IC Markets Asia Fundamental Forecast | 20 December 2024

What happened in the Asia session?

After moderating lower from 2.8% in August to 2.3% in October, core CPI in Japan unexpectedly accelerated to 2.7% YoY in November as it beat the estimate of 2.6%. Japan’s core inflation has consistently remained at or above the Bank of Japan’s 2% target for over two and a half years, which has contributed to their more hawkish stance this year but that was not enough as the central bank paused for the third successive meeting. The yen remained under pressure providing lift for USD/JPY which climbed above 157 on Thursday, a level last seen in July.

What does it mean for the Europe & US sessions?

After Thursday’s pause by the Bank of England (BoE), focus will now shift to consumer spending in the U.K. which registered its first monthly decline in four months as sales fell 0.7% MoM in October. However, sales now expected to rebound 0.5% in November and higher figures could provide the pound with a much-needed lift for Cable.

Retail sales in Canada have grown steadily since July with October’s estimate of 0.7% pointing to a fourth consecutive month of higher consumer spending. This would also mark the second highest sales growth of this year. The Loonie has depreciated significantly in 2024 causing USD/CAD to soar more than 9% as it hit a high of 1.4466 on Thursday. Stronger-than-expected sales could provide a near-term boost for the Loonie and potentially rein in the astronomical rise for USD/CAD.

The Dollar Index (DXY)

Key news events today

PCE Price Index (1:30 pm GMT)

What can we expect from DXY today?

Inflation in the U.S. accelerated in November as evident in the most-recent CPI and PPI data that were released last week. The PCE Price Index – which is the Federal Reserve’s preferred gauge of inflation – also accelerated for the first time this year with headline and core PCE increasing at an annual rate of 2.3% and 2.8% respectively for the month of October. Should the PCE Price Index rise higher for the second month in a row, demand for the dollar will likely surge once more. The DXY looks all set to notch its third week of gains as it already jumped more than 1% this week alone.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted by a majority to lower the Federal Funds Rate target range by 25 basis points to 4.25 to 4.50% on 18 December. Voting against the action was Beth M. Hammack, who preferred to maintain the target range at 4.5 to 4.75%.
• 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.
• The Summary of Economic Projections (SEP) now indicates just two rate cuts in 2025 totalling 50 bps, compared to the full percentage point of reductions projected in the previous quarter.
• GDP growth forecasts were revised upward for 2024 (2.5% vs to 2% in the September projection) and 2025 (2.1% vs 2%), while remaining steady at 2% for 2026. Similarly, PCE inflation projections have been adjusted higher for 2024 (2.4% vs 2.3%), 2025 (2.5% vs 2.1%), and 2026 (2.1% vs 2%).
• 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 28 to 29 January 2025.

Next 24 Hours Bias

Strong Bullish

Gold (XAU)

Key news events today

PCE Price Index (1:30 pm GMT)

What can we expect from Gold today?

Inflation in the U.S. accelerated in November as evident in the most-recent CPI and PPI data that were released last week. The PCE Price Index – which is the Federal Reserve’s preferred gauge of inflation – also accelerated for the first time this year with headline and core PCE increasing at an annual rate of 2.3% and 2.8% respectively for the month of October. Should the PCE Price Index rise higher for the second month in a row, demand for the dollar will likely surge once more and potentially weigh heavily on gold prices.

Next 24 Hours Bias

Medium Bearish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

Robust demand for the greenback drove the Aussie briefly under 0.6200 on Thursday. This currency pair was hovering around 0.6230 as Asian markets came online on Friday but overhead pressures remain intact – these are the support and resistance levels for today.

Support: 0.6170

Resistance: 0.6290

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

Strong Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

After plunging as low as 0.5607 on Thursday, the Kiwi retraced higher to climb above 0.5650 overnight but intense headwinds remain firm. This currency pair was sliding towards 0.5600 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 0.5557

Resistance: 0.5770

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

Strong Bearish

The Japanese Yen (JPY)

Key news events today

National Core CPI (11:30 pm GMT 19th December)

What can we expect from JPY today?

After moderating lower from 2.8% in August to 2.3% in October, core CPI in Japan unexpectedly accelerated to 2.7% YoY in November as it beat the estimate of 2.6%. Japan’s core inflation has consistently remained at or above the Bank of Japan’s 2% target for over two and a half years, which has contributed to their more hawkish stance this year but that was not enough as the central bank paused for the third successive meeting. The yen remained under pressure providing lift for USD/JPY which climbed above 157 on Thursday, a level last seen in July.

