IC Markets Asia Fundamental Forecast | 03 November 2022

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What happened in the US session?

The US Federal Reserve hiked rates by 75bps overnight, taking the US interest rates to 4.00%. Markets experienced significant volatility as the DXY and most major currencies fluctuated strongly. The S&P closed at 3759, down 2.50% overnight. 

What does it mean for the Asia Session?

Look for most major currencies to retrace from the overnight volatility before continuing with the current trend of DXY strength. 

The Dollar Index (DXY)

Key news events today

USD Federal Funds Rate

USD FOMC Statement 

USD FOMC Press Conference 

What can we expect from DXY today?

As the US Federal Reserve hiked rates by 75bps, this decision was much anticipated. On the release of the rates decision, the DXY fell strongly from the 111.20 price level to reach a low of 110.35. This move lower was due to the accompanying statement that indicated ‘ prepared to adjust the pace of purchases if warranted by changes in the economic outlook’. The DXY recovered in strength following comments from Chair Powell that the terminal rates could be higher. The DXY ended the trading session at the 112 round number resistance level. Look for the price to retrace briefly before trading higher again, with the next key resistance at 113.30. 

Central Bank Notes:

  • Federal Reserve hiked rates by 75bps taking interest rates to 4.00%
  • Next meeting is on 15 December 2022
  • Further rate increases can be anticipated, with rate cuts expected only if Fed Reserve is confident inflation is moving back down to 2%

 

Next 24 Hours Bias

Medium Bullish

Gold (XAU)

Key news events today

No major news events. 

What can we expect from Gold today?

Gold reversed strongly to the downside as the DXY strengthened due to the FOMC interest rate decision. Following the test of a high of the 1670 price level, Gold corrected lower strongly to reach the interim support of 1630. With the price currently retracing briefly, look for Gold to test the 1645 price level before trading lower again. Beyond the 1630 price level, the next key support level is at 1619. 

Next 24 Hours Bias

Weak Bearish

The Australian Dollar (AUD)

Key news events today

No major news events. 

What can we expect from AUD today?

Similar to most major currencies, the AUDUSD spiked up before trading lower following the news release from the FOMC. Testing a low of 0.6326, the AUDUSD is currently retracing and could test the interim resistance area of 0.64. If the AUDUSD rejects the resistance area, and the DXY continues to strengthen, look for a continuation of the downtrend with the key support level at 0.6280, beyond the overnight low of 0.6325.

Central Bank Notes:

  • Cash rate stands at 2.85% 
  • Future rate rises will be determined by data, the outlook for inflation, and the labour market.
  • Next meeting on 6 December 2022

Next 24 Hours Bias

Weak Bearish 

The Kiwi Dollar (NZD)

Key news events today

No major news events. 

What can we expect from NZD today?

The NZDUSD had been climbing steadily to the upside following encouraging employment data release yesterday. As price reached the 0.59 key resistance level, this presented the opportunity for a strong reversal. The NZDUSD spiked towards the 0.5930 price area before reversing strongly again. Look for the current retracement to complete and if price remains below the 0.59 resistance level, the opportunity for a reversal is still valid. However, it is likely that the NZDUSD could continue to fluctuate between the 0.58 and 0.59 price levels. 

Central Bank Notes:

  • Cash rate stands at 3.50% 
  • Central bank is likely to continue with the current path of rate adjustment
  • Next meeting is on 23 November 2022

Next 24 Hours Bias

Weak Bearish 

The Japanese Yen (JPY)

Key news events today

No major news events. 

What can we expect from JPY today?

The USDJPY broke below the 147 key support level to reach a low of 145.70. However, the move lower was unsustained as the USDJPY corrected strongly to the upside to test the 148.25 price area. Despite the significant strength of the DXY, the USDJPY has struggled to find significant upside. This could be indicative of a potential shift of sentiment on the USDJPY. As the price retraces back to the 147.30 price area, look for the USDJPY to break below the 147 round number support level to signal a possible down trend, with the next key support level at 145.50. Alternatively, if the DXY continues to strengthen strongly, this could pull the USDJPY higher, with the 149 key resistance level a target, only if the price can break strongly beyond 148. 

Central Bank Notes:

  • Cash rate stands at -0.1%  
  • Expects Short- And Long-Term Policy Rates To Remain At ‘Present Or Lower’ Levels
  • Next meeting is on 20 December  2022

 

Next 24 Hours Bias

Weak Bullish