP)

Key news events today

Labour Force Survey (7:00 am GMT)

What can we expect from GBP today?

After edging lower from May till August, the unemployment rate jumped from 4.0% to 4.3% in September while the claimant count change also soared from 10.1K to 26.7K. November’s estimates point to an unchanged unemployment rate but the claimant count is anticipated to increase by 28.2K. Another month of ‘soft’ employment figures will likely weigh on the pound before the start of the European trading hours.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 8 to 1 to reduce the Bank Rate by 25 basis points, to 4.75% on 7 November 2024 – one member preferred to maintain the Bank rate at 5.0%.
• The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes, and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024.
• Twelve-month CPI inflation fell to 1.7% in September but is expected to increase to around 2.5% by the end of the year as weakness in energy prices falls out of the annual comparison; services consumer price inflation has declined to 4.9%.
• CPI inflation is expected to increase to around 2.75% by the second half of 2025 as weakness in energy prices falls out of the annual comparison, revealing more clearly the continuing persistence of domestic inflationary pressures.
• The MPC’s latest projections for activity and inflation are also set out in the accompanying November Report; this forecast is based on the second case where CPI inflation is projected to fall back to around the 2% target in the medium term as a margin of slack emerges later in the forecast period that acts against second-round effects in domestic prices and wages.
• GDP had grown by 0.5% in 2024 Q2, 0.2% weaker than had been expected in the August Report, and 0.1% weaker than the earlier outturn had indicated at the time of the MPC’s previous meeting. Through the second half of 2024, GDP was projected to grow at a somewhat slower rate than in Q2 – headline GDP growth is expected to fall back to its recent underlying pace of around 0.25% per quarter over the second half of this year.
• The combined effects of the measures announced in Autumn Budget 2024 are provisionally expected to boost the level of GDP by around 0.75% at their peak in a year’s time, relative to the August projections, while the Budget is provisionally expected to boost CPI inflation by just under 0.5% at the peak.
• Annual private sector regular average weekly earnings growth has continued to fall but remained elevated at 4.8% in the three months to August; the MPC judges that the labour market continues to loosen, although it appears relatively tight by historical standards.
• Based on the evolving evidence, a gradual approach to removing policy restraint remains appropriate but monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further.
• The Committee continues to monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 19 December 2024.

Next 24 Hours Bias

Weak Bullish

The Canadian Dollar (CAD)

Key news events today

CPI (1:30 pm GMT)

What can we expect from CAD today?

After easing steadily throughout most parts of this year, consumer inflation in Canada accelerated more than anticipated in October as measured by the various metrics such as median- and trimmed-CPI. However, the forecast for November suggests softer price increases in November, a result that could weaken the Loonie and lift USD/CAD during the U.S. trading hours.

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 50 basis points bringing it down to 3.25% while continuing its policy of balance sheet normalization on 11 December; this marked the fifth consecutive meeting where rates were reduced.
• Canada’s economy grew by 1% in the third quarter, somewhat below the Bank’s October projection, and the fourth quarter also looks weaker than projected. Third-quarter GDP growth was pulled down by business investment, inventories and exports.
• The unemployment rate rose to 6.8% in November as employment continued to grow more slowly than the labour force while wage growth showed some signs of easing, but remains elevated relative to productivity.
• Headline CPI has declined significantly from 2.7% in June to 1.6% in September while shelter costs inflation remains elevated but has begun to ease; the preferred measures of core inflation are now below 2.5%.
• CPI inflation has been about 2% since the summer, and is expected to average close to the 2% target over the next couple of years. Since October, the upward pressure on inflation from shelter and the downward pressure from goods prices have both moderated as expected.
• Looking ahead, the GST holiday will temporarily lower inflation but that will be unwound once the GST break ends. In addition, the possibility the incoming US administration will impose new tariffs on Canadian exports to the United States has increased uncertainty and clouded the economic outlook
• With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, the Governing Council decided to reduce the policy rate by a further 50 basis points to support growth and keep inflation close to the middle of the 1-3% target range.
• The Governing Council has reduced the policy rate substantially since June and going forward, they will be evaluating the need for further reductions in the policy rate one decision at a time.
• The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
• The next meeting is on 29 January 2025.

Next 24 Hours Bias

Weak Bearish

Oil

Key news events today

API Crude Oil Stock (9:30 pm GMT)

What can we expect from Oil today?

