The US indices declined on Thursday due to rising Treasury yields as preliminary data from ADP continued to point to a robust labor market, fueling fears of aggressive tightening by the Federal Reserve. At the close of the US stock market yesterday, the Dow Jones Index (US30) decreased by 1.02%, and the S&P 500 Index (US500) lost 1.16%. Technology Index NASDAQ (US100) fell by 1.47. By the end of the day, all three indices were negative.
Today, the US will release an important Nonfarm Payroll report. Analysts expect the data to show the number of 200,000 jobs while the unemployment rate will remain unchanged. Such data could return strength to the dollar index, which is negative for stock indices. A worsening labor market data, on the other hand, would indicate that the US Federal Reserve will act more softly, which is negative for the dollar and could be a boost to indices. Currently, the Fed is forecasting an increase in the unemployment rate to about 4.6% from the current 3.7% by the end of 2023.
Equity markets in Europe traded yesterday without a single dynamic. German DAX (DE30) decreased by 0.38%, French CAC 40 (FR40) was 0.22% lower, Spanish IBEX 35 (ES35) added 0.51%, and British FTSE 100 (UK100) closed up by 0.64% on Thursday.
The inflation report will be released in Europe today. The December CPI figure is expected to be 9.7% annualized, down from the current level of 10.1%. But there is some confidence in the markets that there may be a positive surprise in the form of a stronger decline in inflation. Falling inflation indicators tend to be a growth booster for stock indices.
Gold prices fell sharply on Thursday due to a rising dollar index and US government bond yields. Recession risks and expectations of a strong labor market report are forcing investors to buy dollars. Precious metals are inversely correlated to the dollar index, so a decline in gold and silver usually accompanies a rise in the dollar.
Asian indices were mostly on the rise yesterday. Japan’s Nikkei 225 (JP225) gained 0.40%, China’s FTSE China A50 (CHA50) added 2.47%, Hong Kong’s Hang Seng (HK50) jumped by 1.25%, India’s NIFTY 50 (IND50) was down by 0.28% and Australia’s S&P/ASX 200 (AU200) was up by 0.06% on the day.
Tokyo’s main Consumer Price Index rose to 3.8% in December, a new 40-year record. This index is a leading indicator of national inflation trends. Rising inflation increases the likelihood that the Bank of Japan will abandon its soft monetary policy this spring.
S&P 500 (F) (US500) 3,808.10 −44.87 (−1.16%)
Dow Jones (US30) 32,930.08 −339.69 (−1.02%)
DAX (DE40) 14,436.31 −54.47 (−0.38%)
FTSE 100 (UK100) 7,633.45 +48.26 (+0.64%)
USD Index 105.12 +0.87 (+0.84%)
Important events for today:
– Japan Services PMI (m/m) at 02:30 (GMT+2);
– German Retail Sales (m/m) at 09:00 (GMT+2);
– Switzerland Retail Sales (m/m) at 09:30 (GMT+2);
– UK Construction PMI (m/m) at 11:30 (GMT+2);
– Eurozone Consumer Price Index (m/m) at 12:00 (GMT+2);
– Eurozone Retail Sales (m/m) at 12:00 (GMT+2);
– US Nonfarm Payrolls (m/m) at 15:30 (GMT+2);
– US Unemployment Rate (m/m) at 15:30 (GMT+2);
– Canada Unemployment Rate (m/m) at 15:30 (GMT+2);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
According to the minutes of the Federal Reserve’s December meeting, Federal Reserve policymakers agreed that an extended period of restrictive policy would be needed to cool “unacceptably high” inflation. The Open Market Committee (FOMC) raised its rate target to a range of 5% to 5.25%. Minneapolis Fed President Neel Kashkari predicts the Fed will raise rates to 5.4%, after which the Central Bank will take a long pause. Markets expect the Fed to raise rates by 0.25% at its next meeting on February 1, with an 84% probability of such a scenario.
Trading recommendations
Support levels: 1.0574, 1.0554, 1.0528, 1.0483, 1.0361, 1.0332, 1.0284
Resistance levels: 1.0640, 1.0664, 1.0695
The trend on the EUR/USD currency pair on the hourly time frame is still bullish. The price is trading at the level of moving averages and above the priority change level. The MACD indicator is positive again. Under such market conditions, buy trades are best considered from the support level of 1.0574 or 1.0554 on intraday time frames. Sell deals can be considered from the resistance level of 1.0640 but better with confirmation in the form of a reverse initiative or a false breakout.
Alternative scenario: if the price breaks down through the support level of 1.0528 and fixes below it, the downtrend will likely resume.
News feed for 2023.01.05:
– Italian Consumer Price Index (m/m) at 12:00 (GMT+2);
– US ADP Non-Farm Employment Change (m/m) at 15:15 (GMT+2);
– US Initial Jobless Claims (w/w) at 15:30 (GMT+2).
