When the bulls start taking victory laps 0 (0)

One of the low-lights of Donald Trump’s presidency when it came to markets was when he autographed a chart of the Dow Jones Industrial Average and sent it to Lou Dobs, highlighting a 1985 point rise.

That was on March 13, 2020, just as the pandemic was kicking off.

The next trading day the index fell 2352 and continued to fall another 20% from there.

The market has a way of humbling even the most-powerful people.

Now it’s Biden that’s testing the market gods with a tweet touting the record highs in the stock market.

This article was written by Adam Button at www.forexlive.com.

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Crude oil futures settle at $71.43 0 (0)

Crude oil futures are settling at $71.43. That’s down -$0.15 or -0.21%.

For the trading week, the price is little change at +0.25%. The low for the week reached $67.71. The high for the week was up at $72.56.

Looking at the weekly chart below, the price traded this week above and below the 200-week moving average at $70.43 (green line in the chart below). However, momentum could not be maintained, and the price rotated back above the moving average level for the second week in a row. Of note is that the low prices did stay above the May and June lows which bottomed near $67.

This article was written by Greg Michalowski at www.forexlive.com.

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Stocks remain in a comfortable spot ahead of North America trading 0 (0)

A more dovish Fed has been a tailwind for risk trades and even after some late profit-taking yesterday, it doesn’t dull the shine from earlier in the week. European indices are maintaining a good mood today with the DAX and CAC 40 both having hit fresh record highs during the week and US indices are also at the highs for the year.

The S&P 500 is on course for a seventh straight week of gains, up 2.5% this week, and during that run, the index has gained by nearly 15%:

It is now less than 2% away from a fresh record high with futures pointing to a 0.3% gain at the moment ahead of the open later.

Despite there being notable headwinds for the global economy and the inflation monster not quite defeated just yet, stocks are on their way to scale to new heights once more. If you ever need more evidence that the stock market is not the economy, this would be it.

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

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AUDUSD Technical Analysis 0 (0)

USD

  • The Fed left interest rates unchanged as expected with a shift in the statement that
    indicated the end of the tightening cycle.
  • The Summary of Economic Projections showed a
    downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
    was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
    in 2024 compared to just two in the last projection.
  • Fed Chair Powell didn’t push back against the strong dovish pricing
    and even said that they are focused on not making the mistake of holding rates
    high for too long, which implies a rate cut coming soon.
  • The US CPI this week came in line with expectations
    with the disinflationary progress continuing steady. This was also confirmed by
    the US PPI the day after where the data missed
    estimates.
  • The labour market has been showing signs of
    weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming
    in strongly.
  • The latest ISM Manufacturing PMI missed expectations falling further into
    contraction, while the ISM Services PMI beat forecasts holding on in expansion.
  • The market expects the Fed to start cutting rates
    in Q1 2024.

AUD

  • The
    RBA left interest rates unchanged as expected at the last meeting with
    the central bank maintaining the usual data dependent language.
  • The
    recent Monthly CPI report missed expectations across
    the board which is a welcome development for the RBA.
  • The
    RBA Governor Bullock has been leaning on a more hawkish side recently, although
    she remains optimistic on the future outlook.
  • The
    latest labour market report beat forecasts across the
    board although the unemployment rate rose more than expected.
  • The
    wage price index surprised to the upside as wage
    growth in Australia remains strong.
  • The
    recent Australian PMIs fell further into contraction for
    both the Manufacturing and Services sectors.
  • The
    market expects the RBA to start cutting rates in Q4 2024.

AUDUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that AUDUSD recently
broke above the key trendline
following the surprisingly dovish FOMC meeting. This has opened the door for a
rally into the 0.68 resistance where we
can expect the sellers to step in with a defined risk above the level to target
a drop back into the 0.65 support.

AUDUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that the pair
started to consolidate just above the recent high at the 0.6680 level. This is
where the buyers are piling in with a defined risk below the level to position
for another rally into the 0.68 handle. The sellers, on the other hand, will
want to see the price breaking lower to invalidate the bullish setup and
position for a drop into the 0.65 support.

AUDUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see more
closely the rangebound price action between the 0.6680 support and the 0.6730
resistance. This gives us a clear playbook as a break to the upside should lead
to a rally into the 0.68 handle, while a break to the downside could trigger a
selloff into the 0.65 support.

Upcoming Events

Today the only notable event on the agenda is the
release of the US PMIs.

This article was written by FL Contributors at www.forexlive.com.

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Eurozone October trade balance €11.1 billion vs €10.0 billion prior 0 (0)

The euro area trade surplus widened slightly in October as exports grew by 0.6% while imports declined by 0.2% on the month, both on a seasonally adjusted basis. Comparing the year-to-date data, exports were seen down 0.2% while imports are down some 12.7% on an unadjusted basis compared to the January to October period last year.