Crude oil prices kicked off the brand-new trading week by falling nearly 1% on Monday as soft consumer spending out of China – the world’s largest importer – weighed on this commodity. WTI oil gapped higher at the open touching $71.44 but prices proceeded to head south before stabilizing around $70.50 per barrel overnight. Moving over to U.S. inventories, the API stockpiles have unexpectedly increased over the last couple of weeks which is typically a sign of lower demand for crude oil in the states. Should these inventories build even further, oil prices could face further near-term headwinds later today.

Next 24 Hours Bias

Weak Bearish

The post IC Markets Europe Fundamental Forecast | 17 December 2024 first appeared on IC Markets | Official Blog.

DXY (US Dollar Index):

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could potentially make a bearish continuation toward the 1st support

Pivot: 107.06

Supporting reasons: Identified as an overlap resistance close to the 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 106.12
Supporting reasons: Identified as a pullback support close to the 61.8% Fibonacci retracement, indicating a potential level where price could find support once more.

1st resistance: 108.07
Supporting reasons: Identified as a swing-high resistance, indicating a potential area that could halt any further upward movement.

EUR/USD:

Potential Direction: Bearish

Overall momentum of the chart: Bearish

Price could potentially make a bearish reaction off the pivot and drop toward the 1st support 

Pivot: 1.0536
Supporting reasons: Identified as an overlap resistance, indicating a potential area where selling pressures could intensify.

1st support: 1.0432

Supporting reasons: Identified as an overlap support close to 61.8% Fibonacci retrcement, indicating a potential level where price could find support once more.

1st resistance: 1.0614
Supporting reasons:  Identified as an overlap resistance close to the 50% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

EUR/JPY:

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could potentially make a bearish reaction off the pivot and drop toward the 1st support 

Pivot: 162.38
Supporting reasons: Identified as an overlap resistance close to the 78.6% Fibonacci projection, indicating a potential area where selling pressures could intensify.

1st support: 160.35

Supporting reasons: Identified as a pullback support, indicating a potential level where price could find support once more.

1st resistance: 164.88
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

EUR/GBP:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could potentially make a bullish bounce off the pivot and rise toward the 1st resistance

Pivot: 0.8268
Supporting reasons: Identified as a pullback support, indicating a potential area where buying pressures could intensify.

1st support: 0.8224

Supporting reasons:  Identified as a swing low support, indicating a potential level where price could find support once more.

1st resistance: 0.8336
Supporting reasons: Identified as an overlap resistance that aligns with the 78.6% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

GBP/USD:

Potential Direction: Bullish

Overall momentum of the chart: Bearish

Price could potentially make a bullish continuation towards the 1st resistance.

Pivot: 1.2604

Supporting reasons: Identified as an overlap support that aligns with the 61.8% Fibonacci retracement, indicating a potential area where buying interests could pick up to resume the uptrend.

1st support: 1.2502

Supporting reasons: Identified as a swing low support, indicating a potential level where price could find support once more.

1st resistance: 1.2798
Supporting reasons: Identified as an overlap resistance close to the 61.8 Fibonacci retracement, indicating a potential area that could halt any further upward movement.

GBP/JPY:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price could potentially make a bearish continuation toward the 1st support 

Pivot: 195.84
Supporting reasons: Identified as a pullback resistance close to the 61.8% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 192.44
Supporting reasons: Identified as an overlap support, indicating a key level where price could find support once more.

1st resistance: 198.21
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

USD/CHF:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price could potentially make a bearish reaction off the pivot and drop toward the 1st support 

Pivot: 0.8941
Supporting reasons: Identified as a swing high resistance, indicating a potential area where selling pressures could intensify.

1st support: 0.8846

Supporting reasons: Identified as a pullback support, indicating a potential level where price could find support once more.

1st resistance: 0.8994
Supporting reasons: Identified a resistance level that aligns with the 161.8% Fibonacci extension, indicating a potential area that could halt any further upward movement.

USD/JPY:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price could potentially make a bearish continuation toward the 1st support 

Pivot: 154.45
Supporting reasons: Identified as a pullback resistance close to the 78.6% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 152.43
Supporting reasons: Identified as a pullback support close to the 38.2% Fibonacci retracement, indicating a potential level where price could find support once again.

1st resistance: 156.57
Supporting reasons: Identified as a swing high resistance, indicating a potential area that could halt any further upward movement.

