Technical Outlook and Review

IC Markets

Forex

Commodity

Stocks

Cryptocurrency

Summary:

The DXY (US Dollar Index) chart currently shows an overall bearish momentum, indicating a potential for price to make a bearish continuation towards the 1st support.

DXY

The DXY (US Dollar Index) chart currently shows an overall bearish momentum, indicating a potential for price to make a bearish continuation towards the 1st support.

The 1st support level at 101.87 is identified as a multi-swing-low support. Further below, the 2nd support level at 100.67 is noted as a swing-low support, further reinforcing its importance as a potential key support level.

To the upside, the 1st resistance level at 102.61 is identified as an overlap resistance that aligns close to the 38.20% Fibonacci retracement level. Higher up, the 2nd resistance level at 103.20 is also marked as an overlap resistance that aligns with a confluence of Fibonacci levels i.e. the 61.80% retracement and the 78.60% projection levels, suggesting a potential barrier for further upside movement.

EUR/USD

The EUR/USD chart currently exhibits an overall bullish momentum. In this context, there is a potential scenario for price to make a bullish continuation towards the 1st resistance.

The 1st resistance level at 1.1006 is identified as a multi-swing-high resistance. Higher up, the 2nd resistance level at 1.1064 is noted as a swing-high resistance, suggesting a potential barrier for further upside movement.

To the downside, the 1st support level at 1.0878 is identified as an overlap support that aligns close to the 50.00% Fibonacci retracement level. Further below, the 2nd support level at 1.0747 is also marked as an overlap support, further reinforcing its importance as a potential key support level.

EUR/JPY

The EUR/JPY chart currently exhibits a bearish overall momentum, suggesting a potential scenario for a bearish continuation towards the 1st support.

he 1st support at 155.62 is deemed significant as it is identified as a pullback support and aligns with the 61.80% Fibonacci Retracement level. This level represents a historical area where buying interest has been present, reinforcing its significance as a key support zone.

Additionally, the 2nd support at 154.07 is considered a multi-swing low support, providing an additional layer of potential support for the currency pair.

On the resistance side, the 1st resistance at 158.17 is associated with a pullback resistance and the 50% Fibonacci Retracement, indicating a level where selling interest could intensify, potentially causing a temporary pause or reversal in the bearish trend.

Furthermore, the 2nd resistance at 159.16 is linked to an overlap resistance and the 61.80% Fibonacci Retracement, presenting a potential challenge for the price to surpass these levels.

EUR/GBP

The EUR/GBP chart currently exhibits a bullish overall momentum, indicating a potential scenario for a bullish continuation towards the 1st resistance.

The 1st support at 0.8650 is considered significant as it represents an overlap support. This level indicates a historical area where buying interest has been present, reinforcing its potential as a crucial support zone.

Additionally, the 2nd support at 0.8602 is identified as a pullback support, providing an extra layer of potential support for the currency pair.

On the resistance side, the 1st resistance at 0.8689 is associated with an overlap resistance and the 61.80% Fibonacci Retracement. This level may act as a barrier where selling interest could intensify, potentially causing a temporary pause or reversal in the bullish trend.

Furthermore, the 2nd resistance at 0.8725 is linked to a pullback resistance and the 78.60% Fibonacci Retracement, presenting an additional challenge for the price to surpass these levels.

GBP/USD

The GBP/USD chart currently exhibits an overall bearish momentum. In this context, there is a potential scenario for price to make a bearish continuation towards the 1st support.

The 1st support level at 1.2612 is identified as an overlap support that aligns with the 61.80% Fibonacci retracement level. Further below, the 2nd support level at 1.2502 is marked as a swing-low support, further reinforcing its importance as a potential key support level.

To the upside, the 1st resistance level at 1.2781 is identified as a multi-swing-high resistance that aligns with the 127.20% Fibonacci extension level. Higher up, the 2nd resistance level at 1.2872 is noted as a pullback resistance that aligns with the 161.80% Fibonacci extension level, suggesting a potential barrier for further upside movement.

GBP/JPY

The GBP/JPY chart currently exhibits a bearish overall momentum, suggesting a potential scenario for a bearish continuation towards the 1st support.