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 19 December, by a 8-1 majority 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.
• Japan’s economy has recovered moderately, although some weakness has been seen in part. Exports and industrial production have been more or less flat while corporate profits have been on an improving trend and business sentiment has stayed at a favourable level.
• The employment and income situation has improved moderately while private consumption has been on a moderate increasing trend despite the impact of price rises and other factors.
• On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) has been in the range of 2.0-2.5% recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a passthrough to consumer prices of cost increases led by the past rise in import prices have waned; inflation expectations have risen moderately.
• With regard to the CPI (all items less fresh food), while the effects of the 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.
• 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 24 January 2025.

Next 24 Hours Bias

Strong Bullish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

After tumbling as low as 1.0343 on Thursday, the Euro retraced higher towards 1.0430 before running out of steam overnight. This currency pair promptly fell under the 1.0400-level once more as Asian markets came online – these are the support and resistance levels for today.

Support: 1.0240

Resistance: 1.0460

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

Medium Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

After hitting a high of 0.9021 on Thursday, USD/CHF pulled back towards 0.8960 but remained elevated. This currency pair resumed the uptrend as it raced towards the threshold of 0.9000 once again and it should climb above this level on the final trading day of the week – these are the support and resistance levels for today.

Support: 0.8920

Resistance: 0.9040

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

Medium Bullish

The Pound (GBP)

Key news events today

Retail Sales (1:30 pm GMT)

What can we expect from GBP today?

After Thursday’s pause by the Bank of England (BoE), focus will now shift to consumer spending in the U.K. which registered its first monthly decline in four months as sales fell 0.7% MoM in October. However, sales now expected to rebound 0.5% in November and higher figures could provide the pound with a much-needed lift for Cable.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6 to 3 to maintain the Bank Rate at 4.75% on 19 December 2024 – three members preferred to reduce the Bank rate by 25 basis points, bringing it down to 4.50%.
• 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. On 18 December 2024, the stock of UK government bonds held for monetary policy purposes was £655B.
• Twelve-month CPI inflation had increased to 2.6% in November from 1.7% in September, slightly higher than previous expectations while services consumer price inflation had remained elevated, at 5.0%, while core goods price inflation had risen to 1.1%.
• Headline CPI inflation was slightly higher than previous expectations, owing in large part to stronger inflation in core goods and food, and is expected to continue to rise slightly in the near term.
• Most indicators of UK near-term activity have declined with Bank staff expecting GDP growth to be weaker at the end of the year than originally projected in the November Monetary Policy Report.
• Bank staff now expected zero GDP growth in 2024 Q4, weaker than the 0.3% that had been incorporated in the November Report, broadly consistent with the latest combined steer from business surveys and the available official data.
• The Committee now judges that the labour market is broadly in balance as annual private sector regular average weekly earnings growth picked up quite sharply in the three months to October but there remains significant uncertainty around developments in the labour market.
• Monetary policy has been guided by the need to squeeze remaining inflationary pressures out of the economy to achieve the 2% target both in a timely manner and on a lasting basis. Over recent quarters there has been progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly.
• The Committee continues to monitor closely the risks of inflation persistence and will assess the extent to which the evolving evidence is consistent with more constrained supply, which could sustain inflationary pressures, or with weaker demand, which could lead to the emergence of spare capacity in the economy and push down inflation; a gradual approach to removing monetary policy restraint remains appropriate.
• 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 and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 6 February 2025.

Next 24 Hours Bias

Strong Bearish

The Canadian Dollar (CAD)

Key news events today

Retail Sales (1:30 pm GMT)

What can we expect from CAD today?

Retail sales in Canada have grown steadily since July with October’s estimate of 0.7% pointing to a fourth consecutive month of higher consumer spending. This would also mark the second highest sales growth of this year. The Loonie has depreciated significantly in 2024 causing USD/CAD to soar more than 9% as it hit a high of 1.4466 on Thursday. Stronger-than-expected sales could provide a near-term boost for the Loonie and potentially rein in the astronomical rise for USD/CAD.

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

Medium Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Prices for crude oil remain under pressure as WTI oil tumbled 1.7% on Thursday as dour economic outlook adds to oversupply concerns – softening economic activity could deepen a slowdown in oil demand growth in 2025. WTI oil looks set to fall under the $69-mark and looks to be on course for a 3.5% weekly decline.

Next 24 Hours Bias

Medium Bearish

The post IC Markets Europe Fundamental Forecast | 20 December 2024 first appeared on IC Markets | Official Blog.

Trump says on social media:

“I told the European Union that they must make up their tremendous deficit with the United States by the large scale purchase of our oil and gas. Otherwise, it is TARIFFS all the way!!!”

It looks like even with a keen focus on China, the EU will not slip his mind when he enters office next month.

He also comments on the debt ceiling as per below:

“Congress must get rid of, or extend out to, perhaps, 2029, the ridiculous Debt Ceiling. Without this, we should never make a deal. Remember, the pressure is on whoever is President.”