USD/CAD:

Potential Direction: Bearish

Overall momentum of the chart: Bullish

Price is rising towards the pivot and could potentially make a bearish reversal off this level to pull back towards the 1st support.

Pivot: 1.4266

Supporting reasons: Identified as a swing-high resistance that aligns with the 161.8% Fibonacci extension and 78.6% Fibonacci projection, indicating a strong level of resistance 

1st support: 1.4186
Supporting reasons: Identified as a pullback support, indicating a key level where price could find support.

1st resistance: 1.4305
Supporting reasons: Identified as a resistance that aligns with the 100% Fibonacci projection, indicating a potential area that could halt any further upward movement.

AUD/USD:

Potential Direction: Neutral
Overall momentum of the chart: Bearish

Price could fluctuate between the 1st resistance and 1st support level.

1st support: 0.6345
Supporting reasons: Identified as a swing-low support, suggesting a key support area where price could find support once again.

1st resistance: 0.6385
Supporting reasons: Identified as an overlap resistance close to the 50% Fibonacci retracements, indicating a potential area that could halt any further upward movement.

NZD/USD

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price is rising towards the pivot and could potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 0.5809

Supporting reasons: Identified as an overlap resistance that aligns close to a 38.2% Fibonacci retracement, indicating a potential area where selling pressures could intensify. The presence of the red Ichimoku Cloud adds further significance to the strength of the bearish momentum.

1st support: 0.5755
Supporting reasons: Identified as a swing-low support, suggesting a key support area where price could find support once more.

1st resistance: 0.5836
Supporting reasons: Identified as an overlap resistance that aligns with a 61.8% Fibonacci retracement, indicating a potential area that could halt any further upward movement.

US30 (DJIA):

Potential Direction: Bullish
Overall momentum of the chart: Bearish

Price has made a bullish bounce off the pivot and could potentially rise towards the 1st resistance.

Pivot: 43,683.45

Supporting reasons: Identified as a pullback support close to the 61.8% Fibonacci retracement, indicating a potential area where buying interests could pick up to resume the uptrend.

1st support: 43,320.69

Supporting reasons: Identified as an overlap support that aligns with a 78.6% Fibonacci retracement, indicating a potential level where price could find support.

1st resistance: 44,184.33

Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

DE40 (DAX):

Potential Direction: Bearish
Overall momentum of the chart: Neutral

Price could rise towards the pivot and potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 20,400.90
Supporting reasons: Identified as an overlap resistance, indicating a potential area where selling pressures could intensify.

1st support: 20,202.28

Supporting reasons: Identified as a pullback support that aligns close to a confluence of Fibonacci levels i.e. a 23.6% retracement and a 127.2% extension, indicating a key level where price could find support.

1st resistance: 20,526.56
Supporting reasons: Identified as a swing-high resistance that aligns with the all-time high, indicating a potential area that could halt any further upward movement.

US500 (S&P 500): 

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price could rise towards the pivot and potentially make a bearish reversal off this level to pull back towards the 1st support.

Pivot: 6,08729

Supporting reasons: Identified as an overlap resistance that aligns with the 78.6% Fibonacci retracement, indicating a potential area where selling pressures could intensify.

1st support: 6,039.86

Supporting reasons: Identified as an overlap support that aligns close to a 23.6% Fibonacci retracement, indicating a potential level where price could find support once more.

1st resistance: 6,143.48
Supporting reasons: Identified as a resistance that aligns with a 161.8% Fibonacci extension, indicating a potential area that could halt any further upward movement.

BTC/USD (Bitcoin):

Potential Direction: Bearish
Overall momentum of the chart: Bullish

Price has made a bullish bounce off the pivot and could potentially rise towards the 1st resistance.

Pivot: 102,886.76

Supporting reasons: Identified as a pullback support, indicating a potential area where buying interests could pick up to resume the uptrend.

1st support: 93,345.84
Supporting reasons: Identified as an overlap support, indicating a potential level where price could find support.

1st resistance:  107,849.06
Supporting reasons: Identified as a swing high resistance,  indicating a potential area that could halt any further upward movement.

ETH/USD (Ethereum):

Potential Direction: Bullish
Overall momentum of the chart: Bullish

Price is rising towards the pivot and could potentially make a bullish break through this level to rise towards the 1st resistance.

Pivot: 3,953.88

Supporting reasons: Identified as an overlap support, where the strong bullish momentum could cause price to break above this level.

1st support: 3,760.69
Supporting reasons: Identified as a pullback support, indicating a potential level where price could find support once more.