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.1965
Prev Close: 1.2057
% chg. over the last day: +0.77 %
In the macro outlook for 2023, Goldman Sachs analysts forecast a 1.2% decline in UK real GDP, well below all other G-10 countries. According to the report, the Eurozone and the UK are already in recession, and more stretched-out increases in energy bills will push inflation to higher peaks than in other countries. High inflation will affect real personal income, consumption, and industrial production. Investors are dumping the sterling, believing that a weakening UK economy will prevent the Bank of England from being as hawkish as its peers.
Trading recommendations
Support levels: 1.2000, 1.1944, 1.1893, 1.1684, 1.1476, 1.1418
From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. But yesterday, the price rose sharply and approached the priority change level. The MACD indicator became positive, and the buyers dominated inside the day. Under such market conditions, it is better to look for buy trades on the intraday timeframes from the support level 1.2000 or 1.1944, but with confirmation. Sell trades are best looked for from the resistance level of 1.2166, but they are also better with confirmation.
Alternative scenario: if the price breaks out through the 1.2100 resistance level and fixes above it, the uptrend will likely resume.
News feed for 2023.01.05:
– UK Services PMI (m/m) at 11:30 (GMT+2).
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 131.01
Prev Close: 132.64
% chg. over the last day: +1.24 %
According to the latest S&P Global PMI data, the decline in Japan’s manufacturing sector worsened in the last month of the year. The Manufacturing Business Activity Index fell from 49.0 to 48.9, the second consecutive month of declining activity. Weak global economic trends led to a steady decline in production and a drop in new orders. Companies have markedly reduced purchases of inputs, and optimism has weakened to its highest level since May.
From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. But the price is now trading above the moving averages, while the MACD indicator has become positive, indicating buying pressure inside the day. Buy trades are best considered on intraday time frames from the support level of 130.58, but only with confirmation. Sell deals can be looked for from the resistance level of 132.92, provided there is a reversal.
Alternative scenario: If the price fixes above 132.92, the uptrend will likely resume.
There is no news feed for today.
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.3665
Prev Close: 1.3477
% chg. over the last day: -1.39 %
Global growth concerns, along with growing COVID-19 problems in China (the largest oil importer) caused the black gold price to drop another 5% yesterday. The overall drop in oil over the last 2 days was almost 10%. Considering that the Canadian dollar is a commodity currency and is highly correlated with the dollar index and oil prices, the prices of USD/CAD continued to decline sharply on Wednesday. With China increasing its export quotas for petroleum products in the first batch for 2023, indicating expectations of low domestic demand, the oil may continue to fall, which is negative for the Canadian currency.
Trading recommendations
Support levels: 1.3478, 1.3439, 1.3386, 1.3360, 1.3281, 1.3212
From the point of view of technical analysis, the trend on the USD/CAD currency pair is close to changing to bearish. The price is trading below the moving averages. The MACD indicator has become deeply negative, and inside the day, sales prevail. A price fixation below 1.3478 will lead to a change of trend to a downtrend. Buy trades should be considered from the support level of 1.3478, but with confirmation, since the level has already been tested. Sell deals are better to look for on the intraday time frames from the resistance level of 1.3530 or 1.3604, but with a confirmation in the form of a reverse initiative on the lower time frames or a false breakout.
Alternative scenario: if the price breaks down and consolidates below the support level of 1.3478, the downtrend will likely resume.
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
At the close of the US stock market yesterday, the Dow Jones Index (US30) increased by 0.40%, and the S&P 500 Index (US500) added 0.75%. The Technology Index NASDAQ (US100) gained 0.69% on Wednesday. All three indices closed the day in positive territory.
The Open Market Committee (FOMC) raised its rate target to a range of 5% to 5.25%. The markets expect the Fed to raise the rate by 0.25% at its next meeting on February 1. The probability of such a scenario is 84%. Goldman Sachs analysts expect three rate hikes of 25 bps in February, March, and May, with a peak funds rate of 5-5.25%.
The ISM Manufacturing Index has long been considered one of the best indicators of the health of the US economy. The December report showed that the manufacturing PMI fell to 48.4 from 49.0. This is the second consecutive month of contraction and the fourth consecutive month below the level of 50. Export orders are down, and new orders are unacceptably low, so there seems little chance of a quick manufacturing recovery.
Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 2.18%, France’s CAC 40 (FR40) added 2.30%, Spain’s IBEX 35 (ES35) jumped by 1.89%, and the British FTSE 100 (UK100) closed up by 0.41% on Wednesday.
Consulting firm KPMG predicts that UK real GDP will contract by 1.3% in 2023. KPMG expects the UK Central Bank to raise the bank rate to 4% during the first quarter of this year before taking a pause. The labor market will begin to deteriorate in the first half of 2023, with the unemployment rate reaching 5.6% by mid-2024, meaning an increase of about 680,000 unemployed people. The jump in food and energy prices and higher overall inflation have already reduced the purchasing power of households.
