AUD/USD keeps hovering in the sub-0.6600 zone. Retail Sales in Australia disappointed expectations. Investors' attention now shifts to inflation figures. Once again, AUD/USD exhibited an erratic performance on Tuesday, remaining ensnared in a rangebound pattern that has persisted since the middle of this month. That said, spot faded the promising start to the week, with the Australian dollar weakening on a daily basis in tandem with the decent gains in the greenback. In the meantime, the resilience of the Australian currency is notable, particularly in light of recent reports suggesting additional stimulus measures by the PBoC to support China's stock market and promote economic recovery in the post-pandemic era. However, these efforts, aimed at boosting the economy, have been slower to materialize than expected. On another front, the expected decision of the Reserve Bank of Australia (RBA) to maintain its current policy stance at its February 6 meeting is viewed as a factor limiting the potential upward movement of the pair in the near term, which should morph into extra-subdued trading in the short-term future. Back to the RBA, the recorded decrease in inflation metrics in December, alongside the perceived tightness in the labour market, has strengthened the consensus among market participants that the central bank will keep its current interest rates unchanged at next week's event. Looking at central banks more broadly, the possibility of the Federal Reserve extending its ongoing restrictive stance for a longer duration than anticipated is expected to support additional gains in the US Dollar, thus acting as a drag for the AUD/USD for the time being. Moving forward, the Inflation Rate is due on Wednesday and is expected to see a marked continuation of the disinflationary path in the domestic economy during the October–December period. In fact, consensus sees consumer prices rising 0.8% QoQ (from 1.2%) and 4.3% YoY (from 5.4%), all lending further legs to the perception that the RBA should maintain its monetary policy unchanged at its imminent gathering. AUD/USD daily chart AUD/USD short-term technical outlook Further losses might push the AUD/USD to revisit its 2024 low of 0.6524 (January 17). The loss of this region may result in a decline to the provisional 100-day SMA of 0.6526, which coincides with the December 2023 bottom (December 7). Down from here follows the 2023 low of 0.6270 (October 26) and the round level of 0.6200, all of which are preceding the 2022 low of 0.6169 (October 13). On the contrary, there is a brief stumbling block at the 55-day SMA at 0.6642. The breakout of this zone might inspire the pair to set sails for the December 2023 top of 0.6871 (December 28), ahead of the July 2023 peak of 0.6894 (July 14) and the June 2023 high of 0.6899 (June 16), all just ahead of the key 0.7000 threshold. Further consolidation seems the name of the game for the pair on the 4-hour chart. On the upside, the 100-SMA is now at 0.6623, while the 200-SMA is at 0.6683. The breach of this region signals a possible move to 0.6728. On the downside, there is early dispute around 0.6551 before 0.6525. If this zone is broken, there is no major disagreement until 0.6452. The MACD remains flat around the positive border, while the RSI grinds lower to the 45 region. View Live Chart for the AUD/USD

XAU/USD Current price: 2,032.51 United States data fueled demand for the US Dollar ahead of the Federal Reserve's announcement. The US Treasury reduced its federal borrowing estimate for 1Q 2024  to $760 billion. XAU/USD keeps grinding higher, with buyers slowly recovering their confidence. The US Dollar is once again appreciating during the American session, resulting in XAU/USD retreating from a fresh weekly high of $2,048.64 achieved following the release of United States (US) data. The country reported that the number of job openings on the last business day of December stood at 9.02 million, according to the US Bureau of Labor Statistics (BLS)  Job Openings and Labor Turnover Survey (JOLTS), higher than the  8.92 million openings reported in November. Additionally, CB announced Consumer Sentiment rose to 114.8 in January, its highest in over two years. The USD is firmer despite a sharp slide in government bond yields. Markets welcomed news from the US Treasury, as the organism reduced its federal borrowing estimate for 1Q 2024  to $760 billion, down from a previous $816 billion estimate. However, Wall Street trimmed previous gains, with major indexes trading mixed around their opening levels. Finally, caution prevails as speculative interest awaits the US Federal Reserve (Fed) monetary policy decision. The central bank will likely keep interest rates on hold, although market players