This article was written by Justin Low at www.forexlive.com.

And just like, another year has come and gone. This is arguably the final real trading day of the year for markets and it should be a case of winding things down after the central bank bonanza since last week. The dollar remains in a prominent position after the Fed while stocks remain shaky as long-end yields continue to rise.

Risk troubles look to be taking shape but the consolation for investors is that we’re just about to wrap up the year. Lighter and thinner flows might ease the pain but at the same time, it’s a double-edged sword as it could exacerbate the underlying mood. But it is year-end anyway. There’s no point in trying to make sense of things in the next two weeks.

We still have to get through today though. And looking to the session ahead, there won’t be much on the agenda to impact broader markets. It’s a case of continuing the post-Fed reaction but for major currencies, do keep an eye out on the option expiries list here.

UK retail sales is the standout item on the calendar and it is estimated to show a bounce after a poor start to Q4 here. If Black Friday sales isn’t enough to lift retail sales, then it would be a very dark outlook for UK consumer sentiment as we look towards next year.

0700 GMT – Germany November PPI figures0700 GMT – UK November retail sales data1100 GMT – UK December CBI retailing reported sales

That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.

This article was written by Justin Low at www.forexlive.com.

DXY (US Dollar Index):

Potential Direction: Bullish
Overall momentum of the chart: Bullish

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

Pivot: 107.56
Supporting reasons: Identified as a pullback support, indicating a potential area where buying pressures could intensify.

1st support: 106.78
Supporting reasons: Identified as an overlap support, indicating a potential level where price could find support once more.

1st resistance: 108.78
Supporting reasons: Identified as a resistance that aligns with the 127.2% Fibonacci extension, 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: 1.0450
Supporting reasons: Identified as a pullback resistance, indicating a potential area where selling pressures could intensify.

1st support: 1.0333

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

1st resistance: 1.0606
Supporting reasons:  Identified as an overlap resistance,  indicating a potential area that could halt any further upward movement.

EUR/JPY:

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: 163.43.
Supporting reasons: Identified as an overlap resistance that aligns with the 127.2% Fibonacci retracement, indicating a potential area where selling pressures could intensify

1st support: 160.53

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

1st resistance: 164.94
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 the pivot and rise toward the 1st resistance

Pivot: 0.8270
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: 0.8325
Supporting reasons: Identified as a swing high resistance, indicating a potential area that could halt any further upward movement.

GBP/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: 1.2616
Supporting reasons: Identified as a pullback resistance, indicating a potential area where selling pressures could intensify

1st support: 1.2488

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

1st resistance: 1.2719
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

GBP/JPY:

Potential Direction: Bullish

Overall momentum of the chart: Bullish

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

Pivot: 195.84
Supporting reasons: Identified as a pullback support, indicating a potential area where buying pressures could intensify.

1st support: 193.17
Supporting reasons: Identified as an overlap support, indicating a key level where price could find support once more.

1st resistance: 199.55
Supporting reasons: Identified as a swing high resistance close to the 78.6% Fibonacci projection, 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: 0.8974
Supporting reasons: Identified as an overlap support, indicating a potential area where buying pressures could intensify.

1st support: 0.8909

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

1st resistance: 0.9074
Supporting reasons: Identified a resistance that aligns with the 61.8% Fibonacci projection, indicating a potential area that could halt any further upward movement.

USD/JPY:

Potential Direction: Bullish

Overall momentum of the chart: Bullish

Price could potentially make a bullish continuation toward the 1st resistance

Pivot: 156.57
Supporting reasons: Identified as a pullback support, indicating a potential area where buying pressures could intensify.

1st support: 154.90
Supporting reasons: Identified as a pullback support, indicating a potential level where price could find support once again.

1st resistance: 159.04
Supporting reasons: Identified as a resistance that aligns with the 100% Fibonacci projection, 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: 1.4517

Supporting reasons: Identified as a multi-swing-high resistance, indicating a potential level where selling pressures could intensify.

1st support: 1.4336
Supporting reasons: Identified as a pullback support that aligns close to a 23.6% Fibonacci retracement, indicating a key level where price could find support.

1st resistance: 1.4602
Supporting reasons: Identified as a 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: 0.6251

Supporting reasons: Identified as a pullback resistance, suggesting a key area where selling pressures have intensified. The presence of a red Ichimoku Cloud adds further significance to the strength of this resistance zone.

1st support: 0.6193
Supporting reasons: Identified as a multi-swing-low support, suggesting a potential area where price could find support once more.

1st resistance: 0.6285
Supporting reasons: Identified as a pullback resistance that aligns close to 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 could rise towards the pivot and potentially make a bearish reversal off this level to fall towards the 1st support.