Switzerland’s annual inflation rate has fallen from 3% to 2.8%. Although the inflation rate has declined, this is the highest inflation rate the country has experienced in decades. From 2008 to 2022, the annual average inflation in Switzerland was between 0.6 and 0.7%.
Global growth problems, along with growing COVID-19 problems in China (the biggest oil importer), have caused the price of “black gold” to fall by another 5%. In addition, leading oil exporter Saudi Arabia may further reduce the price of its flagship Arab Light crude to Asia. The US WTI crude decreased by 5.3% to $72.84 a barrel. British benchmark Brent Crude fell by 5.2% to $77.84 a barrel. The total decline in quotes was almost 10% during the last two days. Considering the fact that China increased export quotas for oil products in the first batch for 2023, which indicates the expectations of low domestic demand, oil quotes may fall even more.
Asian indices traded flat yesterday. Japan’s Nikkei 225 (JP225) decreased by 1.45%, China’s FTSE China A50 (CHA50) gained 0.25%, Hong Kong’s Hang Seng (HK50) ended the day up 3.22%, India’s NIFTY 50 (IND50) decreased by 1.04%, and Australia’s S&P/ASX 200 (AU200) ended Wednesday with a 1.63% gain.
The World Health Organization (WHO) criticized China’s definition of COVID-19 deaths and warned that official statistics do not show the true impact of the outbreak. China’s eagerness to move away from a zero-COVID policy is also alarming in the financial markets. Data on Tuesday showed that manufacturing activity in China contracted for the fifth straight month in December.
S&P 500 (F) (US500) 3,852.97 +28.83 (+0.75%)
Dow Jones (US30) 33,269.77 +133.40 (+0.40%)
DAX (DE40) 14,490.78 +309.11 (+2.18%)
FTSE 100 (UK100) 7,585.19 +31.10 (+0.41%)
USD Index 104.24 −0.28 (−0.27%)
Important events for today:
– China Caixin Services PMI (m/m) at 03:45 (GMT+2);
– UK Services PMI (m/m) at 11:30 (GMT+2);
– Italian Consumer Price Index (m/m) at 12:00 (GMT+2);
– US ADP Non-Farm Employment Change (m/m) at 15:15 (GMT+2);
– US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
The GBPUSD on the D1 time frame was in a prolonged uptrend until 14 December when a last higher top was recorded at 1.24454.
A closer look at the Momentum Oscillator reveals a negative divergence between points “a” and “b” when comparing the tops at 1.23435 and 1.24454. This could have warned technical traders that the bullish trend was losing momentum.
After the higher top at 1.24454, the price dropped through the 15 and 34 Simple Moving Averages and the Momentum Oscillator followed suit by moving into bearish terrain. This confirmed that the bears are making their presence felt.
A possible critical support level formed when a lower bottom was recorded on 3 January at 1.18998. The bulls are currently trying to press the price higher but a resistance level that formed on 28 December at 1.21254 might exert its influence on the market.
If the price of GBPUSD breaks through the critical support level at 1.18998, then three possible price targets may be projected from there. Attaching the Fibonacci tool to the lower bottom at 1.18998, and dragging it to the resistance level at 1.21254, the following targets may be anticipated. The first target can be estimated at 1.17604 (161.8%). The second price target may be calculated at 1.15348 (261.8%) and the third and final target can be expected at 1.11698 (423.6%).
If the resistance level at 1.21254 is broken, the above scenario is no longer valid and must be reassessed.
As long as sellers maintain their negative sentiment and supply continues overcoming demand, the outlook for the GBPUSD currency pair will remain bearish.
The latest Federal Reserve meeting minutes suggest that the U.S. economy is headed for recession as the central bank will remain aggressive in raising rates to cool inflation, warns the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.
The warning comes from deVere Group’s Nigel Green as the meeting minutes released Wednesday signal that the U.S. central bank remains cautious on inflation, with officials agreeing that “rate cuts shouldn’t happen in 2023.”
He says: “Investors have been waiting with bated breath as the Federal Open Market Committee (FOMC) minutes from the December meeting released on Wednesday give us more insight into what factors the Committee has been using for future policy decisions.
“It appears that officials remain hawkish and are especially concerned about the tight labor market.
“We expect that the latest minutes will give the central bank further support to maintain interest rates higher for longer than had been previously priced-in by the markets.
“With the labor market not cooling as fast, there seems to be a considerable turnaround in tone from the more dovish minutes in November.”
He continues: “These minutes dash yet more hopes for an economic soft landing.
“Investors are increasingly concerned that the Federal Reserve could now overtighten and will steer the U.S. economy into a major recession.
“Of course, the central bank will argue it needs to continue with rate rises to bring inflation back to target.