will be looking for clues on upcoming rate cuts. In the latest dot plot, Fed officials anticipated three rate cuts this year, with money markets looking at March for the first trim. Policymakers have been conservative on the date issue, refusing to confirm when they could pull the trigger. XAU/USD short-term technical outlook The daily chart shows XAU/USD trades in the green for a second consecutive day as buyers gain confidence. The bright metal stands above a mildly bearish 20 Simple Moving Average (SMA) for the first time in over two weeks, while the longer moving averages remain far below the current level, with the 100 SMA advancing above a flat 200 SMA. Technical indicators, in the meantime, crossed their midlines into positive territory but lacks strength enough to confirm a bullish extension. The 4-hour chart shows that XAU/USD was quite volatile around the release of US data but trades pretty much unchanged from pre-release levels. The 20 SMA gains upward traction below the current level and below a flat 100 SMA, while the price currently battles with the 200 SMA. Finally, technical indicators hold within positive levels, although without directional strength, failing to provide fresh clues. Support levels: 2,019.20 2,010.00 2,001.60 Resistance levels: 2,040.30 2,052.60 2,064.15

EUR/USD Current price: 1.0843 European data was mixed, as the German economy contracted in Q4. Attention shifts to United States employment-related figures ahead of Fed, NFP. EUR/USD recovered some ground, but bears hold the grip. The EUR/USD pair hovers around 1.0840, recovering some of the ground lost on Monday amid a better market mood weighing on the US Dollar. Wall Street closed the day in the green after its overseas counterparts hesitated for direction, with US indexes benefiting from earnings reports and a positive surprise from the United States (US) Treasury, which cut its quarterly borrowing estimate. As a result, government bond yields fell sharply, putting additional pressure on the USD demand. European data was mixed, as Germany confirmed the economy contracted in Q4. The Gross Domestic Product (GDP) declined 0.3% in the three months to December, while the annualized reading came in at -0.2%, as expected. However, the Eurozone GDP in the same period was up 0.1% from a year earlier, better than the 0% expected. Additionally, the January Economic Sentiment Indicator posted 96.2 as expected, while Consumer Confidence in the same month contracted to -16.1. Market players will now turn their eyes to US data, as the country will release January Consumer Confidence and the JOLTS Job Openings report, relevant ahead of the Nonfarm Payrolls (NFP) report scheduled for next Friday. In the meantime, the Federal Reserve (Fed) will announce its monetary policy decision on Wednesday. EUR/USD short-term technical outlook The daily chart for the EUR/USD pair shows it is battling with a directionless 200 Simple Moving Average (SMA) providing dynamic resistance in the current price zone. The 20 SMA, in the meantime, maintains its bearish slope well above the current level, suggesting limited buying interest. Finally, technical indicators remain within negative levels, with neutral-to-bearish slopes, supporting another leg south. In the near term, the ongoing advance seems a mere correction. The upside is being capped by a bearish 20 SMA, which accelerates its decline below the longer ones. At the same time, technical indicators tick north, but with limited strength and still below their midlines. Bears could lose interest if the pair accelerates through 1.0890, although price action will likely remain limited ahead of the Fed's decision. Support levels: 1.0800 1.0760 1.0720 Resistance levels: 1.0845 1.0890 1.0945  

EUR/USD trades slightly above 1.0800 following Monday's decline. Near-term technical outlook suggests that the bearish bias remains intact. Disappointing growth figures from Germany and Euro area could further weigh on the Euro. EUR/USD started the week on the back foot and touched its lowest level since mid-December below 1.0800 in the early American session on Monday. Although the pair manages to hold above this level in the European morning on Tuesday, it risks losing it in case European data disappoint. Mixed comments from European Central Bank (ECB) officials weighed on the Euro on Monday. ECB Vice President Luis de Guindos said inflation risks were tilted to the downside and ECB policymaker Mario Centeno argued that the central bank should start cutting rate sooner than later, while avoiding abrupt moves. On a hawkish note, Governing Council member Peter Kazimir said that a rate cut in June is more probable than April but the exact timing is secondary to the decision's impact.