Pivot: 0.5684

Supporting reasons: Identified as an overlap resistance, indicating a potential area where selling pressures could intensify. The presence of a red Ichimoku Cloud adds further significance to the strength of this resistance zone.

1st support: 0.5553
Supporting reasons: Identified as a swing-low support, suggesting a key support area where price could find support once again.

1st resistance: 0.5798
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.

US30 (DJIA):

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: 42,654.55

Supporting reasons: Identified as an overlap resistance, indicating a potential area where selling pressures could intensify. The presence of a red Ichimoku Cloud adds further significance to the strength of this resistance zone.

1st support: 41,762.06

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

1st resistance: 43,045.19

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: Bearish

Price is making a bearish break below the pivot and could potentially fall towards the 1st support.

Pivot: 19,902.14
Supporting reasons: Identified as a potential breakout level where the strong bearish momentum could drive price lower.

1st support: 19,664.76

Supporting reasons: Identified as a pullback support that aligns close to a 50% Fibonacci retracement, indicating a key level where price could find support.

1st resistance: 20,202.28
Supporting reasons: Identified as a pullback resistance, indicating a potential area that could halt any further upward movement.

US500 (S&P 500): 

Potential Direction: Bearish
Overall momentum of the chart: Bearish

Price is making a bearish break below the pivot and could potentially fall towards the 1st support.

Pivot: 5,853.30

Supporting reasons: Identified as a potential breakout level where the strong bearish momentum could drive price lower.

1st support: 5,761.80

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

1st resistance: 5,930.30
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

BTC/USD (Bitcoin):

Potential Direction: Bearish
Overall momentum of the chart: Bearish

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

Pivot: 99,518.87

Supporting reasons: Identified as a potential breakout level where the strong bearish momentum could drive price lower.

1st support: 92,791.73
Supporting reasons: Identified as an overlap support that aligns with a 38.2% Fibonacci retracement, indicating a potential level where price could find support once again.

1st resistance:  103,493.90
Supporting reasons: Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

ETH/USD (Ethereum):

Potential Direction: Bearish
Overall momentum of the chart: Bearish

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

Pivot: 3,501.55

Supporting reasons: Identified as a potential breakout level where the strong bearish momentum could drive price lower.

1st support: 3,283.12
Supporting reasons: Identified as an overlap support that aligns with a confluence of Fibonacci levels i.e. a 78.6% retracement and a 127.2% extension, indicating a potential level where price could find support once more.

1st resistance: 3,688.94
Supporting reasons:  Identified as an overlap resistance, indicating a potential area that could halt any further upward movement.

WTI/USD (Oil):

Potential Direction: Bullish
Overall momentum of the chart: Neutral

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

Pivot: 69.13
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: 67.92
Supporting reasons: Identified as a pullback support that aligns close to a 78.6% Fibonacci retracement, indicating a key level where price could find support once again.

1st resistance: 70.61
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.

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 

Pivot: 262619.67
Supporting reasons: Identified as an overlap resistance, indicating a potential area where selling pressures could intensify.

1st support: 2585.41

Supporting reasons: Identified as an overlap support that aligns with the 127.2% Fibonacci extension, indicating a potential level where price could find support.

1st resistance: 2665.06

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

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The post Friday 20th December 2024: Technical Outlook and Review first appeared on IC Markets | Official Blog.

IC Markets Asia Fundamental Forecast | 20 December 2024

What happened in the U.S. session?

As widely expected, the Bank of England (BoE) maintained its Official Bank Rate (OBR) at 4.75% to mark the second pause over the past four meetings. The Monetary Policy Committee (MPC) voted by a majority of 6 to 3 to keep rates on hold, with three members preferring a reduction of 25 basis points which would have brought the OBR to 4.5%. With CPI inflation, wage growth and some indicators of inflation expectations rising in recent months, adding to the risk of inflation persistence, the central bank reinforced that a gradual approach to removing monetary policy restraint remains appropriate. Despite the relatively ‘hawkish’ statement, the pound sold off sharply as Cable plunged over 1% following the announcement, losing more than 130 pips in the process as it tumbled under 1.2500.

Moving over to stateside, the final GDP reading for the third quarter of this year showed the American economy growing stronger than its second estimate of 2.8% and above the second quarter’s reading. GDP expanded at an annual rate of 3.1% to mark the biggest growth rate so far this year as personal spending increased at the fastest pace since the first quarter of 2023 while fixed investment and investment in equipment also soared. Along with unemployment claims which moderated lower to 220K – a sign of labour market resilience – these macroeconomic data provided another strong tailwind for the greenback as the dollar index (DXY) surged past 108 to hit an overnight high of 108.48.