“But it must also ensure that the tight labor market doesn’t overshadow the broader picture and continue to overdo the hikes, which would make a U.S. recession deeper and longer.
“As the world’s largest economy, this would clearly have a serious, negative impact on the global economy.”
Nigel Green concludes: “The tone of the minutes indicate the Fed is not yet ready to pivot as the central bank believes risks for inflation remain to the upside and they will keep tightening until more substantial progress is made on bringing it back closer to target.
“Inflation remains their primary concern, not risks to economic growth.”
About:
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.
“The Federal Reserve is forging ahead with its balance sheet reduction”
By Elliott Wave International
I know — inflation has been grabbing all the headlines for a good while now — so you may wonder why the subject of deflation is relevant.
First, the definitions of inflation and deflation go beyond commonly accepted meanings.
As Robert Prechter’s Last Chance to Conquer the Crash says:
Inflation is an increase in the total amount of money and credit, and deflation is a decrease in the total amount of money and credit. …
The most common misunderstanding about inflation and deflation … is the idea that inflation is rising prices and deflation is falling prices. General price changes, though, are simply effects.
That said, let’s start off with an occurrence which is quite rare. Here’s a chart and commentary from the December Elliott Wave Theorist, a monthly publication which covers major financial and cultural trends:
The chart, published by the Fed, shows that absolute M2 has been declining on a month-by-month basis for the first time in many decades, probably since the 1930s or 1940s. This trend is deflationary.
Keep in mind that M2 is a measure of the U.S. money stock that includes M1 (currency and coins held by the non-bank public, checkable deposits, and travelers’ checks) plus savings deposits (including money market deposit accounts), small time deposits under $100,000, and shares in retail money market mutual funds.
Another factor regarding deflation has to do with the Fed.
The November Global Forecast Service, an Elliott Wave International publication which analyzes 50-plus worldwide financial markets, showed this chart and noted:
The Federal Reserve is forging ahead with its balance sheet reduction, as the chart shows. This reduction in the central bank’s assets which were paid for by money created out of thin air constitutes disinflation, and deflation (when the balance sheet is contracting on an annualized basis) will likely come by the end of the year.
So, now you see why deflation is very much on the radar screen of Elliott Wave International’s Global Forecast Service, which can help you to prepare for what may be next.
Understanding the Elliott wave price patterns of global stock market indexes can also be of help in anticipating what’s next for major economies around the globe.
You see, the economy tends to follow the stock market, in each country.
Getting back to the Wave Principle, here are some insights from Frost & Prechter’s book, Elliott Wave Principle: Key to Market Behavior:
The Wave Principle is governed by man’s social nature, and since he has such a nature, its expression generates forms. As the forms are repetitive, they have predictive value.
Sometimes the market appears to reflect outside conditions and events, but at other times it is entirely detached from what most people assume are causal conditions. The reason is that the market has a law of its own. It is not propelled by the external causality to which one becomes accustomed in the everyday experiences of life. The path of prices is not a product of news. Nor is the market the cyclically rhythmic machine that some declare it to be. Its movement reflects a repetition of forms that is independent both of presumed causal events and of periodicity.
The market’s progression unfolds in waves. Waves are patterns of directional movement.
Would you like to read the entire online version of this Wall Street classic — for free?
You may do so once you become a member of Club EWI, the world’s largest Elliott wave educational community.
A Club EWI membership is also free (no obligations whatsoever) and allows for complimentary access to a wealth of Elliott wave resources on investing and trading.
This article was syndicated by Elliott Wave International and was originally published under the headline Why the Threat of Deflation is Real. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
Meta Materials Inc. wins an innovation award at the Consumer Electronics Show and shows off its tech giving a clearer view of the contents of your microwave.
Another new year means another chance for the tech industry to show off at the Consumer Electronics Show.
META was named a CES 2023 Innovation Awards Honoree for the NANOWEB® transparent EMI shielding film, which promises to make it easier to tell when your leftovers are ready in the microwave by clearing up the radiation shielding used on the window.
The technology is also used to de-ice auto sensors and manufacture antennas and electrochromic lenses for augmented reality and 5G reflector films.
The company will also demonstrate its electric vehicle (EV)-related products, like its NPORE® nanocomposite ceramic battery separator and current collectors, to reduce copper usage and improve safety at the show.
It promises to be a busy year for the company, analyst Graham Mattison of Water Tower Research wrote.
It promises to be a busy year for the company, analyst Graham Mattison of Water Tower Research wrote in a Dec. 19 research note.
“We expect that META will announce at least one production contract this year, delivering a major milestone in the company’s growth of commercial revenues,” Mattison wrote. “While META has yet to announce anything, we see NANOWEB® as the likely technology to be commercially incorporated into a product.”
The Catalyst: NANOWEB®
Source: META Materials Inc.
But it’s the microwave application of the technology that may attract crowds for META in Las Vegas. Mattison said an estimated 70 million microwaves are sold every year.