We saw a cautious start to the week for European markets yesterday with the CAC 40 and DAX both treading water close to last week's record closing highs, and today's economic numbers expected to show further evidence of weak economic activity in Europe. US markets were slightly more upbeat with the S&P500 setting fresh record highs ahead of tomorrow's Fed rate meeting and today's earnings numbers from Microsoft, Alphabet and AMD all of which will be reporting after the closing bell, while the other three from this week's big cap earnings releases from Amazon, Apple and Meta are all due to report Thursday. The strong finish in the US could see European markets open at, or close to recent record highs themselves later this morning. In view of the gains that we've seen in these big cap stocks over recent weeks the bar has been set very high. How high can be shown in the current value of just these 5 companies of Apple, Amazon, Alphabet, Meta Platforms and Microsoft which add up to a total market cap of just over $10trn, putting the total value of all 5 companies at over 50% of the total market cap of the Nasdaq 100. Let's hope the market likes what this week's earnings numbers tell them.   Today's economic numbers from Europe could also serve to bring forward market expectations of when to expect the first rate cut from the European Central Bank. At the end of last year, the ECB was at pains to push back on the idea that we might see a rate cut much before the summer of this year, citing a sharp uptick in December CPI and concerns about elevated wage growth. A few weeks further forward and one month into 2024 and cracks are starting to emerge in that consensus, after comments yesterday from Portuguese ECB governing council member Mario Centeno who said that rate cuts should start sooner rather than later so that the process is gradual, without any need to wait for wages data. Additional comments from Slovakia member Peter Kazimir served to reinforce the dovish shift, arguing the case for rate cuts although his confidence over timing was less fixed, and very much data dependant, although he admitted that June was more likely than April.  Today's Q4 GDP numbers from Europe's 4 biggest economies could well serve to bring that June timeline forward into April, with markets now pricing the first rate cut at the April meeting, sending EUR/USD below 1.0800 for the first time in 6-weeks, The French economy is predicted to improve modestly to 0% in Q4 from -0.1% in Q3, however there is considerable downside risk to this estimate if recent PMI numbers are any guide.  In Italy the picture looks little better with a stagnation also expected, and a modest slowdown from 0.1% in Q3, while in Germany the economy is expected to be in recession with a -0.1% contraction in Q3 followed by a bigger -0.3% contraction in Q4. The only silver lining is Spain where the economy is expected to grow by 0.2%, however that is unlikely to be enough to prevent the bloc sliding into a technical recession with another quarterly contraction of -0.1% following a similar contraction in Q3. This would be a blow to the ECB which has consistently insisted that Europe isn't in a recession, however based on how poor recent PMI and other related economic numbers have been, it is difficult to see how it can't be. We've also got some important economic numbers from the UK with the latest lending numbers for December, and which could point to a weak end of the year, given the sharp slide in retail sales we've seen in some of the recent economic numbers. The recent decline in mortgage rates has seen a pickup in mortgage approvals from the lows of 43.7k in September, and could well see a further pickup to the highest levels since June last year with 53k. Net consumer credit is expected to slow from £2bn to £1.5bn. Markets will also be focussed on the conclusion of the Federal Reserve rate meeting, which starts today, and concludes tomorrow, with today's JOLTS data expected to show vacancies in the US to slow modestly to 8.72m in December, from 8.79m in November, which would be close to a 3-year low, but still well above the levels we saw pre-pandemic, when they were around 7.2m. EUR/USD – Slipped below the 1.0800 area yesterday, opening up the prospect that we could see a move towards the 1.0720 area. Resistance at the highs last week at 1.0930 and behind that at 1.1000.  GBP/USD – The failure to move back towards the recent highs could see a return to the 1.2590 area on a move below the 50-day SMA. We need to...