The 1st support at 180.09 is considered significant as it represents a pullback support. This level indicates a historical area where buying interest has been present, reinforcing its potential as a crucial support zone.

Additionally, the 2nd support at 178.67 is identified as a multi-swing low support and is associated with the 127.20% Fibonacci Extension, providing an additional layer of potential support for the currency pair.

On the resistance side, the intermediate resistance at 182.29 is linked to a pullback resistance. This level may act as a barrier where selling interest could intensify, potentially causing a temporary pause or reversal in the bearish trend.

Furthermore, the 1st resistance at 184.05 is associated with a multi-swing high resistance, presenting an additional challenge for the price to surpass these levels.

USD/CHF

The USD/CHF chart currently exhibits an overall bearish momentum. In this context, there is a potential scenario for price to make a bearish continuation towards the 1st support.

The intermediate support level at 0.8592 is identified as a pullback support that aligns with the 61.80% Fibonacci projection level while the 1st support level at 0.8558 is marked as a multi-swing-low support that aligns with the 78.60% Fibonacci projection level. Further below, the 2nd support level at 0.8520 is noted as a swing-low support that aligns with the 100.00% Fibonacci projection level, further reinforcing its importance as a key support level.

To the upside, the 1st resistance level at 0.8638 is identified as a pullback resistance that aligns close to the 23.60% Fibonacci retracement level. Higher up, the 2nd resistance level at 0.8710 is also marked as a pullback resistance that aligns with the 50.00% Fibonacci retracement level, suggesting a potential barrier for further upside movement.

USD/JPY

The USD/JPY chart currently exhibits an overall bearish momentum, indicating a potential for price to make a bearish continuation towards the 1st support.

The 1st support level at 142.46 is identified as an overlap support that aligns with the 61.80% Fibonacci retracement level. Further below, the 2nd support level at 141.50 is noted as a multi-swing-low support, further reinforcing its importance as a key support level.

To the upside, the 1st resistance level at 144.53 is identified as a pullback resistance. Higher up, the 2nd resistance level at 145.32 is also marked as a pullback resistance that aligns with the 78.60% Fibonacci retracement level, suggesting a potential barrier for further upside movement.

USD/CAD

The USD/CAD chart currently exhibits an overall bearish momentum, indicating a potential for a drop towards the 1st support.

The 1st support level at 1.3319 is identified as a pullback support that aligns with the 100.00% Fibonacci projection level. Further below, the 2nd support level at 1.3261 is noted as an overlap support, further reinforcing its importance as a key support level.

To the upside, the 1st resistance level at 1.3403 is identified as a pullback resistance that aligns with the 23.60% Fibonacci retracement level. Higher up, the 2nd resistance level at 1.3486 is also marked as a pullback resistance that aligns with the 50.00% Fibonacci retracement level, suggesting a potential barrier for further upside movement.

AUD/USD

The AUD/USD chart currently exhibits an overall bullish momentum. In this context, there is a potential scenario for price to make a bullish continuation towards the 1st resistance.

The 1st resistance level at 0.6811 is identified as a swing-high resistance that aligns with a confluence of Fibonacci levels i.e. the 161.80% extension and the 78.60% projection levels. Higher up, the 2nd resistance level at 0.6846 is also noted as a swing-high resistance, indicating its potential significance as a barrier for further upward movement.

To the downside, the 1st support level at 0.6730 is identified as an overlap support that aligns with the 23.60% Fibonacci retracement level. Further below, the 2nd support level at 0.6670 is also marked as an overlap support that aligns close to the 50.00% Fibonacci retracement level, further reinforcing its importance as a key support level.

NZD/USD

The NZD/USD chart currently exhibits an overall bullish momentum. In this context, there is a potential scenario for price to make a bullish bounce off the 1st support and rise towards the 1st resistance.

The 1st support level at 0.6250 is identified as an overlap support that aligns with the 23.60% Fibonacci retracement level. Further below, the 2nd support level at 0.6182 is also noted as an overlap support that aligns close to the 50.00% Fibonacci retracement level, further reinforcing its importance as a key support level.