What does it mean for the Asia Session?

After moderating lower from 2.8% in August to 2.3% in October, core CPI in Japan unexpectedly accelerated to 2.7% YoY in November as it beat the estimate of 2.6%. Japan’s core inflation has consistently remained at or above the Bank of Japan’s 2% target for over two and a half years, which has contributed to their more hawkish stance this year but that was not enough as the central bank paused for the third successive meeting. The yen remained under pressure providing lift for USD/JPY which climbed above 157 on Thursday, a level last seen in July.

The Dollar Index (DXY)

Key news events today

PCE Price Index (1:30 pm GMT)

What can we expect from DXY today?

Inflation in the U.S. accelerated in November as evident in the most-recent CPI and PPI data that were released last week. The PCE Price Index – which is the Federal Reserve’s preferred gauge of inflation – also accelerated for the first time this year with headline and core PCE increasing at an annual rate of 2.3% and 2.8% respectively for the month of October. Should the PCE Price Index rise higher for the second month in a row, demand for the dollar will likely surge once more. The DXY looks all set to notch its third week of gains as it already jumped more than 1% this week alone.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted by a majority to lower the Federal Funds Rate target range by 25 basis points to 4.25 to 4.50% on 18 December. Voting against the action was Beth M. Hammack, who preferred to maintain the target range at 4.5 to 4.75%.
• 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.
• The Summary of Economic Projections (SEP) now indicates just two rate cuts in 2025 totalling 50 bps, compared to the full percentage point of reductions projected in the previous quarter.
• GDP growth forecasts were revised upward for 2024 (2.5% vs to 2% in the September projection) and 2025 (2.1% vs 2%), while remaining steady at 2% for 2026. Similarly, PCE inflation projections have been adjusted higher for 2024 (2.4% vs 2.3%), 2025 (2.5% vs 2.1%), and 2026 (2.1% vs 2%).
• 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 28 to 29 January 2025.

Next 24 Hours Bias

Strong Bullish

Gold (XAU)

Key news events today

PCE Price Index (1:30 pm GMT)

What can we expect from Gold today?

Inflation in the U.S. accelerated in November as evident in the most-recent CPI and PPI data that were released last week. The PCE Price Index – which is the Federal Reserve’s preferred gauge of inflation – also accelerated for the first time this year with headline and core PCE increasing at an annual rate of 2.3% and 2.8% respectively for the month of October. Should the PCE Price Index rise higher for the second month in a row, demand for the dollar will likely surge once more and potentially weigh heavily on gold prices.

Next 24 Hours Bias

Medium Bearish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

Robust demand for the greenback drove the Aussie briefly under 0.6200 on Thursday. This currency pair was hovering around 0.6230 as Asian markets came online on Friday but overhead pressures remain intact – these are the support and resistance levels for today.

Support: 0.6170

Resistance: 0.6290

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

Strong Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

After plunging as low as 0.5607 on Thursday, the Kiwi retraced higher to climb above 0.5650 overnight but intense headwinds remain firm. This currency pair was sliding towards 0.5600 at the beginning of the Asia session – these are the support and resistance levels for today.

Support: 0.5557

Resistance: 0.5770

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

Strong Bearish

The Japanese Yen (JPY)

Key news events today

National Core CPI (11:30 pm GMT 19th December)

What can we expect from JPY today?

After moderating lower from 2.8% in August to 2.3% in October, core CPI in Japan unexpectedly accelerated to 2.7% YoY in November as it beat the estimate of 2.6%. Japan’s core inflation has consistently remained at or above the Bank of Japan’s 2% target for over two and a half years, which has contributed to their more hawkish stance this year but that was not enough as the central bank paused for the third successive meeting. The yen remained under pressure providing lift for USD/JPY which climbed above 157 on Thursday, a level last seen in July.

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 19 December, by a 8-1 majority 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.
• Japan’s economy has recovered moderately, although some weakness has been seen in part. Exports and industrial production have been more or less flat while corporate profits have been on an improving trend and business sentiment has stayed at a favourable level.
• The employment and income situation has improved moderately while private consumption has been on a moderate increasing trend despite the impact of price rises and other factors.
• On the price front, the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) has been in the range of 2.0-2.5% recently, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a passthrough to consumer prices of cost increases led by the past rise in import prices have waned; inflation expectations have risen moderately.
• With regard to the CPI (all items less fresh food), while the effects of the 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.
• 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 24 January 2025.

Next 24 Hours Bias

Strong Bullish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

After tumbling as low as 1.0343 on Thursday, the Euro retraced higher towards 1.0430 before running out of steam overnight. This currency pair promptly fell under the 1.0400-level once more as Asian markets came online – these are the support and resistance levels for today.