Federal Reserve preview There are also two major central bank meetings and a raft of economic data that is worth watching. The Fed will announce interest rates on Wednesday. No change is expected, and there will be a press conference afterwards, so the focus will be on the accompanying statement and what Jerome Powell is willing to tell the press. Analysts will be watching to see if the Fed suggests that the market is getting too excited about the prospect of multiple rate cuts this year. The market is pricing in just over 6 rate cuts for 2024, with the first rate cut now expected to come in May, and for rates to end the year at 3.95%. The Fed's last 'dot plot' only had 3 rate cuts expected by the FOMC, who actually make the rate decisions. Why stocks could stymie Fed rate cuts The recent stock market acceleration in the US could be a fly in the ointment for Fed rate cuts. The rally in US stocks added $8 trillion to share holder value, the S&P 500 set fresh records in 5 straight sessions in the last week, and financial conditions are at their loosest since 2022, as you can see in the chart below. This is one of the many metrics that feed into the FOMC models that help the Fed to make rate decisions. This input is flashing a warning sign about cutting rates too quickly. Chart: Goldman Sachs US financial conditions index  Source: Bloomberg  The Fed could struggle to stick to their dovish rhetoric A market rally on the assumption of rate cuts, rather than rate cuts themselves could be counter-productive since this is a form of easing, and it may make the Fed less willing to cut rates. For the Fed's meeting this week, this means that the Fed could struggle to lean into their recent dovish rhetoric. In its simplest terms, the recent stock market rally gives the Fed a reason to delay rate cuts, but if the bull run in stocks comes to an end, then rate hikes could become more likely. Looking forward, the Fed may go from having an inflation problem, to having an asset price problem, which may prove to be just as tricky to disinflate. The market may find out this week that it can't have it both ways. Overall, there is a risk that US stock indices could come under pressure on the back of this FOMC meeting, especially if the dovish tone from the December Fed meeting is shelved. As mentioned, if the Fed continues to push back on recent dovish rhetoric and say that they remain data dependent, then the market may struggle to digest this. The lack of clear communicaiton could be filled with market panic and speculation if the Fed pushes back too hard on rate cut expectations. The dollar was mixed last week, and started to make gains vs, the EUR, GBP and JPY. If the Fed is considered less dovish than it was in December, then we could see a broad-based dollar rally and a selloff in risky assets. BOE faces different set of challenges from the Fed The Bank of England also meet this week, and we will send out a preview ahead of time. However, we expect a dovish shift from the BOE and even though UK stocks outperformed US stocks last week, there has been no bull market for the FTSE. The FTSE 100 is lower by more than 1.2% so far this year, and by 1.4% in the last 12 months. The BOE does not have to worry about a stock market bull run stoking inflation pressures in the UK.

Gold price consolidates the previous rebound near $2,030 amid a weaker US Dollar. Risks of further geopolitical escalation counter falling March Fed rate cut bets. Gold price could stay rangebound due to mixed technical indicators, ahead of US jobs data.   Gold price is treading water near $2,030 early Tuesday, consolidating the previous rebound to a four-day high of $2,038. Gold price is weighing the further escalation in the geopolitical tensions between the Middle East and the United States (US) against the backdrop of reduced bets for a March Federal Reserve (Fed) interest rate cut. Gold price looks to US JOLTs data for fresh impetus Amidst the latest development on the Middle East and the US geopolitical conflict, Sky News reported that US President Joe Biden is likely to authorize military action in the Middle East as early as Monday night. This comes in response to the killing of three US service members by an unmanned aerial drone attack on forces stationed in northeastern Jordan near the Syrian border. Markets stay risk-averse and trade with caution, as they also remain wary amid a deepening real estate crisis fuelled Chinese demand worries, after a Hong Kong court ordered the liquidation of property giant China Evergrande Group on Monday. The traditional safe-haven, Gold price, draws support from these concerning factors alongside a broad-based US Dollar weakness and the extended selling in the US Treasury bond yields so far in Tuesday's trading. On Monday, Gold price staged a solid turnaround and hit multi-day highs above $2,030, capitalizing on a sell-off in the US Treasury bond yields, which limited the US Dollar upside. The US Treasury bond yields tumbled following a sharp rally in the US government bonds after the Treasury cut its first-quarter borrowing estimate. The Treasury Department said Monday it expects to borrow $760 billion in the first quarter, which is $55 billion lower than the October estimate. The decline was driven, in part, by "higher net fiscal flows" and a higher cash balance. Intensifying Middle East geopolitical tensions also turned in favor of Gold price amid a global flight to safety theme.   