EURUSD
- EUR/USD is trading within a narrow range near 1.1050 in early Europe on Wednesday. The holiday season, coupled with the final week of 2023, has contributed to a lack of clear directional bias in the pair.
- The US Dollar is struggling against major currencies, including the Euro, as expectations of a dovish stance from the Federal Reserve (Fed) gain momentum. Money markets are increasingly anticipating a faster pace of rate cuts from the Fed throughout 2024, driven by declining inflation metrics that outpace most models' predictions.
- Despite a moderate pullback in the US Dollar late on Friday, it remains notably down for the week. Against the Euro, the Dollar has depreciated by nearly a third of a percent from Monday's opening bids.
- From a technical standpoint, the EUR/USD pair is leaning toward the bullish side. Technical support flags have been established in the pair's ascent from the lows near 1.0450 recorded in October.
- The primary factors influencing EUR/USD include the dovish expectations surrounding the Federal Reserve's future actions, the holiday-induced subdued market conditions, and the technical signals suggesting a bullish inclination.
| SMA (20) | Slightly Rising |
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| RSI (14) | Slightly Rising |
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| MACD (12, 26, 9) | Slightly Rising |
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Closing statement: EUR/USD is navigating a narrow range in the context of the holiday season, with a weaker US Dollar being a notable theme. Dovish expectations for the Federal Reserve's policy, coupled with technical factors favouring the Euro, contribute to the current dynamics in the EUR/USD pair.
GBPUSD
- GBP/USD is trading above 1.2700 in the European morning on Wednesday.
- The pair benefits from the divergent monetary policy outlooks between the Federal Reserve (Fed) and the Bank of England (BoE), which weakens the US Dollar. This dynamic is contributing to keeping GBP/USD afloat amid light trading conditions typical of the year-end period.
- Retail Sales in the UK recorded a 1.3% monthly increase in November, according to the report from the UK's Office for National Statistics (ONS) released on Friday. This positive data could be providing support to the British Pound.
- On a negative note, the ONS revised the annualized Gross Domestic Product (GDP) growth for the third quarter lower to 0.3% from the initial estimate of 0.6%. This downward revision might be influencing sentiment, but the impact on the pair is not explicitly stated.
- If GBP/USD struggles to maintain stability above 1.2700, potential support levels include 1.2660 (50-period Simple Moving Average or SMA), 1.2630 (100-period SMA), and 1.2600 (Fibonacci 23.6% retracement of the latest uptrend).
| SMA (20) | Rising |
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| RSI (14) | Rising |
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| MACD (12, 26, 9) | Neutral |
Closing statement: GBP/USD remains above 1.2700, influenced by the contrast in monetary policy outlooks between the Fed and BoE. Positive UK Retail Sales data supports the Pound, but a revised lower GDP growth figure for Q3 is noted. Technical support levels are outlined if the pair faces downward pressure.
GOLD
- Gold (XAU/USD) has experienced a correction, snapping a three-day uptrend and trading near $2,070 early on Wednesday.
- The correction in Gold is attributed to the US Dollar (USD) finding its footing amid a cautious market mood. The USD's strength is influencing the precious metal.
- Market dynamics around Gold are influenced by muted activity in the US Federal Reserve (Fed) interest rate cut expectations for the upcoming year. The cautious stance on rate cuts leaves gold buyers uncertain.
- Gold had been on a three-day uptrend, supported by increased expectations of Fed rate cuts in 2024. The market is currently pricing in a 79% chance of a rate cut starting in March 2024, according to the CME FedWatch tool. The pricing indicates as much as 153 basis points (bps) of cuts for the next year.
- The dovish sentiment around the Fed's policy pivot gained strength after data from the Commerce Department showed that the Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, rose just 0.1% in November and was up 3.2% from a year ago.
- Gold investors are expected to trade cautiously as full markets return. The pre-New Year curtailed week might continue to see muted volumes.
Closing statement: Gold experiences a correction, snapping a recent uptrend, influenced by the USD's strength amid a cautious market mood. The Gold market is also affected by muted activity in Fed interest rate cut expectations for 2024, with investors exercising caution in the pre-New Year trading environment.
CRUDE OIL
- West Texas Intermediate (WTI) crude oil prices are trading higher, hovering around $75.40 per barrel during the Asian session on Wednesday.
- The increase in crude oil prices is partially attributed to optimism surrounding potential US interest rate cuts. Expectations of rate cuts are seen as stimulative for economic growth, which, in turn, could boost fuel demand.
- Despite escalating tensions in the Middle East, there's a possibility that oil prices could face constraints. Major shipping firms, including Maersk and CMA CGM, have begun returning to the Red Sea following the deployment of a multinational task force in the region. This has somewhat eased concerns about disruptions to oil shipments.
- The United States (US) has completed contracts to acquire three million barrels of oil. This move is aimed at replenishing the Strategic Petroleum Reserve (SPR), signaling strategic measures to secure oil supply.
- Market participants are likely to closely monitor the US API Weekly Crude Oil Stock data for the week ending on December 22, scheduled for release on Wednesday. This data provides insights into the inventory levels, impacting market sentiment and prices.
| SMA (20) | Falling |
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| RSI (14) | Rising |
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| MACD (12, 26, 9) | Rising |
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Closing statement: Crude oil prices are on the rise, supported by optimism around potential US interest rate cuts and strategic measures by the US to replenish the Strategic Petroleum Reserve. Ongoing tensions in the Middle East are being balanced by a return to the Red Sea by major shipping firms, indicating a cautious but positive market sentiment.
DAX
- On Friday, US economic indicators were influential in driving demand for riskier assets. Softer-than-expected inflation numbers supported market expectations for a Federal Reserve (Fed) rate cut in Q1 2024.
- Late in the European session, investor attention will be directed towards economic indicators, particularly the Richmond and Dallas services and manufacturing index numbers for December. These numbers are crucial for assessing the health and outlook of the US economy.
- From a technical perspective, the DAX is holding above the 50-day and 200-day Exponential Moving Averages (EMAs). Both EMAs are sending bullish signals, indicating positive price momentum.
- The DAX's current position is significant, and a break above the 16,750 handle could provide strong support for a further upward movement. This breakout might pave the way for a move toward the December 14 All-Time High, which is around the 17,000 level.
- It's worth noting that the 14-day Relative Strength Index (RSI) reading stands at 70.75, indicating that the DAX is in overbought territory. In such conditions, selling pressure may intensify, especially around the 16,750 handle.
| SMA (20) | Rising |
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| RSI (14) | Slightly Falling |
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| MACD (12, 26, 9) | Slightly Falling |
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Closing statement: The DAX is currently positioned favourably above key EMAs, and a breakthrough at the 16,750 level could set the stage for a move towards the recent All-Time High. However, traders should be cautious of potential selling pressure given the overbought conditions signalled by the RSI.