“All microwave ovens produce radiation, which is why windows within their doors have significant shielding,” wrote ROTH Capital Partners analyst Gerry Sweeney in a research note.
“But this also obscures visibility into the oven. MMAT EMI shielding uses nanostructures to divert radiation waves back into the oven, allowing for a clear window. Furthermore, initial testing indicates lower amounts of radiation escape. Initial testing, results, and NANOWEB® line production likely open the door to increasing conversations with OEMs in coming quarters.”
ROTH has a Buy rating on META with a target of US$2.
“META is at the early stage of what we expect will be a significant growth curve as its technologies are incorporated into many of today’s products in a range of industries,” Mattison wrote.
“The company’s growing portfolio of technologies, along with its production capabilities, partnerships, and deep patent portfolio, give META a competitive advantage as it works to penetrate addressable markets that are collectively well in excess of US$50 billion.”
META’s total revenue grew year-over-year (YOY) in the third quarter by 329% to US$2.5 million and 388% to US$8.8 million over the first nine months versus the same period in 2021.
But operating expenses also doubled YOY to US$23.9 million following several important acquisitions, analyst MacMurray Whale of Cormark Securities pointed out.
The company’s Q3 net loss increased to US$24.5 million, or US$0.07 per share, on 362.2 million weighted average shares, compared to US$11.4 million, or US$0.04 per share, on 280 million weighted average shares in Q3 2021.
But operating expenses also doubled YOY to US$23.9 million following several important acquisitions, analyst MacMurray Whale of Cormark Securities pointed out.
“MMAT has many early-stage projects across a number of different verticals, most of which have not entered into commercial-scale production,” he wrote.
Hundreds of Patents
Metamaterials were first developed in the 1960s but only came into their own in the 2000s, when design and manufacturing capabilities caught up to the technology. The company is using them to develop nanotechnology products like self-deicing and defogging car and truck headlights and windows, see-through antennas, augmented reality glasses that look like regular glasses, and special eyewear that protects pilots’ eyes from laser strikes.
META is applying its futuristic technology to the communications, health and wellness, aerospace, automotive, and clean energy sectors.
ROTH has a Buy rating on META with a target of US$2.
The company has 472 active patent documents, of which 292 patents have been granted across all its technologies.
“META has been innovating over the last ten years,” President, Chief Executive Officer, and founder George Palikaras said in a video on META’s website. “We start with the design using computer algorithms that design the functions of the designed material . . . We can use a single computer with a single engineer and reduce the time to designing and innovating in the material space from six months down to a few hours.”
He said that reduces costs and makes META “a preferred partner and a preferred developer that enables a wide range of applications in the industry.”
Its NANOWEB® product is the “most transparent and conductive film available today on the market,” Palikaras said.
The global market for lithium-ion battery separators was estimated at US$5.1 billion in 2021 and is projected to reach US$9 billion by 2025, Yano Research Institute Ltd. said.
META also was granted U.S. patents for its second-generation NPORE® nanoporous ceramic separator and its third-generation NPORE® ECS (electrode-coated separator) for lithium-ion batteries.
The global market for lithium-ion battery separators was estimated at US$5.1 billion in 2021 and is projected to reach US$9 billion by 2025, Yano Research Institute Ltd. said.
META also has entered a memo of understanding with DuPont Teijin Films and Mitsubishi Electric Europe to use Meta’s PLASMAfusion to scale a high-volume manufacturing system for film-based, coated copper current collectors. The process reduces the amount of the red metal needed for EV batteries.
Ownership and Share Structure
Major shareholders include Thomas Gordon Welch, with 6.64% or 24 million shares; Anne Barber Lambert, with 6.39% or 23.14 million shares; Lamda Guard Technologies Ltd., with 6.35% or 22.98 million shares; Nova Scotia Innovation Corp., with 3.45% or 12.5 million shares; and Georgios Palikaras, with 1.92% or 6.96 million shares. About 14% of META is held institutionally held.
The stock is covered by numerous analysts, including SingularResearch’s Christopher J. Sakai, ROTH Capital Partners’ Gerry Sweeney, as well as Cormark Securities’ MacMurray Whale, and newsletter writer Clive Maund of Clivemaund.com. Click “See More Live Data” in the data box above to review more.
The company has a market cap of $419.84 million with 361.9 million shares outstanding, 267 million of them free-floating. It trades in a 52-week range of US$2.95 and US$0.63.
Disclosures: 1) Steve Sobek wrote this article for Streetwise Reports LLC. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None. His/her company has a financial relationship with the following companies referred to in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: Meta Materials Inc. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
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Preliminary data showed that inflation in Germany slowed to an annualized rate of 8.6% in December from 10% as one-time government payments came into effect to help consumers pay their heating and gas bills. In recent months, many German unions have successfully advocated above-average wage increases to offset the impact of inflation. Meanwhile, unemployment rates in Europe’s largest economy rose slightly in December to 2.45 million, or 5.5%.