Attention now turns toward the US JOLTs Job Openings data for fresh signs on the labor market conditions ahead of Wednesday's Fed policy announcements and Friday's Nonfarm Payrolls data release. Markets are now pricing a 46% probability of a March Fed rate cut while no rate change is expected following this week's policy meeting. However, comments from Fed Chair Jerome Powell will be closely scrutinized for repricing of the rate cut expectations, having a significant impact on the value of the US Dollar and the Gold price. The Fed begins its two-day policy meeting on Tuesday, with the verdict likely to be announced on Wednesday. Gold price technical analysis: Daily chart As observed on the daily chart, Gold price is managed to yield a daily closing above $2,030, the intersection of the 50-day Simple Moving Average (SMA) and and the 21-day SMA. Gold buyers, however, ran into static resistance near the $2,038 level, which capped the upside. The 14-day Relative Strength Index (RSI) indicator recaptured the midline, providing much-needed support to Gold buyers. But an impending Bear Cross continues to warrant caution for them, keeping the recovery in check. The 21-day SMA is on the verge of crossing the 50-day SMA from above, which if happens will confirm the Bear Cross. Acceptance above the $2,038 barrier will put the psychological $2,050 level back in play. Further up, Gold optimists will target the December 12 high of 2,062. On the downside, an immediate cushion is seen at the previous day's low of $2,018, below which the rising trendline support of $2,012 could be threatened.   The next strong downside cap is seen around the $2,000 region.

It appears more and more likely that the Federal Reserve is poised to completely abandon any pretense of fighting inflation, despite the fact CPI remains well above the 2 percent target. The Fed has already paused interest rate hikes, and most analysts expect rate cuts later this year. Now, the financial news networks have started chattering about the possibility of the central bank either slowing or even ending its balance sheet reduction plan. Speculation about the end of balance sheet reduction started early this month with the release of the FOMC meeting minutes. They revealed that some committee members thought they needed to "begin to discuss" technical factors that would direct their decision to slow the runoff of maturing bonds from its balance sheet.  Dallas Fed President Lorie Logan was the first committee member to talk about it publicly, saying that the central bank should begin tapering the runoff of bonds from its balance sheet when its reverse-repo facility fell below a certain level. More recently, Federal Reserve Governor Christopher Waller said it would be "reasonable" to start thinking about tapering off quantitative tightening this year. If the Fed has done enough to slay price inflation, ending balance sheet reduction would make sense. But has it really done enough? FED BALANCE SHEET REDUCTION IN PRACTICE The Fed announced a balance sheet reduction plan in March 2022 when it could no longer convince everybody that price inflation was "transitory." It called for $30 billion in US Treasuries and $17.5 billion in mortgage-backed securities to roll off the balance sheet in June, July, and August of 2022. That totaled $45 billion per month. The Fed said it would increase the pace to $95 billion per month in September 2022, capping the U.S. Treasury roll-off at $60 billion. It wasn't exactly an ambitious plan.  If the Fed followed the blueprint, it would take 7.8 years for the Fed to shrink its balance sheet back to pre-pandemic levels. To date, the Fed has rolled about $1.29 trillion off the balance sheet. This sounds impressive until you realize that the central bank blew up the balance sheet by $4.81 trillion in just two years in response to the pandemic. And they are already talking about ending quantitative tightening. Stop and consider what this means. The central bank only wrung a little more than a quarter of the inflation it created during the pandemic out of the economy. This explains why despite rate hikes and quantitative tightening, financial conditions remain loose in historical terms. As of the week of January 19, the Chicago Fed Financial Conditions Index stood at -0.57. A negative number indicates loose financial conditions.  