Support: 1.0240

Resistance: 1.0460

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

Medium Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

After hitting a high of 0.9021 on Thursday, USD/CHF pulled back towards 0.8960 but remained elevated. This currency pair resumed the uptrend as it raced towards the threshold of 0.9000 once again and it should climb above this level on the final trading day of the week – these are the support and resistance levels for today.

Support: 0.8920

Resistance: 0.9040

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

Medium Bullish

The Pound (GBP)

Key news events today

Retail Sales (1:30 pm GMT)

What can we expect from GBP today?

After Thursday’s pause by the Bank of England (BoE), focus will now shift to consumer spending in the U.K. which registered its first monthly decline in four months as sales fell 0.7% MoM in October. However, sales now expected to rebound 0.5% in November and higher figures could provide the pound with a much-needed lift for Cable.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 6 to 3 to maintain the Bank Rate at 4.75% on 19 December 2024 – three members preferred to reduce the Bank rate by 25 basis points, bringing it down to 4.50%.
• 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. On 18 December 2024, the stock of UK government bonds held for monetary policy purposes was £655B.
• Twelve-month CPI inflation had increased to 2.6% in November from 1.7% in September, slightly higher than previous expectations while services consumer price inflation had remained elevated, at 5.0%, while core goods price inflation had risen to 1.1%.
• Headline CPI inflation was slightly higher than previous expectations, owing in large part to stronger inflation in core goods and food, and is expected to continue to rise slightly in the near term.
• Most indicators of UK near-term activity have declined with Bank staff expecting GDP growth to be weaker at the end of the year than originally projected in the November Monetary Policy Report.
• Bank staff now expected zero GDP growth in 2024 Q4, weaker than the 0.3% that had been incorporated in the November Report, broadly consistent with the latest combined steer from business surveys and the available official data.
• The Committee now judges that the labour market is broadly in balance as annual private sector regular average weekly earnings growth picked up quite sharply in the three months to October but there remains significant uncertainty around developments in the labour market.
• Monetary policy has been guided by the need to squeeze remaining inflationary pressures out of the economy to achieve the 2% target both in a timely manner and on a lasting basis. Over recent quarters there has been progress in disinflation, particularly as previous external shocks have abated, although remaining domestic inflationary pressures are resolving more slowly.
• The Committee continues to monitor closely the risks of inflation persistence and will assess the extent to which the evolving evidence is consistent with more constrained supply, which could sustain inflationary pressures, or with weaker demand, which could lead to the emergence of spare capacity in the economy and push down inflation; a gradual approach to removing monetary policy restraint remains appropriate.
• 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 and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 6 February 2025.

Next 24 Hours Bias

Strong Bearish

The Canadian Dollar (CAD)

Key news events today

Retail Sales (1:30 pm GMT)

What can we expect from CAD today?

Retail sales in Canada have grown steadily since July with October’s estimate of 0.7% pointing to a fourth consecutive month of higher consumer spending. This would also mark the second highest sales growth of this year. The Loonie has depreciated significantly in 2024 causing USD/CAD to soar more than 9% as it hit a high of 1.4466 on Thursday. Stronger-than-expected sales could provide a near-term boost for the Loonie and potentially rein in the astronomical rise for USD/CAD.

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

Medium Bullish

Oil

Key news events today

No major news events.

What can we expect from Oil today?

Prices for crude oil remain under pressure as WTI oil tumbled 1.7% on Thursday as dour economic outlook adds to oversupply concerns – softening economic activity could deepen a slowdown in oil demand growth in 2025. WTI oil looks set to fall under the $69-mark and looks to be on course for a 3.5% weekly decline.

Next 24 Hours Bias

Medium Bearish

The post IC Markets Asia Fundamental Forecast | 20 December 2024 first appeared on IC Markets | Official Blog.

• Japan yen intervention official says will take appropriate action against excess FX moves
• China one year bond yield drops to 1%, first time in 15 years
• New Zealand credit card spending -3.2% y/y in November (prior +0.3%)
• South Korea to ease FX regulations to improve liquidity conditions
• U.S. authorities may ban Chinese-made TP-Link internet routers, used in millions of homes
• PBOC sets USD/ CNY reference rate for today at 7.1901 (vs. estimate at 7.3086)
• USD/JPY (finally) responds (a little) to intervention comments
• PBOC sets 1 year Loan Prime Rate (LPR) at 3.1% and 5-year at 3.6%, both unchanged
• Japan fin min Kato with verbal intervention on JPY – recent one-side, sharp yen moves
• Australian November data – Private Sector Credit +0.5% m/m (expected +0.5%)
• People’s Bank of China Loan Prime Rate (LPR) setting due today – why its less relevant
• USD/JPY hits a 5-month high just shy of 158.00
• Largest construction machinery firm fears Trump tariffs – our business based on free trade
• US Bill to avert a government shutdown has failed
• Japan November headline CPI +2.9% (expected +2.9%, prior 2.3%)
• The Federal Reserve saved US equities from a bubble (but there’s still a chance!)
• US inflation (PCE) data due Friday – here are the critical ranges to watch
• New Zealand exports in November higher than in October (imports lower)
• Forexlive Americas FX news wrap 19 Dec: BOE keeps rate unchanged but is more dovish
• Federal Reserve monetary policy has entered a new phase – may be quite different
• US broader indices give up gains and close lower on the day
• New Zealand December consumer confidence jumps into optimism! 100.2 (prior 99.8)
• Trade ideas thread – Friday, 20 December, insightful charts, technical analysis, ideas