To the upside, the 1st resistance level at 0.6307 is identified as a swing-high resistance that aligns with a confluence of Fibonacci levels i.e. the 161.80% extension and the 78.60% projection levels. Higher up, the 2nd resistance level at 0.6402 is also marked as a swing-high resistance, indicating its potential significance as a barrier for further upward movement.

DJ30

The DJ30 chart currently exhibits a bullish overall momentum, indicating a potential scenario for a bullish bounce off the 1st support and a subsequent move towards the 1st resistance.

The 1st support at 37151.74 is considered significant as it represents an overlap support, signifying a historical area where buying interest has been present. This reinforces its potential as a crucial support zone for the index.

Additionally, the 2nd support at 36298.13 is identified as both an overlap support and associated with the 23.60% Fibonacci Retracement, providing an additional layer of potential support.

On the resistance side, the 1st resistance at 37808.77 is linked to the 161.80% Fibonacci Extension. This level may act as a barrier where selling interest could intensify, potentially causing a temporary pause or reversal in the bullish trend.

GER40

The GER40 chart currently demonstrates a neutral overall momentum, with factors contributing to this state. As a result, the price could potentially make fluctuations between the 1st resistance and 1st support levels.

The 1st support at 16490.00 is considered significant as it represents an overlap support and is associated with the 23.60% Fibonacci Retracement. This level indicates a historical area where buying interest has been present, reinforcing its potential as a crucial support zone.

Additionally, the 2nd support at 16062.00 is identified as a pullback support and is linked to the 38.20% Fibonacci Retracement, providing an additional layer of potential support for the index.

On the resistance side, the intermediate resistance at 16776.70 is associated with a pullback resistance, indicating a level where selling interest could intensify.

Furthermore, the 1st resistance at 16961.70 is linked to a swing high resistance and the 127.20% Fibonacci Extension, highlighting a potential challenge for the price to surpass these levels.

US500

The US500 chart currently demonstrates a bullish overall momentum, with several factors contributing to this positive sentiment. As a result, the price could potentially make a bullish continuation towards the 1st resistance.

The intermediate support at 4699.2 is considered significant as it represents a multi-swing low support, indicating a historical area where buying interest has been present.

Additionally, the 1st support at 4601.9 is identified as an overlap support and is associated with the 23.60% Fibonacci Retracement, providing an additional layer of potential support for the index.

On the resistance side, the 1st resistance at 4771.7 is linked to a swing high resistance, and the 2nd resistance at 4817.0 is also associated with a swing high resistance. These levels represent potential barriers where selling interest could intensify, potentially causing a temporary pause or reversal in the bullish trend.

BTC/USD

The BTC/USD chart currently demonstrates a bullish overall momentum, suggesting a potential scenario for a bullish continuation towards the 1st resistance.

The 1st support at 40715 is noteworthy as it corresponds to a swing low support and aligns with the 50% Fibonacci Retracement level. This level indicates a historical area where buying interest has been prevalent, reinforcing its significance as a crucial support zone.

Additionally, the 2nd support at 38437 is identified as an overlap support and is associated with the 78.60% Fibonacci Retracement, providing an additional layer of potential support for the cryptocurrency.

On the resistance side, the 1st resistance at 44490 is linked to a swing high resistance, marking a level where selling interest could intensify, potentially causing a temporary pause or reversal in the bullish trend.

Furthermore, the 2nd resistance at 45999 is associated with the 127.20% Fibonacci Extension, presenting a potential challenge for the price to surpass these levels. Technical Outlook and Review_15

ETH/USD

The ETH/USD chart currently exhibits a bearish overall momentum, suggesting a potential scenario for a bearish continuation towards the 1st support.

The 1st support at 2175.19 is significant as it is identified as a pullback support and coincides with the 78.60% Fibonacci Retracement level. This level indicates a historical area where buying interest has been present, reinforcing its importance as a key support zone.

Additionally, the 2nd support at 2120.29 is considered a swing low support, providing an additional layer of potential support for the cryptocurrency.

On the resistance side, the 1st resistance at 2255.39 is associated with a pullback resistance and the 61.80% Fibonacci Retracement, indicating a level where selling interest could intensify, potentially causing a temporary pause or reversal in the bearish trend.