1st resistance: 4,265.00
Supporting reasons:  Identified as a resistance that aligns with a 127.2% Fibonacci extension, indicating a potential area that could halt any further upward movement.

WTI/USD (Oil):

Potential Direction: Bullish
Overall momentum of the chart: Bullish

Price has made a bullish bounce off the pivot and could potentially rise towards the 1st resistance.

Pivot: 70.46
Supporting reasons: Identified as an overlap support that aligns with a 23.6% Fibonacci retracement, indicating a potential area where buying interests could pick up to resume the uptrend.

1st support: 69.13
Supporting reasons: Identified as an overlap support that aligns close to a 50% Fibonacci retracement, indicating a key level where price could find support once again.

1st resistance: 71.48
Supporting reasons: Identified as a multi-swing-high resistance that aligns close to a 127.2% Fibonacci extension, indicating a potential area that could halt any further upward movement.

XAU/USD (GOLD):

Potential Direction: Bearish

Overall momentum of the chart: Bearish

Price could potentially make a bearish reaction off the pivot and drop toward the 1st support, indicating a bearish trend, sustained selling pressure, and overall bearish sentiment.

Pivot: 2666.19
Supporting reasons: Identified as a pullback resistance, indicating a potential area where selling pressures could intensify.

1st support: 2596.48

Supporting reasons: Identified as a pullback support, indicating a potential level where price could find support.

1st resistance: 2720.46

Supporting reasons: Identified as a swing high resistance, indicating a potential area that could halt any further upward movement.

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The post Tuesday 17th December 2024: Technical Outlook and Review first appeared on IC Markets | Official Blog.

IC Markets Asia Fundamental Forecast | 17 December 2024

What happened in the U.S. session?

Manufacturing activity in the U.S. slumped deeper into contraction as evident in the Empire State Manufacturing Index and the flash manufacturing PMI reports as new orders and shipments grew at a much slower pace in the state of New York. The manufacturing PMI report signalled a deterioration in business conditions for a sixth successive month with the rate of contraction accelerating at the fastest rate since September. However, the service-producing businesses were once again the bright spot as this sector lifted overall PMI activity with the flash Composite accelerator from 54.9 in November to 56.6 in December. This reading pointed to the strongest growth of private sector activity since March 2022, prompted by a surge in categories such as new orders and employment in the services sector. The dollar index (DXY) hit an overnight high of 107.16 following the release of the above-mentioned data before dipping under 107 by the end of this session.

What does it mean for the Asia Session?

As Asian markets digest the latest U.S. macroeconomic data, the DXY was hovering around 106.80 while spot prices for gold stabilized around $2,650/oz. With no major data releases during this session, financial markets could tread cautiously before kicking into action as the U.K. labour force survey and EU Zew Economic Sentiment index are released during the European trading hours.

The Dollar Index (DXY)

Key news events today

Retail Sales (1:30 pm GMT)

What can we expect from DXY today?

Consumer spending in the U.S. looks set to rise for the third consecutive month with sales expected to increase 0.6% MoM in November. With the holiday shopping season already in full-swing following the Black Friday sales after Thanksgiving, retail sales should continue to grow steadily as the year comes to an end, providing the dollar with further tailwinds.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to lower the Federal Funds Rate target range by 25 basis points to 4.50% to 4.75% on 7th November.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run and judges that the risks to achieving its employment and inflation goals are roughly in balance.
• The economic outlook is uncertain, and the Committee is attentive to the risks to both sides of its dual mandate.
• Recent indicators suggest that economic activity has continued to expand at a solid pace while labour market conditions have generally eased, and the unemployment rate has moved up but remains low.
• Inflation has made further progress toward the Committee’s 2% objective but remains somewhat elevated.
• In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.
• In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. Beginning in June, the Committee slowed the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.
• The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities.
• The next meeting runs from 17 to 18 December 2024.

Next 24 Hours Bias

Weak Bearish

Gold (XAU)

Key news events today

Retail Sales (1:30 pm GMT)

What can we expect from Gold today?

Consumer spending in the U.S. looks set to rise for the third consecutive month with sales expected to increase 0.6% MoM in November. With the holiday shopping season already in full-swing following the Black Friday sales after Thanksgiving, retail sales should continue to grow steadily as the year comes to an end, providing the dollar with further tailwinds – a result that could weigh on gold in the near-term.