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

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ECB’s Holzmann: There was no discussion of a change to rates at latest meeting 0 (0)

  • Majority said there are risks to the upside on inflation
  • For most of us, core inflation is what we are looking at
  • Wouldn’t say we are at terminal rate but the chance has increased

They still want to leave the door open to further tightening but given prevailing circumstances, everyone knows that they are done already. The only thing is that they can’t declare victory on the inflation front just yet, hence the ongoing rhetoric i.e. no pivot.

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

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USDCAD Technical Analysis – We are at a key level 0 (0)

USD

  • The Fed left interest rates unchanged as expected with a shift in the statement that
    indicated the end of the tightening cycle.
  • The Summary of Economic Projections showed a
    downward revision to Growth and Core PCE in 2024 while the Unemployment Rate
    was left unchanged. Moreover, the Dot Plot was revised to show three rate cuts
    in 2024 compared to just two in the last projection.
  • Fed Chair Powell didn’t push back against the strong dovish pricing
    and even said that they are focused on not making the mistake of holding rates
    high for too long, which implies a rate cut coming soon.
  • The US CPI this week came in line with expectations
    with the disinflationary progress continuing steady. This was also confirmed by
    the US PPI the day after where the data missed
    estimates.
  • The labour market has been showing signs of
    weakening lately but we got some strong releases recently with the US Jobless Claims and the NFP coming
    in strongly.
  • The latest ISM Manufacturing PMI missed expectations falling further into
    contraction, while the ISM Services PMI beat forecasts holding on in expansion.
  • The market expects the Fed to start cutting rates
    in Q1 2024.

CAD

  • The BoC kept the interest rate steady at
    5.00%
    as expected with the usual caveat that
    it’s prepared to raise the policy rate further if needed.
  • BoC Governor Macklem recently has been leaning on a more
    neutral side as inflation continues to abate.
  • The recent Canadian CPI missed expectations across the
    board and the underlying inflation measures eased, which was a welcome
    development for the BoC.
  • On the labour market side, the latest report beat expectations
    although the unemployment rate ticked higher again.
  • The market expects the BoC to start
    cutting rates in Q2 2024.

USDCAD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that USDCAD rejected
the trendline and sold
off as the Fed came out surprisingly dovish. The pair has now reached the key
swing low at 1.3382 where we can expect the buyers to step in with a defined
risk below the level to position for a rally into the trendline. We can also
notice that the price is a bit overstretched to the downside as depicted by the
distance from the blue 8 moving average. In such
instances, we can generally see a pullback into the moving average or some
consolidation before the next move.

USDCAD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see that we recently
got a fakeout above the trendline, which is generally a reversal signal, and as
soon as the price fell below the support at
1.3550, the sellers piled in aggressively supported by the dovish Fed. From a
risk management perspective, the sellers would be better off waiting for a
pullback after such a strong and quick selloff. The probable resistances will
be the 1.35 handle and the trendline.

USDCAD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is starting to diverge with
the MACD right
at the key swing low level. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. This should be another layer of
confluence for the buyers with the first target coming in at 1.35.

Upcoming Events

Today the only notable event on the agenda is the
release of the US PMIs.

This article was written by FL Contributors at www.forexlive.com.

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Winter is Coming: How Prepared is Europe to Withstand it? 0 (0)

●For approximately 500 days (in 2021–2023), Europe was
gripped by an unprecedented energy crisis that was characterised by record-high
prices—especially for natural gas.

●Supply issues induced by the changing
geopolitical landscape have been the central cause of the crisis.

●After reaching an extraordinarily high
level of €311 per MWh in the summer of 2022, natural
gas prices have dropped by more than 80% by winter 2023, but they remain more
than two times higher than their long-term historical average.

●Europe has managed to withstand the most acute phase of the
crisis but at a rather large cost.

●Overall, Europe has adapted and managed to
accumulate substantial natural gas inventories, but the situation remains
fragile and prices volatile.

●Although the probability of an energy
crisis returning this winter is relatively low, such possibility still remains.

While there are
many aspects of the energy crisis in Europe within several markets, including
crude oil, coal, electricity, and emission allowances, as well as within
several domains, such as EU energy policies and regulation, diplomacy and
international relations, this article will focus exclusively on the natural gas
market, because it is here where the energy crisis has been most pronounced.

Europe faced an
unprecedented energy crisis for around seventeen months (from September 2021 to
February 2023), as coal, natural gas, and electricity prices surged to all-time
highs. Governments across the continent rushed in to introduce energy-saving measures
and implement conservation policies, while households and businesses had to cut
consumption rapidly.