Furthermore, the 2nd resistance at 2317.77 is linked to a swing high resistance and the 100% Fibonacci Retracement, presenting a potential challenge for the price to surpass these levels.

WTI/USD

The WTI chart currently exhibits an overall bullish momentum, suggesting a prevailing uptrend. In this context, there is a potential scenario for price to make a bullish continuation towards the 1st resistance.

The 1st resistance level at 75.35 is identified as an overlap resistance that aligns close to the 61.80% Fibonacci retracement level. Higher up, the 2nd resistance level at 79.40 is noted as a multi-swing-high resistance, further indicating its potential significance as a barrier for further upward movement.

To the downside, the 1st support level at 72.60 is identified as an overlap support that aligns with the 38.20% Fibonacci retracement level. Further below, the 2nd support level at 71.32 is marked as a pullback support, reinforcing its importance as a key support level. Technical Outlook and Review_17

XAU/USD (GOLD)

The XAU/USD chart currently demonstrates a neutral momentum, indicating a potential for price to fluctuate between the 1st support and the 1st resistance.

The 1st support level at 2,016.90 is identified as an overlap support that aligns with the 38.20% Fibonacci retracement level. Further below, the 2nd support level at 1,976.18 is noted as a pullback support, reinforcing its importance as a key support level.

To the upside, the 1st resistance level at 2,047.93 is identified as a pullback resistance. Higher up, the 2nd resistance level at 2,087.79 is also marked as a pullback resistance that aligns close to the 61.80% Fibonacci retracement level, further indicating its potential significance as a barrier for further upward movement. Technical Outlook and Review_18

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

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Samantha Luan

Economic

Central Bank

Forex

Yen rebounds broadly in today's Asian trading session, buoyed by optimistic revisions in Japan's economic growth forecasts. The government, in its semi-annual economic report, upgraded its growth projections for both the current and next fiscal years. Forecast for fiscal 2023 was raised from 1.3% to 1.6%, while projection for fiscal 2024 saw an increase from 1.2% to 1.3%. Furthermore, core inflation in Japan is anticipated to slow down from current fiscal year's rate of 3.0% to 2.5% in the next fiscal year. That is, core inflation is projected to stay above BoJ's 2% target.

Despite Yen's recovery today, it remains the weakest performer for the week. Nevertheless, the currency's post-BoJ selloff seems to have concluded, setting the stage for a period of consolidation. While a new high for Yen is unlikely, the range for near-term consolidation seems to have been established. Meanwhile, Sterling is the second weakest currency, largely due to the sell-off triggered by the latest UK CPI data yesterday. Dollar follows as the third weakest. On the other end of the spectrum, Swiss Franc has shown remarkable strength, becoming the best performer this week. Australian Dollar and the New Zealand Dollar are also showing firmness, while Euro and Canadian are mixed.

A notable development was observed in the stock market overnight, with DOW having a significant pullback after hitting new record high. This movement may reflect broader trend of position adjustments by investors as the year-end holiday season approaches. If this trend continues, the Aussie could lose its upward momentum and may enter a phase of consolidation as well.

Technically, break of 1.6319 resistance in EUR/AUD would indicate short bottoming just ahead of 100% projection of 1.7062 to 1.6319 from 1.6844 at 1.6106, on bullish convergence condition in 4H MACD. Stronger rebound would then be seen to 1.6478 resistance.

Yen Rebounds on Upgraded Growth Forecasts, Global Risk-On Sentiment Eases_1

In Asia, at the time of writing, Nikkei is down -1.56%. Hong Kong HSI is down -0.03%. China Shanghai SSE is up 0.34%. Singapore Strait Times is up 0.22%. Overnight, DOW fell -1.27%. S&P 500 fell -1.47%. NASDAQ fell -1.50%. 10-year yield fell -0.045 to 3.877.

Fed's Harker: Cautious path to future rate cuts, inflation fight continues

Philadelphia Fed President Patrick Harker, in a local radio interview overnight, shared expressed that while there will be a need to lower interest rates eventually, this shift should not happen "right away" or "too fast."

Harker stated, "I've been in the camp of, let's hold rates where they are for a while, let's see how this plays out, we don't need to raise rates anymore."