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

The Aussie stabilized around 0.6350 on Monday and was seen edging higher towards 0.6380 as Asian markets came online – these are the support and resistance levels for today.

Support: 0.6345

Resistance: 0.6415

Central Bank Notes:

• The RBA kept the cash rate target unchanged at 4.35% on 10th December, marking the ninth consecutive pause.
• Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. However, measures of underlying inflation are around 3.5%, which is still some way from the 2.5% midpoint of the inflation target.
• The most recent forecasts published in the November Statement on Monetary Policy (SMP) do not see inflation returning sustainably to the midpoint of the target until 2026 but the Board is gaining some confidence that inflationary pressures are declining in line with these recent forecasts with risks remaining in place.
• Growth in output has been weak as the economy grew by only 0.8% in the September quarter over the past year. Outside of the COVID-19 pandemic, this was the slowest pace of growth since the early 1990s.
• A range of indicators suggest that labour market conditions remain tight; while those conditions have been easing gradually, some indicators have recently stabilised. The unemployment rate was 4.1 per cent in October, up from 3.5 per cent in late 2022.
• Wage pressures have eased more than expected in the November SMP. The rate of wages growth as measured by the Wage Price Index was 3.5% over the year to the September quarter, a step down from the previous quarter, but labour productivity growth remains weak.
• Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment. To date, longer term inflation expectations have been consistent with the inflation target and it is important that this remains the case.
• The Board will continue to rely upon the data and the evolving assessment of risks to guide its decisions, paying close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
• The next meeting is on 18 February 2025.

Next 24 Hours Bias

Weak Bullish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

After falling sharply last week, the Kiwi found footing around 0.5760 on Monday to stem the downfall. This currency pair was seen rising steadily towards 0.5800 at the beginning of the Asia session- these are the support and resistance levels for today.

Support: 0.5740

Resistance: 0.5810

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 50 basis points bringing it down to 4.25% on 27 November, marking the third consecutive rate cut.
• The Committee assessed that annual consumer price inflation has declined and is now close to the midpoint of the MPC’s 1 to 3% target band; inflation expectations are also close to target and core inflation is converging to the midpoint.
• Economic activity remains subdued and output continues to be below its potential. With excess productive capacity in the economy, inflation pressures have eased. If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR further early next year.
• Domestic economic activity remains below trend, as a result of weakness in demand for durable goods consumption and investment. This has been reflected in falling activity in interest rate sensitive sectors such as construction, manufacturing, and retail trade. In contrast, some services sectors have continued to grow.
• Consistent with feedback from business visits, high frequency indicators suggest that the economy has stabilised in recent months. Economic growth is expected to recover from the December quarter, in part due to lower interest rates, but there is uncertainty around the exact timing and speed of the recovery.
• Wage growth is slowing, consistent with inflation returning to the target midpoint while employment levels and job vacancies have declined, reflecting subdued economic activity; unemployment is expected to continue rising in the near term.
• Expectations of future inflation, the pricing intentions of firms, and spare productive capacity are consistent with the inflation target being sustainably achieved, providing the context and the confidence for the Committee to further ease monetary policy restraint.
• The next meeting is on 19 February 2025.

Next 24 Hours Bias

Weak Bullish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

The yen continued to remain weak keeping USD/JPY elevated on Monday. This currency pair reached an overnight high of 154.47 before pulling back slightly, floating above the 154-level as Asian markets came online – these are the support and resistance levels for today.

Support: 153.40

Resistance: 154.90

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 31st October, by a unanimous vote, to set the following guideline for money market operations for the intermeeting period:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.25%.
  2. The Bank will embark on a plan to reduce the amount of its monthly outright purchases of JGBs so that it will be about 3 trillion yen in January-March 2026; the amount will be cut down by about 400 billion yen each calendar quarter in principle.
• The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is likely to be at around 2.5% for fiscal 2024 and then be at around 2% for fiscal 2025 and 2026.
• While the effects of a pass-through to consumer prices of cost increases led by the past rise in import prices are expected to wane, underlying CPI inflation is expected to increase gradually, since it is projected that the output gap will improve and that medium- to long-term inflation expectations will rise with a virtuous cycle between wages and prices continuing to intensify.
• Comparing the projections with those presented in the previous Outlook for Economic Activity and Prices (Outlook Report), the projected real GDP growth rates are more or less unchanged. The projected year-on-year rate of increase in the CPI (all items less fresh food) for fiscal 2025 is somewhat lower due to factors such as the recent decline in crude oil and other resource prices.
• Japan’s economy is likely to keep growing at a pace above its potential growth rate, with overseas economies continuing to grow moderately and as a virtuous cycle from income to spending gradually intensifies against the background of factors such as accommodative financial conditions.
• The next meeting is on 19 December 2024.