It has been an unimpressive inflation fight. That's why I say the pivot by the Fed isn't victory, it's surrender. Inflation won. The Fed is throwing in the towel. Why? Because everybody knows that this debt-riddled economy can't keep plugging along without easy money. Furthermore, the Federal Reserve can't shrink its balance sheet in a meaningful way. A BALANCE SHEET HISTORY LESSON When the economy is bad, the Fed ramps up quantitative easing. It buys bonds on the open market with money created out of thin air. By putting its big fat thumb on the bond market and creating artificial demand, it keeps bond prices higher than they otherwise would be. Conversely, interest rates stay lower. This benefits the U.S. Treasury, allowing it to continue borrowing at lower interest rates. This is called debt monetization. The Fed literally transforms U.S. government debt into money. Debt monetization is inflationary. It expands the money supply and ultimately pushes consumer prices higher than they would be. In practice, Americans pay an inflation tax to help sustain the debt. When times are good, the Fed should theoretically pull that liquidity out of the economy, but in practice, the central bank is very slow to shrink the balance sheet. Why? Because once it injects trillions in liquidity into the economy, it can't get it out without popping the bubbles it blew up and driving the economy into a recession. We witnessed this song and dance after the 2008 financial crisis. In the early days of the Great Recession, then-Federal Reserve Chairman Ben Bernanke assured Congress that he was not monetizing debt. Bernanke claimed the difference between debt monetization and the Fed's plan was it was not providing a permanent source of financing. He insisted the bonds would only remain on the Fed's balance sheet for a short time and assured Congress that once the crisis was over, the Fed would sell the bonds it bought during the emergency.  That never happened. Bernanke ran three rounds of quantitative easing, pushing the balance sheet from $8.98 billion before the financial crisis to just over $4.5 trillion by December 2014. The central bank tried to unwind its balance sheet in 2018. The FOMC said balance sheet...

AUD/USD maintains the trade around the 0.6600 region. Australia's Inflation Rate takes centre stage later in the week. The FOMC gathering and US NFP are seen as key drivers. Another day, another erratic performance of AUD/USD, which remains trapped within the multi-session consolidative phase in place since the middle of the current month. This time, however, spot managed to start the week in quite a positive fashion. The daily strengthening of the Australian dollar contrasts with noticeable gains in the greenback. The resilience of the Australian currency is evident in recent reports indicating additional stimulus measures by the People's Bank of China (PBoC) to bolster China's stock market and ignite economic recovery in the post-pandemic era, which has been slower to materialize thus far. The influence of China, along with the anticipated decision of the Reserve Bank of Australia (RBA) to maintain its current policy stance next month, continues to be perceived as a factor that will restrict the potential for the pair to rise in the coming weeks. This also suggests that there may be more subdued trading in the short-term future, at least.   Regarding the Reserve Bank of Australia (RBA), the recorded decrease in inflation metrics during December, coupled with the still perceived tight labour market, appears to have strengthened the prevailing consensus among market participants that the central bank will maintain its current interest rates at the upcoming event in February. Speaking about central banks, the likelihood that the Federal Reserve could extend its ongoing restrictive stance for longer than anticipated should be supportive of extra gains in the US Dollar, and therefore a drag for AUD/USD. AUD/USD daily chart AUD/USD short-term technical outlook Further losses may cause the AUD/USD to retest its 2024 bottom of 0.6524 (January 17). The loss of this region may cause a drop to the provisional 100-day SMA of 0.6525, an area coincident with the December 2023 bottom (December 7). Down from here come the 2023 low of 0.6270 (October 26) and the round level of 0.6200, all of which are previous to the 2022 low of 0.6169 (October 13). On the contrary, there is a temporary hurdle at the 55-day SMA at 0.6638. The breakout of this zone could motivate the pair to set sails to the December 2023 top of 0.6871 (December 28) ahead of the July 2023 peak of 0.6894 (July 14) and the June 2023 high of 0.6899 (June 16), both of which are just above the important 0.7000 level. On the 4-hour chart, the pair appears to be consolidating more. On the upside, the 100-SMA is currently at 0.6629, with the 200-SMA at 0.6682. The surpass of this area suggests a potential advance to 0.6728. On the downside, there is preliminary disagreement at 0.6551 prior to 0.6525. If this zone is breached, there is no significant dispute until 0.6452. The MACD flirts with the positive limit, while the RSI eases towards the 50 threshold. View Live Chart for the AUD/USD