Looking ahead, Harker acknowledged the necessity of reducing rates, saying, "it's important that we start to move rates down." However, he emphasized a gradual approach: "we don't have to do it too fast, we're not going to do it right away, it's going to take some time."

Harker also added a note of caution regarding the economic outlook, particularly concerning inflation. "Let me be clear: The job on inflation is not done, but we are moving in the right direction, things are starting to look better and better."

BoC minutes indicate greater confidence in current monetary policy restrictiveness

Summary of BoC's December 6 meeting showed members collectively agreed "the likelihood that monetary policy was sufficiently restrictive to achieve the inflation target had increased."

However, members also unanimously agreed that "risks to the inflation outlook remained." Hence, BoC did not rule out the possibility of further interest rate hikes.

To effectively assess underlying inflationary pressures, BoC members agreed to focus on several key economic indicators. These include the balance of supply and demand in the economy, wage growth, corporate pricing behavior, and inflation expectations.

It's clarified that while these indicators are not intermediate targets, they "provided helpful information on where inflation is headed."

ECB's Kazaks sees mid-2024 rate cuts, urges caution on early reduction

ECB Governing Council member Martins Kazaks, in an interview overnight, indicated that the most likely period for rate reductions could be around the "middle of next year", specifically pointing to June or July as probable months.

However, Kazaks expressed caution about reducing rates too soon, stating, "But in the spring at the current moment that's too early." He also noted a disparity between his outlook and market expectations, particularly concerning the possibility of an initial rate cut in March, which he views as overly "optimistic".

Kazaks also noted that interest rates are likely to remain at 4% for a while before any reduction is considered.

GBP/JPY Daily Outlook

GBP/JPY's fall from 184.15 extends lower today but overall it's staying in range above 178.32. Intraday bias remains neutral and further decline is expected. On the downside, break of will resume the decline from 188.63 and target 38.2% retracement of 148.93 to 188.63 at 173.46. However, decisive break of 184.30 will argue that pull back from 188.63 has completed and bring retest of this high. Yen Rebounds on Upgraded Growth Forecasts, Global Risk-On Sentiment Eases_2

Yen Rebounds on Upgraded Growth Forecasts, Global Risk-On Sentiment Eases_2

In the bigger picture, price actions from 188.63 medium term top are currently seen as a correction to the up trend from 148.93 (2022 low) only. As long as 172.11 resistance turned support holds, larger up trend from 123.94 (2020 low) is still in favor to resume through 188.63 at a later stage.

Source: ActionForex

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Chandan Gupta

Stocks

With the S&P 500 index in overbought territory and volume limited by the looming holiday, heavy trading in put options expiring within 24 hours, so-called 0DTE options, sends the market to its biggest loss in nearly three years. Observers believe that's enough to cause a fall.

The argument is that such trades would force market makers on the other side of the trade to hedge their risks, which would push the market down. "We have been wary of the 0DTE option for some time," Matthew Timm, head of equity derivatives trading at Cantor Fitzgerald, said in a memo with his colleague Paolo Zanello. “Today we experienced an intraday decline that we believe may have been caused or definitely exacerbated by the 0DTE SPX option.The market environment is certainly ripe for that.

What drew attention was a put option trade that gave the buyer the right, but not the obligation, to sell the underlying asset, such as in the 4,755 to 4,765 range, they said.

The S&P index fell from an intraday low of 4,778.01 to close at 4,698.35. The 1.5% drop from the previous close was the largest since September 26th. Gauge relative strength readings were at levels typically seen before declining.

The VIX index, Wall Street's fear gauge, has soared from near multi-year lows. Given the explosion in trading in zero-day contracts on any given day of the week this year, debate continues about their broader impact.For institutional investors, zero-date-to-maturity options provide a way to hedge short-term risks and pursue position entry and position-based strategies.

For individual investors, these offer an opportunity to make big bets with little capital that may or may not pay off quickly. JPMorgan Chase & Co.'s Marko Kolanovic warns that the product's popularity could repeat past shocks like 2018's Bormageddon, but CBOE Global Markets warns that derivatives It said there was little evidence that buying and selling would destabilize financial markets.