Moreover, the
conflict in Ukraine has disrupted energy supplies as the European Union (EU)
has prohibited the maritime transport of Russian crude oil and has set a target
for the bloc to phase out imports from Russia by 2027. Furthermore, three of
the four lines of the Nord Stream pipeline were damaged by unknown explosions,
limiting Europe’s supply options. Either way, importing cheap pipeline gas from
Russia no longer seems like a viable option for Europe as relations between the
two actors remain strained.

Now, as 2023 draws
to a close, can we confidently conclude that the energy crisis in Europe is
over? How prepared is Europe to cope with the upcoming winter? What are the
risks and challenges that lie ahead?

History

Kar Yong Ang, Octa
analyst, has succinctly summarised the context: ‘Europe’s energy
crisis was long in the making. As the global economy recovered from the
recession caused by COVID-19, the demand for LNG [liquified natural gas] surged
in the summer of 2021. However, the supply could not immediately cope with the
rising demand, so prices across the globe went up. Higher prices, coupled with
LNG supply constraints and sluggish European production, prevented the European
states from restocking natural gas to adequate levels before the winter.
Another shock came in December 2021, when gas flows from Russia along the Yamal
Europe route dropped sharply—ostensibly due to maintenance. Then, as you know,
the armed conflict in Ukraine broke out, taking the whole continent to a
totally different reality and sending energy costs to the stratosphere.’

Natural
gas price in Europe (Title Transfer Facility, TTF)

The
energy crisis’s most acute phase occurred in the summer of 2022. One only needs
to look at the evolution of Europe’s benchmark natural gas price (TTF) to
assess the scale of the emergency (see the chart above). On 25 August 2022, TTF
price reached €311 per megawatt-hour (MWh), the highest level ever recorded. On
that specific day, the price was 44% above the previous maximum reached on
March 7, 2022, and was a staggering 18 times higher than the three-year average
price recorded over 2019-2021. Despite Europe’s gas storage sites being 78%
full in August 2022, supply worries were rife as imports from Russia dropped by
around 60%, forcing Europe to rely extensively on liquefied natural gas (LNG)
imports—especially from the United States. However, the aggregate supply of LNG
in the global market at that time was reduced as one of the U.S. LNG export
plants—Freeport LNG—had to go offline due to an explosion incident. Thus, to
secure an adequate number of LNG cargoes, Europe had to outbid other customers
in South and East Asia by agreeing to pay higher prices to suppliers.

A lot has changed
since last summer. Europe has adopted and managed to reduce demand, find new
suppliers and build natural gas stocks to comfortable levels. The European gas
prices have returned to normality but remain above the level observed before
the crisis. On Monday, 6 December, the front-month futures contract for
delivery in January at TTF settled at €39.25 per MWh, 87% below the peak
observed in August 2022 but still some two times above the historical average
seen in 2019-2021. Kar Yong Ang, Octa analyst singles out several reasons for
normalisation:

‘Although natural gas prices in Europe remain higher than they were
before the crisis, the situation has improved dramatically. Indeed, the
contrast with 2022 looks quite impressive. There are several reasons for this.
First, there was a structural loss of demand partly due to reduced economic
activity and partly due to conservation policies. Second, imports of pipeline
gas from Norway have increased, as well as LNG imports from the United States
and other countries. On top of it, there was a bit of luck as well, as weather
conditions allowed the Europeans to build the stocks faster than normal.’

Indeed, probably
the most painful yet effective adjustment that Europe had to endure was the
loss of demand. According to Eurostat, total
gas use in the EU’s top 6 consuming countries—Germany, Italy, France,
Netherlands, Spain, and Poland—was down by 17% in the first ten months of 2023
compared with the five-year average for 2017-2021. Obviously, energy-intensive
industries such as chemicals and steel production had to bear the brunt of
adjustment. For example, according to Statistisches
Bundesamt
, Germany’s energy-intensive manufacturing production has decreased
by about 20% since the start of 2022 and has not shown any signs of recovery
yet.

At the same time,
however, as consumption went down, so did local supply. According to Eurostat, total
indigenous production in the EU’s top 6 gas-producing countries—Germany, Italy,
Hungary, Netherlands, Poland, and Romania—was down by 41% in the first ten
months of 2023 compared with the five-year average for 2017-2021. The key
reason for the continuing drop in production in Europe is the gradual phasing
out of the Groningen natural gas field, Europe’s largest one, where a series of
earthquakes led the government to shut down production.