From
Japan today we had inflation data for November. Inflation rates moved
solidly higher, well above the Bank of Japan 2% target level, above
expectations, and above October levels. The “core-core”
inflation rate, which strips out prices of fresh food and energy and
is the closest to the US measure of core inflation moved to its
highest level since April.

Despite
this the yen slid even lower, with USD/JPY ticking to 5-month highs
above 157.90.

Then
we had intervention type comments from Japan’s finance minister
Kato. He used forthright words such as:

• one-sided
• sharp
  moves
• speculation

which
are indicative of a greater degree of concern.

It
took some time, but eventually the yen displayed some strength, with
USD/JPY dropping back towards 157.15 and thereabouts. Its since been a little lower.

China
left its benchmark lending rates unchanged, as expected, at the
monthly fixing today.

• the
  one-year loan prime rate (LPR) was kept at 3.10%,
• the
  five-year LPR unchanged also, at 3.60%.

These
rates were last cut in October; the 1-year by 25bp from 3.35% and the
5-year also by 25bp, from 3.85%. These cuts were the largest since
the LPR reform in August 2019 and marked the third reduction in 2024.

In
other news the US government moved closer to a shutdown. A bill aimed
at furthering funding for the government, promoting Trump’s
recommendation to further expand US government debt failed in the
House in Congress. Republicans have a majority in the House but many
disagree with fiscal profligacy.

Still
to come is the critical US inflation data – PCE – at 8.30am US
Eastern time. There is a ‘ranges to watch’ preview above.

***

As I was posting we had more intervention type comments from Japan, this time from Atsushi Mimura, Japan’s vice finance minister for international affairs, AKA ‘top currency diplomat’. USD/JPY is little changed on these so far.

USD/JPY update:

This article was written by Eamonn Sheridan at www.forexlive.com.

Mimura verbal intervention. Atsushi Mimura is Japan’s vice finance minister for international affairs, AKA ‘top currency diplomat’.

• Am gravely concerned about forex moves.
• Will take appropriate action against excessive forex moves.
• Alarmed, including over speculative moves.
• Believe it is not appropriate for me to comment further on forex.
• Won’t comment on BOJ’s communication given its independence.

Earlier today we had USD/JPY knocked from its 5-month high by intervention remarks from finance minister Kato:

• Japan fin min Kato with verbal intervention on JPY – recent one-side, sharp yen moves

This article was written by Eamonn Sheridan at www.forexlive.com.

China one year bond yield drops to 1%, first time since 2009.

Earlier today we had the 1- and 5-year rates set unchanged:

• PBOC sets 1 year Loan Prime Rate (LPR) at 3.1% and 5-year at 3.6%, both unchanged

No reduction despite ongoing easing pressure. The People’s Bank of China seems very concerned that further rate cuts would prompt further yuan weakness and capital flight.

This article was written by Eamonn Sheridan at www.forexlive.com.

Finance ministry / Bank of Korea joint statement:

• South
  Korea
  to ease FX
  regulations to improve liquidity conditions

No further details as yet.

Here we go, more, via Reuters:

• “Strict regulations restrain the efficiency of foreign
  exchange management, and there is a need to take into account
  worsened foreign exchange liquidity conditions after recent
  events,”
• ceiling of foreign exchange
  futures contracts will be raised to 75% of capital holdings for
  local banks and 375% for Seoul branches of foreign banks, from
  the current 50% and 250%, respectively.
• measures also include allowing companies to take out loans
  in foreign currencies and exchange the funds for the won, if
  they are used for investing in facilities such as equipment,
  property and land purchases.
• ministry said it would implement the measures in a swift
  manner and consider expanding them after reviewing the effects.

This article was written by Eamonn Sheridan at www.forexlive.com.