Next 24 Hours Bias

Medium Bullish

The Euro (EUR)

Key news events today

Germany ifo Business Climate (9:00 am GMT)

ZEW Economic Sentiment (10:00 am GMT)

What can we expect from EUR today?

After falling more than originally anticipated in November, the ZEW Economic Sentiment looks set to extend the downturn even further in December with market forecasts pointing to a decline from 12.5 to 11.8, especially after Monday’s flash results which showed Composite PMI activity in the Euro Area contracting for the fourth month in a row. Overhead pressures on the Euro remain firmly in place and this currency pair could slip under 1.0500 once more.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 12 December to mark the third successive rate cut.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 3.15%, 3.40% and 3.00% respectively.
• The disinflation process is well on track and most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis.
• Staff see headline inflation averaging 2.4% in 2024, 2.1% in 2025, 1.9% in 2026 and 2.1% in 2027 when the expanded EU Emissions Trading System becomes operational. For inflation excluding energy and food, staff project an average of 2.9% in 2024, 2.3% in 2025 and 1.9% in both 2026 and 2027.
• Staff now expect a slower economic recovery than in the September projections. Although growth picked up in the third quarter of this year, survey indicators suggest it has slowed in the current quarter – the economy is expected to grow by 0.7% in 2024, 1.1% in 2025, 1.4% in 2026 and 1.3% in 2027
• The Eurosystem no longer reinvests all of the principal payments from maturing securities purchased under the pandemic emergency purchase programme (PEPP), reducing the PEPP portfolio by €7.5 billion per month on average and the Governing Council intends to discontinue reinvestments under the PEPP at the end of 2024.
• The Governing Council stands ready to adjust all of its instruments within its mandate to ensure that inflation stabilises sustainably at its 2% target over the medium term and to preserve the smooth functioning of monetary policy transmission.
• The next meeting is on 30 January 2025.

Next 24 Hours Bias

Weak Bullish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Continued weakness in the franc lifted USD/CHF to an overnight high of 0.8947. This currency pair eased at the beginning of the Asia session but it should remain elevated as the day progresses – these are the support and resistance levels for today.

Support: 0.8880

Resistance: 0.8950

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 50 basis points, going from 1.00% to 0.50% on 12 December, marking for the fourth consecutive reduction.
• Underlying inflationary pressure has decreased again this quarter.
• Inflation in the period since the last monetary policy assessment has again been lower than expected as it decreased from 1.1% in August to 0.7% in November; both goods and services contributed to this decline.
• In the shorter term, the new conditional inflation forecast is below that of September: 1.1% for 2024, 0.3% for 2025 and 0.8% for 2026, based on the assumption that the SNB policy rate is 0.5% over the entire forecast horizon.
• GDP growth in Switzerland was only modest in the third quarter of 2024 with growth in the services sector was again somewhat stronger, while value added in manufacturing declined.
• There was a further slight increase in unemployment, and employment growth was subdued while the utilisation of overall production capacity was
• normal.
• The SNB anticipates GDP growth of around 1% this year while currently expecting growth of between 1.0% and 1.5% for 2025.
• The SNB will continue to monitor the situation closely, and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 20 March 2025.

Next 24 Hours Bias

Weak Bearish

The Pound (GBP)

Key news events today

Labour Force Survey (7:00 am GMT)

What can we expect from GBP today?