Option analysis firm Spot Gamma said in a post on social media platform X that the 0DTE option caused a decline in US stock benchmarks. Rocky Fishman, founder of derivatives analysis firm Asim 500, said the $900 billion in daily 0DTE trading volume was the highest since early October, given the lack of concrete economic news throughout the day.

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Cohen

Economic

Stocks

Investors in Asia go into Thursday's trading session on the defensive, after a late slide on Wall Street took the shine off figures that earlier showed global inflationary pressures cooling further.

The regional economic and policy highlights on Thursday are the Indonesian central bank's latest policy decision, consumer price inflation and trade figures from Hong Kong, and producer price inflation data from South Korea.

A far steeper decline in UK inflation last month than anticipated hammered gilt yields on Wednesday and strengthened the growing view that major central banks have substantial room to cut interest rates next year.

With figures also showing a jump in U.S. consumer confidence to a five-month high, the 'Goldilocks' and 'soft landing' juiced the global risk rally until the last hour of trading on Wall Street triggered a sharp reversal.

World stocks, which were up 10 days in a row and on course for their longest winning streak in nearly three years, slumped 0.7% and chalked up their biggest decline in two months. The three main U.S. indexes, at or near record highs this week, also registered their biggest daily losses since October.

If that negativity spills over into Asia into Thursday, the long-standing underperformance of emerging market and Asian markets - and Chinese markets, in particular - is likely to continue.

The Shanghai blue chip CSI 300 index fell more than 1% on Wednesday. It is on course for a sixth straight weekly loss, which would be its worst weekly run in 12 years, and a record fifth consecutive monthly loss.

The big picture remains challenging - deflation is taking hold, the huge property sector is imploding and the growth outlook is questionable at best.

It's a different story in Hong Kong, at least as far as inflation is concerned. Consumer price inflation has been rising lately, and reached a year-high of 2.7% in October while the month-on-month rate rose to a two-year high of 1.0%.

Economists in a Reuters poll expect figures on Thursday to show that annual inflation held steady at 2.7% in November.

Bank Indonesia, meanwhile, is expected to keep its benchmark seven-day reverse repo rate steady at 6.00% for a second month - inflation has been within its 2% to 4% target range for six months and the rupiah has gained nearly 2% since a surprise rate hike in October, easing pressure on imported prices.

Economists polled expect the first rate cut to be in the third quarter of 2024. But with inflation well-behaved, the rupiah ticking up, and the Fed forecast to start cutting U.S. rates pretty soon, BI may move well before that.

Source: Reuters

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Economic

Central Bank

Forex

Yen traders turn attention to national CPI numbers

On Tuesday, the Bank of Japan decided unanimously to keep interest rates untouched at -0.1% and stick to its yield curve control policy framework that places an upper bound of 1% for the 10-year Japanese government bond yield as reference. With the Bank giving no signals that the era of ultra-loose policy conditions is nearing its end, yen traders were largely disappointed, with the currency turning south again. After BoJ Decision, Yen Traders Turn to CPIs and Summary of Opinions_1

After BoJ Decision, Yen Traders Turn to CPIs and Summary of Opinions_1

Whether the slide will continue for a while longer or not may depend on the national inflation numbers for November, due out during the Asian session Friday, and the core one is anticipated to have declined to 2.5% y/y from 2.8%. The Tokyo CPI data for the month revealed notable slowdowns in both headline and core consumer prices, corroborating the forecast for the National core CPI and suggesting that the headline rate may have also declined.

Will a slowdown impact BoJ's pivot decision?

That said, a slowdown in inflation may not necessarily mean that the BoJ will dismiss the idea of raising interest rates at some point in the months to come as both metrics are still lying above the Bank's 2% objective. What's more, the Bank is paying very close attention to wage growth and a meaningful acceleration may be the signal for policymakers to take interest rates out of negative territory.

After BoJ Decision, Yen Traders Turn to CPIs and Summary of Opinions_3

With that in mind, a very likely month for doing so may be April, just after next year's spring wage negotiations. In October, Japan's umbrella labor union, Rengo, said that they will demand hikes of at least 5%, which could take real wage growth into positive territory. Considering that the market expects the Fed to cut interest rates by around 150bps next year, this may allow the yen to stay in uptrend mode against its US counterpart, even if the latest slide continues for a while longer.