The Wall Street Journal carries the report (gated):

• U.S. Weighs Ban on Chinese-Made Router in Millions of American Homes

In brief:

• U.S. authorities are investigating whether TP-Link, a Chinese company dominating the U.S. home and small-business router market, poses a national security threat due to its alleged links to cyberattacks. The company, which supplies internet routers to federal agencies, including the Defense Department, is under scrutiny by multiple government agencies, including Commerce, Defense, and Justice.
• A ban on TP-Link devices in the U.S. is being considered for next year. The matter may be addressed by the incoming Trump administration, which has signaled a tough stance on China.

This article was written by Eamonn Sheridan at www.forexlive.com.

Markets Calm After Fed Storm – Nasdaq off 0.1%

US stock markets had a bit of a breather yesterday after Wednesday’s volatile post-Fed moves. All three major indices closed close to flat: the Dow added 0.04%, the S&P lost 0.09%, and the Nasdaq fell 0.1%. The US Treasury yield curve steepened, with the 2-year yield losing 3.8 basis points to move back to 4.317%, while the 10-year benchmark moved 4.8 basis points higher to 4.562%. The dollar continued to push higher, although much slower than its post-Fed surge, with the DXY gaining 0.27% to close at 108.40. Oil prices fell again as future demand concerns continued to weigh, with Brent down 0.95% to $72.69 and WTI down 0.91% to $69.38. Gold had a lively day as well, ultimately recovering a small amount of the previous day’s loss, closing up 0.24% at $2,593.05.

Cable to Weaken After Dovish Bank of England

It has been a near-perfect storm for Cable bears over the last few trading sessions as both associated central banks have pushed the major currency pair lower. Cable was on the back foot into yesterday’s Bank of England rate call after the Fed produced a hawkish cut the previous day. When the MPC held rates as expected, but the rate vote showed that 3 members (not the expected 2) had pushed for a cut, we saw a further extension of the move south. The market is now pricing in 55 basis points worth of cuts next year, compared to 45 basis points before the decision, and traders will be looking for levels to sell in the coming days. Cable has found some support near the November low, but a break lower now opens the way for a move to challenge the annual low at 1.2296 before the end of the year.

Another Busy Calendar Day to See Out the Week

It’s another full calendar day today to close out the week, with macroeconomic events scheduled across all three trading sessions. Chinese markets are in focus in the Asian session, with the key Loan Prime Rates updates scheduled for midway through the day, with investors again hoping for some stimulus for the world’s second-largest economy. Another day and another data release from the UK once Europe comes into play, with Retail Sales numbers due out early in the session. The expectation is for a 0.5% increase in the month-on-month data, and a miss here could see Cable drop hard. The US day kicks off with focus north of the border on Canadian Retail Sales, but US Core PCE data is set to dominate overall market sentiment as we move into the final trading session of a volatile week.

The post General Market Analysis – 20/12/24 first appeared on IC Markets | Official Blog.

Komatsu is the world’s second-largest construction machinery firm, after Caterpillar ( yes, my headline is incorrect on this point).

• Top Business Risk for Komatsu:

  • Komatsu’s primary concern under Trump’s presidency is potential retaliatory tariffs by Canada on American-made mining machines.
  • Canada’s retaliatory duties could significantly impact Komatsu, as Canada is the largest export destination for its U.S.-made mining equipment.

• Trump’s Trade Policies:

  • Trump’s proposed tariffs on imports from Canada, China, and Mexico may provoke retaliatory trade barriers.
  • Komatsu, a global manufacturer earning over 25% of its sales from North America, sees retaliatory tariffs as a “one-two punch” to its export-focused business model.

• Komatsu’s U.S. Operations:

  • The company employs about 8,000 staff in the U.S. and exports $1 billion more than it imports annually, following its acquisition of Joy Global in 2017.
  • Komatsu relies on free trade for its U.S. operations and views a potential trade war as a major threat.

• Impact of Tariffs on Components:

  • Tariffs on U.S.-bound components like sheet metal from China would have a minor impact and could be mitigated by shifting to alternative suppliers in Southeast Asia within 2-3 months.

• Fossil Fuel and Heavy Machinery Demand:

  • Trump’s pro-fossil fuel stance might offset declining U.S. demand for heavy machinery caused by oversupply in the rental market.

• Komatsu’s Investment Plans:

  • Komatsu plans to invest $80 million in a mining equipment service center in Arizona and $65 million in ABS, a Detroit-based battery maker acquired in 2023.
  • The company remains committed to investing in the U.S., regardless of the political landscape.

• Market Outlook:

  • Komatsu expects a “challenging” business environment in the upcoming fiscal year, with flat global demand, rising fixed costs, and limited opportunities for price increases as supply chains normalize.

***

Political meddling is going to weigh into a rocky 2025 for many firms.

This article was written by Eamonn Sheridan at www.forexlive.com.