Thus, Europe had to
rely on imports more and more to balance its natural gas market. Russia has
long been the main supplier of affordable pipeline gas into Europe, but
geopolitical tensions, sanctions, and explosions of the Nord Stream pipeline
have brought the flows to a minimum. According to Eurostat, Russia
exported just 22.3 billion cubic metres of natural gas into Europe in the first
nine months of 2023, which is 57% lower than during the same period in 2022 and
65% lower than during the same period in 2021. Concurrently, imports of LNG
from the United States reached 30.01 billion cubic metres during the first nine
months of the year, up a whopping 185% from the same period in 2021.

Another factor that
helped Europe fill the supply gap and live through the volatile months of 2022
was pure luck. Indeed, the unusually warm winter in 2022–2023 lowered the
heating demand and allowed the European states to start building stocks earlier
than usual. This year’s weather conditions have also been quite favourable.
Windy and wet weather increased electricity generation from renewable sources,
while mild temperatures in November have delayed the onset of winter heating.

‘Overall, Europe has managed to bring its
natural gas inventories to a rather comfortable level and is now well-protected
to withstand future supply shocks,’says Kar Yong Ang,
Octa analyst. Indeed, according to the latest data from Gas Infrastructure
Europe, gas storage levels are at record highs for this time of the year at
around 94% full, said Octa analyst, adding that the general bias for TTF price
remains bearish. ‘I would not be surprised to see European
natural gas prices drop to €30 per MWh in case of a normal winter.
Alternatively, if this upcoming winter turns out to be colder than normal, we
might see TTF temporarily hitting €60 per MWh.’

However, Kar Yong
Ang says that different kinds of challenges and risks lie ahead for Europe. ‘Some
European states have secured a number of long-term import deals with major LNG
producers, which, on the face of it, is a good thing. But, it appears that
Europe is placing too much faith in LNG. It’s betting too much on a single
supply source, which may backfire in the long run. If Europe is to permanently
replace relatively cheap pipeline imports from Russia with relatively expensive
LNG imports, then, I am afraid, economic activity in its traditional industries
may never recover to the pre-crisis levels, and in fact, deindustrialisation
may kick in full force.’

Indeed, Europe’s
top competitors—the United States and China—benefit from lower prices. The
United States has ample resources at home, while China is getting cheap imports
from Russia. Europe risks losing its competitive standing in the global
marketplace. Furthermore, as we explained at the beginning of the article, the
temporary shutdown of a single LNG export plant in the U.S. has already
highlighted how strongly European energy security is now connected with the
intricacies of the global LNG market.

‘All 27 member states of the EU have been
net importers of energy since 2013, and this status is unlikely to change in
the foreseeable future. With supply options more limited than in the past, European consumers will have to get used to
more volatile natural gas prices, as they will increasingly be determined by
the whims of the weather and by the bargaining power of other LNG importers in
Asia,’ saysKar Yong Ang, Octa analyst.

Europe has survived
the energy crisis and managed to adapt but has done so at the cost of lower
demand and reduced economic activity. Now, Europe will have to learn to
navigate the global LNG trade successfully to secure the most favourable deals.

About
Octa

Octa is an international broker that has been providing online
trading services worldwide since 2011. It offers commission-free access to
financial markets and various services already utilised by clients from 180
countries who have opened more than 42 million trading accounts. Free
educational webinars, articles, and analytical tools they provide help clients
reach their investment goals.

The company is involved in a
comprehensive network of charitable and humanitarian initiatives, including the
improvement of educational infrastructure and short-notice relief projects
supporting local communities.

In the APAC region, Octa captured the
‘Best Forex Broker Malaysia 2022′ and the ‘Best Global Broker Asia 2022′ awards
from Global Banking and Finance Review and International Business Magazine,
respectively.

This article was written by FL Contributors at www.forexlive.com.

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Dollar stays in retreat mode alongside bond yields on the day 0 (0)

It’s been more or less a straightforward one so far in European morning trade, with traders sticking with the sell the dollar, buy everything else mood. The more dovish Fed yesterday is the main driver still, all before we get a more of a mix of the BOE and ECB later on. The dollar’s struggles come as Treasury yields are also falling further, with 10-year yields now hitting below 3.95% on the day:

The USD/JPY chart above shows a further technical breakdown in the pair, falling past its 200-day moving average (blue line) now and that tees up a potential drop towards 140.00 next.

A more dovish BOE and ECB could be further catalysts to drive further gains in the Japanese yen, à la lower bond yields globally.

Going back to the dollar, EUR/USD is seen up 0.5% to 1.0925 currently and GBP/USD up 0.4% to 1.2675 on the day. As equities are also ripping higher in European trading, commodity currencies are also benefiting with AUD/USD up 0.9% to 0.6715 and NZD/USD up 0.7% to 0.6215 currently.

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

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