Summary of Opinions could reveal more

Governor Ueda gave no clear signals on when the Bank could exit negative rates on Tuesday, saying that they will not rush into raising rates just because the Fed could start cutting in a few months, adding that if they were to act, interest rates would only rise slightly. Yet, the market assigns a nearly 40% chance for a minor rate increase at the January meeting, with that percentage rising to 80% in April.

Perhaps investors are hoping to get more clarity from the meeting's Summary of Opinions next week, on Wednesday. Back in October, some members discussed the conditions and possible timing of a future exit from negative interest rates, but the November summary highlighted that the Bank needs to patiently continue with monetary easing. If the December one reveals that there is a fresh discussion on the matter, then the yen could stage a decent comeback.

Dollar/yen rebounds, but stays in downtrend

From a technical standpoint, despite the latest recovery, dollar/yen remains below the downtrend line drawn from the high of November 13. What's more, Tuesday's advance was halted near the 144.00/80 zone, with the price returning below the 200-day exponential moving average thereafter. This means that the bears could take charge again at some point soon and perhaps aim for another test near the 141.50 territory. A break lower could confirm a lower low and perhaps see scope for extensions towards the next key support area at around 138.00. After BoJ Decision, Yen Traders Turn to CPIs and Summary of Opinions_4

After BoJ Decision, Yen Traders Turn to CPIs and Summary of Opinions_4

On the upside, a break above 146.50 could turn the outlook neutral, while the move signaling that the bulls are in full control may be a break above 148.75, as it may confirm the pair's return above the prior uptrend line drawn from the low of March 24.

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Devin

Economic

Better than expected inflation figures in the United Kingdom have led to suggestions that interest rates could start to come down earlier than planned, after central bank the Bank of England, or BoE, made 14 consecutive monthly rises from the end of 2021 until this year.

Newly-published data from the Office for National Statistics, or ONS, shows that inflation is now at 3.9 percent, still almost double the BoE's target of 2 percent, but its lowest annual rate in more than two years.

It had been widely expected that the figure may fall from October's 4.6 percent to 4.4 percent, so the larger than anticipated reduction is good news for consumers and also for the government, although Chancellor of the Exchequer Jeremy Hunt was not complacent about the work yet to be done, particularly with a general election likely in the next 12 months.

"Alongside the business tax cuts announced in the autumn statement, this means we are back on the path to healthy, sustainable growth," he said. "But many families are still struggling with high prices, so we will continue to prioritize measures that help with cost of living pressures."

The ONS's chief economist, Grant Fitzner, told the BBC that the figures were "good news for a change", which "would be encouraging" to institutions such as the BoE.

The UK rate is now level with the rate in France, but above that of the European Union, which is at 3.1 percent, and the United States, at 2.1 percent, which is why the encouraging downward trend may not result in interest rate cuts straight away.

The BoE's governor, Andrew Bailey, has previously said there will be no cuts until the 2 percent target is reached, but there is speculation that there may now be a reduction as soon as May.

Richard Carter, head of fixed interest research at wealth management company Quilter Cheviot, said there had been a "sense of cautious optimism" around the issue for some time, which could make the BoE's life a little bit easier.

"The Bank of England now certainly faces a less daunting task in steering inflation back to its 2 percent target next year, without necessitating a deep recession," he told Forbes business magazine. "This further decline in the pace at which prices are rising offers a glimmer of relief for households grappling with rising living costs."

James McManus, chief investment officer at Nutmeg investment group, noted that although energy prices had fallen significantly from where they were a year ago, "food prices, which have slowed according to today's data, are still 9 percent higher than a year ago. So, food inflation, perhaps one we all feel most acutely in our weekly shops or eating out bills, still needs to come down dramatically".

Source: ChinaDaily

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SAXO

Stocks

A strong 2023 for India and global equities

This year has been remarkable in many ways with year-end 2022 predictions not coming true. China did not deliver the growth rebound expected by the market. The global economy did not slip into a recession as expected. Inflation remained stickier than expected lifting policy rates under the narrative "higher for longer". A banking crisis was close to fulfil many negative predictions but proved to be isolated among a few bank banks with poor risk controls. The generative AI technology also proved to be a game changer for technology stocks and more broadly sentiment.