Trading recommendations
Support levels: 1.0528, 1.0483, 1.0361, 1.0332, 1.0284, 1.0193
Resistance levels: 1.0612, 1.0664, 1.0695
The EUR/USD currency pair trend on the hourly time frame is still bullish. The price is still trading in a wide price corridor. The MACD indicator has become negative. Volatility remains low. Under such market conditions, buy trades are best considered from the support level of 1.0638 on intraday time frames. Sell deals can be considered from the resistance level of 1.0689, but better with confirmation in the form of a reverse initiative or a false breakout since the level has already been tested.
Alternative scenario: if the price breaks down through the support level of 1.0549 and fixes below it, the downtrend will likely resume.
News feed for 2023.01.04:
– French Consumer Price index (m/m) at 09:45 (GMT+2);
– Spanish Services PMI (m/m) at 10:00 (GMT+2);
– Italian Services PMI (m/m) at 10:45 (GMT+2);
– French Services PMI (m/m) at 10:50 (GMT+2);
– Germany Services PMI (m/m) at 10:55 (GMT+2);
– Eurozone Services PMI (m/m) at 11:00 (GMT+2);
– US ISM Manufacturing PMI (m/m) at 17:00 (GMT+2);
– US JOLTs Job Openings (m/m) at 17:00 (GMT+2);
– US FOMC minutes at 21:00 (GMT+2).
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.2042
Prev Close: 1.1966
% chg. over the last day: -0.64 %
The UK manufacturing sector ended 2022 on a weak footing, with output, new orders, and employment declining faster. Domestic and foreign demand remained lackluster as customers faced rising costs, increased market volatility, and Brexit-related complications. The seasonally adjusted Purchasing Managers’ Index for the UK manufacturing sector fell to a 31-month low of 45.3 in December, down from 46.5 in November. The PMI has remained below the neutral 50.0 mark for five months in a row. All five PMI sub-indices point to a weakening operating environment for the UK manufacturing economy.
From the technical point of view, the trend on the GBP/USD currency pair on the hourly time frame is bearish. The MACD indicator is in the negative zone, but there is a divergence on several timeframes, indicating a limited further decline. Under such market conditions, buy trades are better to look for on intraday time frames from the support level of 1.1893, but with confirmation. Sell trades are best sought from the resistance level of 1.2056 but also better with confirmation.
Alternative scenario: if the price breaks out through the 1.2100 resistance level and fixes above it, the uptrend will likely resume.
There is no news feed for today.
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 130.77
Prev Close: 130.97
% chg. over the last day: +0.16 %
The Japanese yen rose to a seven-month high against the US dollar on Tuesday, crossing the 130 mark. The strengthening of the yen was triggered by the Bank of Japan’s (BOJ) decision to loosen control over the yield curve and allow holders of certain government bonds to move within a wider range. The US Federal Reserve and other central banks are seeking to slow the pace of interest rate hikes, while the BOJ will only begin to move toward policy normalization this year. Analysts believe the first half of 2023 may pass under the strengthening of the Japanese yen.
From the technical point of view, the medium-term trend on the currency pair USD/JPY is bearish. The price is now trading at the level of the moving averages, while the MACD indicator has become inactive, but the divergence on several time frames indicates that further decline is limited. Buy trades are best considered on intraday time frames from the support level of 129.65, but only with confirmation. Sell deals be looked at from the resistance level of 132.92, provided there is a reversal.
Alternative scenario: If the price fixes above 133.58, the uptrend will likely resume.
News feed for 2023.01.04:
– Japan Manufacturing PMI (m/m) at 02:30 (GMT+2).
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.3569
Prev Close: 1.3668
% chg. over the last day: +0.72 %
Canada’s manufacturing economy remains in a moderate contraction zone, characterized by further declines in production, new orders, and buying activity. The seasonally adjusted Manufacturing PMI registered 49.2 in December, down from 49.6 in November and below the 50.0 mark for the fifth consecutive month. This is the longest decline since August 2015. The main reason for the decline is a drop in new orders due to continuing high inflation and uncertainty in sales.
Trading recommendations
Support levels: 1.3627, 1.3570, 1.3530, 1.3437, 1.3386, 1.3360, 1.3281, 1.3212
Resistance levels: 1.3700, 1.3776, 1.3855
From the point of view of technical analysis, the trend on the USD/CAD currency pair is bullish. The price is trading above the moving averages and forming provocation zones along the move, which do not allow the price to go down. The MACD indicator is in the positive zone. Within the day, buying prevails. Buy trades should be considered from the support at 1.3570, but with confirmation. Sell deals are better to look for on the intraday time frames from the resistance level of 1.3700, but with a confirmation in the form of a reverse initiative on the lower time frames or a false breakout, since the level has already been tested.