Summary The Animal Spirits Index (ASI) had a strong close to 2023, shooting up by 0.51 points in December. In all, the ASI was somewhat volatile throughout 2023, largely reflecting the surprising turn that the year took. While oscillating consumer confidence and economic policy uncertainty weighed heavily on the ASI, financial markets showed remarkable strength and boosted the index throughout the year. We suspect 2024 will bring continued volatility in the ASI. While we expect the FOMC to begin their cutting cycle this year, which will likely boost the index, a pull back in consumption may accelerate the labor market's moderation, which could weigh heavily on the ASI via lower consumer confidence. A Year in Review The Animal Spirits Index had a strong close to 2023. The index shot up by 0.51 points in December, marking the largest increase since February 2019. Strong gains in both the consumer confidence and S&P 500 components of the index drove the uptick. In all, the ASI was somewhat volatile throughout 2023, trending up until August, then sharply decreasing through November, and finishing out with a year-end rally in December. Our previous reports detail the methodology of the index, but on a basic level, an ASI value above zero indicates optimism and a value below zero suggests pessimism.1 The ASI's changing nature largely reflects the surprising turn that 2023 took. By the end of 2022, the Federal Reserve had hiked rates by 425 bps, leading many to believe 2023 would see sluggish growth and a modest recession. Yet, even as the Fed continued to hike rates through last summer, the economy remained surprisingly resilient. Real income growth remained strong, which helped to boost real consumer spending; payrolls continued to expand and inflation slowed considerably. In all, real GDP expanded 2.5% in 2023—an outstanding performance compared to the 0.3% growth rate predicted by the Blue Chip consensus at the beginning of the year. In this report, we dive deeper into how the components of the ASI changed throughout 2023 and provide a brief outlook for what to expect in 2024. Download the Full Report!

As the events of 2024 unfold on the world stage, the Brent oil market is being driven by many factors. Most interestingly, 2023 ended with global oil inventories, especially Brent, at their lowest level since mid-2022. According to the International Energy Agency (IEA), this fluctuation in inventories has added an even more significant element of unpredictability to the market, so it is more important than ever to understand where the price of oil will move! This analysis explores the intricacies of supply, geopolitical influences, economic conditions, and internal OPEC+ dynamics that combine to shape the trajectory of oil prices. Geopolitical tensions and price forecasts  The geopolitical landscape in the Middle East remains a critical factor for the Brent market in 2024. Tensions in the Red Sea and Yemen pose significant risks to oil flow along major trade routes. For example, Brent prices experienced a spike following US and UK airstrikes on Houthi targets, reflecting the market's sensitivity to regional conflicts. Wall Street analysts expect a moderate recovery in Brent crude oil prices in 2024, averaging around $85 per barrel. Forecasts for Brent crude oil in 2024 present a diverse picture. The US Energy Information Administration (EIA) forecasts an average price of around $82 per barrel, while Barclays and Citi have adjusted their forecasts to $93 and $74 per barrel, respectively. These forecasts consider potential overproduction issues, geopolitical risks, and global economic growth trends. For example, S&P Global Commodity Insights emphasizes the impact of OPEC+ production decisions on these price forecasts. But what about oil demand?  Global oil supply is set for a significant increase in 2024, with an expected rise of 1.5 million b/d, bringing the total to 103.5 million b/d. Key participants are non-OPEC+ countries such as the US, Brazil, Guyana, and Canada. However, this supply surge could lead to a glut in the market, especially if OPEC+ decides to abandon its additional voluntary cuts in the second quarter of 2024. At the same time, demand growth is expected to slow down, influenced by various factors, including technological advancements in energy efficiency and vehicle electrification. Challenges of OPEC+ There are growing concerns within OPEC+ about the unity and future strategy of the group. Angola's recent withdrawal from the agreement has raised questions about the alliance's stability. This withdrawal and production adjustments from other member countries could significantly change the group's collective output. For example, Russia and Saudi Arabia, critical players in OPEC+, have different thresholds for acceptable oil prices - $85 and $100 per barrel, respectively. This difference in interests could lead to problems in reaching a consensus on production levels, potentially affecting global oil prices. XBR/USD, Daily Timeframe In the Daily timeframe, XBRUSD is moving in a downtrend, and the price is below the 23.6 Fibonacci level. In the short term, it is possible to expect a test of the 85.00 resistance area, which creates two possible scenarios. If the resistance of 85.00 is broken and the trend line is crossed, we can expect a rise to the level of 93.00, which corresponds to 38.2 Fibonacci. However, if the price bounces off the resistance, the target will be the support at 70.00.  