We wrote extensively from the fragmentation game in 2023 which is concept that describes the current geopolitical dynamic under a self-reliant principles. This dynamic is bad for China and good for other countries such as Mexico, India, Vietnam, Indonesia, South Korea and Japan. This underlying trend is understood by the market and Indian equities have also been one of the best performing markets this year up 19.3% in USD terms. For comparison, Chinese equities are down 12.8%, developed markets up 23.1%, US equities up 26.5% and European equities up 18.7%. Most of the rise this has been due to P/E ratios rising as earnings growth has been miniscule which sets 2024 up for a year where companies must deliver on earnings growth to justify their market values.

An important to note on India is that economic growth is now projected to outstrip China for the foreseeable future and many more companies will follow Apple setting up manufacturing in the country. India is also having an election in April next year and this could become a positive factor for sentiment and growth as the new government will likely initiate new growth initiatives. But the future growth of India does not come cheap as we explain further down. Will Emerging Markets Stage a Comeback in 2024?_1

Will Emerging Markets Stage a Comeback in 2024?_1

China is the big unknown in 2024

For many global investors China has increasingly become uninvestable due to trade frictions between the US and China, the war in Ukraine, increased regulations, capital controls, declining population, and lately an obvious broken economic model. As the figure above shows, Chinese equities have delivered -31% cumulative return in USD terms since 1 January 2018 compared to 66% for global equities and 92% for US equities over the same period.

After the strict lockdowns in China were lifted in late 2022 the market was betting hard on China to deliver a strong rebound in 2023, but the recurring troubles in the real estate sector derailed your dreams. Instead China from weakness to more weakness ending this year with communicated intentions by the government to stimulate the economy even more. While those intentions are good the question is how you stimulate an economy with a lot of slack when it is export driven and losing market share to other countries. Stimulus cannot be directed to real estate because this is an unproductive use of capital at this point. There are no easy solutions for China in 2024.

Return expectations are not kind to emerging markets

Emerging markets have been a disappointment for over a decade now and with strong US equity market returns global investors have increasingly ignored the emerging market story betting on the US technology sector. The main question for 2024 is whether emerging markets can finally get back on track. There are two ways to look at this.

In the very short-term EM equity market outperformance is directly linked to the rebound case in Chinese equities. If it does not arrive, then EM equities will underperform again.
In the longer run (10 years), EM equities do not look as attractive as DM equities because of capital consumption and low transmission of GDP growth to earnings growth.

Let us look at Indian equities, EM and DM equities and their 10-year real return expectations in USD. As the figure below shows, the dividend yield is very low in India and much higher in EM. The dividend yield is the starting point for setting long-term return expectations in equities. Companies can return capital through dividends but also buybacks. If we look at Indian and EM equities then we observe that since early 2015 companies have consumed capital (issued more common stock capital than decreased common stock through buybacks), which is not necessarily bad if that issued equity capital is used for enabling higher growth rates. In DM equities excess return on capital has on average delivered 1.5% annualised buyback yield.

Finally, and this is the important point, Indian equities are not expected to deliver a significant real earnings growth in USD as Indian publicly listed companies have only grown earnings in USD by around 4.7% per year. If we subtract the 10-year inflation rate expectation in the US of 2.4% annualised then the real earnings growth in USD is only 2.3% annualised. How can it be so low when annual real GDP growth has been around 6.9%. There are several factors behind this such as 1) the Indian Rupee declines on average around 3.5% annualised due to the inflation differential between INR and USD and 2) low transmission between GDP growth and earnings growth.

Earnings growth in EM in USD terms has been even more disappointing because of Chinese earnings. The real earnings growth in USD has been close to zero since early 2015. There are several factors behind this such as weak commodity markets, stronger USD, weak Chinese corporate sector earnings, and structural growth difficulties. Given we expect the USD to weaken over the next 10 years and commodities will continue to rise we expect real earnings growth in USD can be higher than what it has been over the past 8 years and thus we set expectations below DM at 1.6% annualised. Will Emerging Markets Stage a Comeback in 2024?_2