Alternative scenario: if the price breaks down and consolidates below the support level of 1.3529, the downtrend will likely resume.
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
As the stock market closed yesterday, the Dow Jones Index (US30) decreased by 0.04%, and the S&P 500 Index (US500) fell by 0.41%. The Technology Index NASDAQ (US100) lost 0.76% on Tuesday. At the end of the day, all three indices closed with losses.
Apple (AAPL) lost more than 4%, approaching a $2 trillion market value for the first time since 2021. Shares of electric carmaker Tesla Inc (TSLA) fell more than 13% Tuesday after the company reported lower-than-expected deliveries for the quarter and year.
The US stocks ended 2022 with their worst performance since 2008, as interest rates rose throughout the year, putting pressure on once-high growth rates and shares of large tech companies.
In the United States, this week’s focus will be on Friday’s US Nonfarm Payrolls report for December. The jobs report is crucial as the Federal Reserve faces the dilemma of whether to continue tightening monetary policy to bring inflation to desired levels or to abandon aggressive rate hikes to protect the economy from slowing. Higher inflation and rising interest rates have hit the housing sector and could next hit the labor market.
The FOMC minutes will also be released today. Given Powell’s hawkish tone after the last meeting and the general market expectation that the Fed will now level rates, there is speculation that the minutes may be more dovish this time. The market is currently pricing in a final rate below 5.0%, while the Fed is pushing for a final rate above 5.0%.
Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 0.80%, France’s CAC 40 (FR40) added 0.44%, Spain’s IBEX 35 (ES35) jumped by 0.42%, Britain’s FTSE 100 (UK100) closed Tuesday in plus 1.37%.
European Central Bank Governing Council spokesman Martins Kazaks expects interest rates to rise significantly in February and March 2023. We are talking about a 0.5% ECB rate hike at each of the meetings. Kazaks, who heads Latvia’s Central Bank, is considered one of the hawkish officials.
Oil starts in 2023 with declining 4%. The US West Texas Intermediate (WTI) crude for February delivery fell by 4.1% to $76.93 a barrel. Brent Crude oil of British origin for delivery in February dropped by 4.4% to $82.10 per barrel. Decreasing activity at factories in China (the biggest oil importer) and IMF warnings about global recession put pressure on oil quotes. The outlook for crude oil remains very uncertain, so high volatility will persist.
Gold showed a strong start in the new year as concerns about an impending recession and a potential slowdown in US interest rates led to increased demand for safe-haven assets other than the dollar.
Asian indices traded flat yesterday. Japan’s Nikkei 225 (JP225) did not trade yesterday, China’s FTSE China A50 (CHA50) fell by 0.69%, Hong Kong’s Hang Seng (HK50) ended the day up by 1.84%, India’s NIFTY 50 (IND50) added 0.19%, and Australia’s S&P/ASX 200 (AU200) ended Tuesday with a minus 1.31%.
China’s repeal of strict antivirus controls last month caused COVID-19 to spread to 1.4 billion people. Funeral companies are reporting a surge in demand for their services, and international health experts are predicting that at least a million people in China will die from COVID-19 this year. But officially, China reports few COVID-19 deaths and downplays concerns about the disease.
S&P 500 (F) (US500) 3,823.95 −15.55 (−0.41%)
Dow Jones (US30) 33,134.79 −12.46 (−0.038%)
DAX (DE40) 14,181.67 +112.41 (+0.80%)
FTSE 100 (UK100) 7,554.09 +102.35 (+1.37%)
USD Index 104.61 +1.09 (+1.05%)
Important events for today:
– Japan Manufacturing PMI (m/m) at 02:30 (GMT+2);
– Switzerland Consumer Price index (m/m) at 09:30 (GMT+2);
– French Consumer Price index (m/m) at 09:45 (GMT+2);
– Spanish Services PMI (m/m) at 10:00 (GMT+2);
– Italian Services PMI (m/m) at 10:45 (GMT+2);
– French Services PMI (m/m) at 10:50 (GMT+2);
– Germany Services PMI (m/m) at 10:55 (GMT+2);
– Eurozone Services PMI (m/m) at 11:00 (GMT+2);
– US ISM Manufacturing PMI (m/m) at 17:00 (GMT+2);
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.
The outlook for the new year is dominated by this one fear: recession.
Major economies such as the UK and Eurozone are believed to be already going through an economic contraction. The US – the world’s largest economy – expected to experience a downturn later this year.
Yet amidst all these recession fears at the onset of 2023, the financial markets still do present opportunities for investors and traders.
Here are 3 assets that may see a stellar year:
1) Gold to hit $2000?
Gold has long been seen as a safe haven asset: a way for investors to protect their money in times of heightened fear and uncertainty.