OPEC+ faces many challenges that depend on whether the cartel members can continue to work in concert. However, current problems within the cartel, increased supply from non-OPEC+ countries, falling demand from significant consumers, and pressure from the green agenda could put severe pressure on Brent's price. In addition, the US and China, still leading in oil consumption, are not interested in prices rising above 75-85 dollars per barrel, which could have serious consequences. With similar dynamics, the oil price in 2024 could be 70-72 dollars per barrel.  However, prices could increase if OPEC+ can solve internal problems and reach a consensus. Also, one should not rule out the factor of geopolitical tension, which may push oil prices up and reach the level of 90-100.  Conclusion To sum up, the oil market in 2024 is characterized by diverse and sometimes conflicting factors. Declining global inventories, heightened geopolitical tensions, differing price forecasts, and a complex supply-demand balance set the stage for a year of cautious navigation.  The impact of OPEC+, while significant, is being tested by domestic challenges and external market dynamics, making forecasting oil prices more challenging than ever. This complex scenario emphasizes stakeholders' need for vigilance and adaptability as they respond to changing global oil market conditions. FBS is an international brand present in over 150 countries. Independent companies united by the FBS brand are devoted to their clients and offer them opportunities to trade Margin FX and CFDs. FBS Markets Inc: license IFSC/000102/310. Tradestone Ltd.: CySEC license number 331/17. FCA temporary permit 808276. Intelligent Financial Markets Pty Ltd/: ASIC Licence number 426359.

EUR/USD Current price: 1.0821 European Central Bank policymakers maintain a cautious stance on rate cuts. The macroeconomic calendar is scarce on Monday but is packed this week. EUR/USD flirts with fresh January lows, could extend its slide towards 1.0760. The Euro is the weakest US Dollar rival at the beginning of a new week, as the EUR/USD pair barely holds above the 1.0800 mark. Market participants are pushing bets of a 25 basis points (bps) rate cut in April higher, despite comments from European Central Bank (ECB) officials against such a move. ECB Governing Council official Peter Kazimir said that a rate cut is more probable in June than in April, adding that signs of disinflation are positive but that there is not enough information to make a confident conclusion. Finally, he noted that the ECB is not behind the curve, it's the market getting ahead of events. Also, Vice-President of the ECB Luis de Guindos said that the central bank will cut rates when policymakers are sure inflation meets the 2% goal. As his colleague, de Guindos, remarked on the good progress in inflation but clarified they are not still there.   Meanwhile, the macroeconomic calendar has little to offer on Monday, with no data from the Eurozone and the United States (US) offering the January Dallas Fed Manufacturing Business Index. However, the week will be packed with first-tier events, including the Eurozone and Germany's Gross Domestic Product, the US Federal Reserve (Fed) monetary policy decision, and the January Nonfarm Payrolls report. EUR/USD short-term technical outlook The EUR/USD pair bounced modestly from a fresh January low of 1.0813, as broad US Dollar weakness prevents it from falling further. Technical readings in the daily chart support another leg south. EUR/USD is finding sellers around the 200 Simple Moving Average, located at around 1.0845. The former support has now become resistance. At the same time, the 20 SMA accelerates south above the longer one. Finally, technical indicators remain within negative levels, with neutral-to-bearish strength. The near-term picture is also bearish. EUR/USD develops below all its moving averages, with the 20 SMA heading firmly south below the longer ones. At the same time, technical indicators develop below their midlines, gaining bearish strength in line with a downward extension, particularly on a break below the 1.0800 threshold. Support levels: 1.0800 1.0760 1.0720 Resistance levels: 1.0845 1.0890 1.0945