After edging lower from May till August, the unemployment rate jumped from 4.0% to 4.3% in September while the claimant count change also soared from 10.1K to 26.7K. November’s estimates point to an unchanged unemployment rate but the claimant count is anticipated to increase by 28.2K. Another month of ‘soft’ employment figures will likely weigh on the pound before the start of the European trading hours.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 8 to 1 to reduce the Bank Rate by 25 basis points, to 4.75% on 7 November 2024 – one member preferred to maintain the Bank rate at 5.0%.
• The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes, and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024.
• Twelve-month CPI inflation fell to 1.7% in September but is expected to increase to around 2.5% by the end of the year as weakness in energy prices falls out of the annual comparison; services consumer price inflation has declined to 4.9%.
• CPI inflation is expected to increase to around 2.75% by the second half of 2025 as weakness in energy prices falls out of the annual comparison, revealing more clearly the continuing persistence of domestic inflationary pressures.
• The MPC’s latest projections for activity and inflation are also set out in the accompanying November Report; this forecast is based on the second case where CPI inflation is projected to fall back to around the 2% target in the medium term as a margin of slack emerges later in the forecast period that acts against second-round effects in domestic prices and wages.
• GDP had grown by 0.5% in 2024 Q2, 0.2% weaker than had been expected in the August Report, and 0.1% weaker than the earlier outturn had indicated at the time of the MPC’s previous meeting. Through the second half of 2024, GDP was projected to grow at a somewhat slower rate than in Q2 – headline GDP growth is expected to fall back to its recent underlying pace of around 0.25% per quarter over the second half of this year.
• The combined effects of the measures announced in Autumn Budget 2024 are provisionally expected to boost the level of GDP by around 0.75% at their peak in a year’s time, relative to the August projections, while the Budget is provisionally expected to boost CPI inflation by just under 0.5% at the peak.
• Annual private sector regular average weekly earnings growth has continued to fall but remained elevated at 4.8% in the three months to August; the MPC judges that the labour market continues to loosen, although it appears relatively tight by historical standards.
• Based on the evolving evidence, a gradual approach to removing policy restraint remains appropriate but monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further.
• The Committee continues to monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 19 December 2024.

Next 24 Hours Bias

Weak Bullish

The Canadian Dollar (CAD)

Key news events today

CPI (1:30 pm GMT)

What can we expect from CAD today?

After easing steadily throughout most parts of this year, consumer inflation in Canada accelerated more than anticipated in October as measured by the various metrics such as median- and trimmed-CPI. However, the forecast for November suggests softer price increases in November, a result that could weaken the Loonie and lift USD/CAD during the U.S. trading hours.

Central Bank Notes:

• The Bank of Canada reduced its target for the overnight rate by 50 basis points bringing it down to 3.25% while continuing its policy of balance sheet normalization on 11 December; this marked the fifth consecutive meeting where rates were reduced.
• Canada’s economy grew by 1% in the third quarter, somewhat below the Bank’s October projection, and the fourth quarter also looks weaker than projected. Third-quarter GDP growth was pulled down by business investment, inventories and exports.
• The unemployment rate rose to 6.8% in November as employment continued to grow more slowly than the labour force while wage growth showed some signs of easing, but remains elevated relative to productivity.
• Headline CPI has declined significantly from 2.7% in June to 1.6% in September while shelter costs inflation remains elevated but has begun to ease; the preferred measures of core inflation are now below 2.5%.
• CPI inflation has been about 2% since the summer, and is expected to average close to the 2% target over the next couple of years. Since October, the upward pressure on inflation from shelter and the downward pressure from goods prices have both moderated as expected.
• Looking ahead, the GST holiday will temporarily lower inflation but that will be unwound once the GST break ends. In addition, the possibility the incoming US administration will impose new tariffs on Canadian exports to the United States has increased uncertainty and clouded the economic outlook
• With inflation around 2%, the economy in excess supply, and recent indicators tilted towards softer growth than projected, the Governing Council decided to reduce the policy rate by a further 50 basis points to support growth and keep inflation close to the middle of the 1-3% target range.
• The Governing Council has reduced the policy rate substantially since June and going forward, they will be evaluating the need for further reductions in the policy rate one decision at a time.
• The Bank is committed to maintaining price stability for Canadians by keeping inflation close to the 2% target.
• The next meeting is on 29 January 2025.

Next 24 Hours Bias

Weak Bearish

Oil

Key news events today

API Crude Oil Stock (9:30 pm GMT)

What can we expect from Oil today?

Crude oil prices kicked off the brand-new trading week by falling nearly 1% on Monday as soft consumer spending out of China – the world’s largest importer – weighed on this commodity. WTI oil gapped higher at the open touching $71.44 but prices proceeded to head south before stabilizing around $70.50 per barrel overnight. Moving over to U.S. inventories, the API stockpiles have unexpectedly increased over the last couple of weeks which is typically a sign of lower demand for crude oil in the states. Should these inventories build even further, oil prices could face further near-term headwinds later today.

Next 24 Hours Bias

Weak Bearish

The post IC Markets Asia Fundamental Forecast | 17 December 2024 first appeared on IC Markets | Official Blog.