As proof, here’s a list of how gold performed during the US recessions (as listed by the NBER) that have occurred since 1990:
Gulf War Recession (July 1990 – March 1991) = gold soared by as much as17.5% at its peak on 21 August 1990.
Dot Com Recession (March 2001 – Nov 2001) = gold up by as much as 10.4% at its peak on 26 Septembe 2001.
The Great Recession (Dec 2007 – June 2009) = gold rose by as much as 28% by March 2008 when it traded over $1000 per ounce for the first time ever in the US futures market.
Covid-19 Recession (Feb 2020 – April 2020) = gold hit a record high at $2075.47 in August 2020
Using such past performances as a guide, the prospects of gold’s prospects of climbing by another 9% from today’s prices ($1848 at the time of writing) to reach $2000 doesn’t seem too farfetched.
Fundamental perspective: What needs to happen?
Besides a US recession, the key component for gold’s ability to climb higher rests on this key factor:
The US dollar has to weaken further as markets brace for the Fed eventually cutting interest rates to help support the US economy.
As bullion’s “enemy” becomes less potent in the face of a looming recession, that could encourage gold bulls to push the precious metal even higher in 2023.
At the time of writing, markets are predicting a 71% chance that we could see $2000 gold once more in 2023.
What could go wrong?
If gold’s enemy #1 from 2022 makes a return: US inflation remains stubbornly higher, forcing the Fed to continue hiking interest rates aggressively, which in turn restores demand for the US dollar.
That may force a major rethink among gold bulls, perhaps accompanied by the unwinding of some of bullion’s gains of late.
2) Japanese Yen: USDJPY back down to 125?
Last year, the Yen fell by 12.2% against the US dollar, making JPY the second-worst performing G10 currency against the greenback in 2022.
That’s all about to change, with the Yen ready to catch up.
Fundamental perspective: What needs to happen?
It all depends on what the central banks in the US and Japan do in relation to one another.
Fed pivot: If the Federal Reserve “pivots” and is forced to lower US interest rates later in 2023 in order to offset a US recession, that should spell more weakness for the dollar.
BoJ pivot: If the Bank of Japan also does its own “pivot” but instead of cutting, it actually raises its own interest rates, that should spell more gains for JPY.
Such expectations will come into sharper focus once the new central bank governor takes over when current BoJ Governor Haruhiko Kuroda’s term expires in April.
Keep in mind that the BoJ’s policy balance rate now still rests at negative 0.10%, making it a clear laggard across major central bankers that had been busy hiking their own rates throughout 2022.
In short, if the BoJ hikes rates at a time when the Fed is cutting its own rates (or perhaps even just thinking about making such a move), that should help pave the way for the Yen’s speedy recovery.
For now, markets predict a 53% that USDJPY would eventually trade below 125 sometime over the next 12 months.
What could go wrong?
Still-dovish BoJ: the incoming BoJ Governor keeps Japan’s benchmark rate mired in negative territory on signs that inflation is not as sticky as hoped.
This scenario would be made worse if the Fed stays hawkish and keeps sending US interest rates much higher than the currently forecasted peak of around 5%.
A still-dovish BoJ + a still-hawkish Fed = USDJPY’s downside severely capped.
3) FTSE China A50 Index back above 14,000?
There is much hope surrounding the reopening of the Chinese economy this year, with the government essentially having abandoned its Covid Zero campaign.
And such optimism has already been playing out in Chinese stocks in recent months.
Here’s a comparison between the FTSE China A50 Index against its global peers since end-October through the present day:
FTSE China A50 Index: +15.9%
Europe’s STOXX 50: +7.3%
MSCI ACWI Index (stocks across developed and emerging markets): +3.26%
S&P 500: -1.24%
Fundamental perspective: What needs to happen?
The world’s second largest economy needs to finally break off the Covid shackles that have hampered it over the past 3 years.
Once the economy can overcome the recent snags of skyrocketing Covid cases and hospitalizations, consumers need to eventually feel confident once more about going out their economic activities, be it returning to the office, spending money at physical stores, and even going on vacations.
Assuming that China can find a steady footing and follow in the rest-of-the-world’s footsteps in terms of the post-pandemic recovery, that promises to help restore the earnings of China’s public-listed companies, which in turn should entice more investors into pushing these stock prices higher.
Additionally, policymakers on both the fiscal (government) and monetary (central bank) sides must continue adopting a supportive stance to shore up China’s economic momentum.
All of the above should position China as an attractive investment destination for foreign investors, especially within the context of a looming global recession.
What could go wrong?
If China continues to struggle with the Covid menace, that would only worsen the expected global recession and deal a massive blow to hopes for a sustained recovery in Chinese stock markets.
Also, if China’s inflation starts to run too hota la the rest of the world, that may force policymakers into a restrictive stance to curb inflation at the expense of economic growth.
If 2023 also sees a return of heightened geopolitical tensions between the West and China, that could also sour sentiment surrounding Chinese assets.
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