2023/01/29 (158.021) Technical Analysis

EURUSD

The new year 2023 has already shown us a lot as participants in the financial market: price action is not as negative on the stock markets as many experts expected a few weeks ago. In mid-December the mood was still in the basement – the great global recession was certain. Many forecasts for 2023 sounded correspondingly pessimistic. Now the mood has changed significantly. The 2023 recession might even fail – at least on a global level. Scattered shallow recessions included in various sub-areas around the globe (like US, Eurozone). So we should always question the validity of concrete forecasts, because the half-life of many forecasts is not very long. Neither do my 4XSetUps trading capabilities.

I’m addressing the topic of “forecasts” because the occasional email I get from time to time has repeatedly asked me about specific forecasts for individual stocks. It’s often about price action – whether in Germany with the DAX or in the USA with the S&P 500. The question is also popular: Where will the euro be at the end of 2023?

To be honest: I have no idea. And actually I don’t care. If someone tells you that the DAX will end the year at 18,000 points and the S&P 500 will end the year at 5,000 points, they can tell you that. Maybe such an expert is even right at the end of the year. But the probability is a lot higher that such a forecast is not correct! Which is why I always like to talk about technical analysis 4x setups. Namely with a specific entry price, target price and/or exit price. As a competent, serious info broker, I don’t want to and can’t do more! Or do you expect even more?

The Future Is Uncertain – Especially On The Financial Market

To be honest: Here, too, I am only updating the most recent development and I think that the trend will initially continue non-linearly, sooner or later, more or less. So stay long in the EURUSD, as well as in the DOW Future & DAX Future. Also let the highly speculative long position in the TESLA share run. If the stock market develops better than expected. And please perceive all this in connection with all 4 open 4XSetUps. Because only all 4 together make sense – at least for me.
That may happen – or it may not. There is much to suggest that development will continue for the time being, but the past two years 2022 & 2021 have clearly shown us how quickly things can change and how quickly old certainties no longer apply. So why this uncertain look into the future? Then it’s better to focus on what we can specifically influence!

Many questions are unanswered at the moment, many relevant factors simply cannot be assessed. Who knows what Putin will do next, whether the winter will be cold again and energy will still be expensive as a result? Therefore, I will continue to change my mind when I see fit – even if I previously made a specific contrary market or inflation forecast. It just doesn’t make sense, on a case-by-case basis; to hold on to an analysis, opinion, and comment when certain facts have (not) changed. Am I therefore an overestimated superficial publisher, author, and/or inform broker who simply takes himself too seriously? I don’t believe! Because from my point of view, it is much more important that you have a fundamental future perspective, on the financial market, and always know at what price you get in and out – and don’t lose yourself in your own imagination! Or? And that’s where I see my strength. So that you, as an interested financial market participant, do not deal with topics that do not increase your probability of a daily profit.

Euro Falls While European Trading Session On Friday

The euro recently gave way on Friday. The European single currency cost 1.0844 US dollars in the afternoon. On Friday night it was still trading at $1.09. The European Central Bank set the reference rate at 1.0865 (Thursday: 1.0895) dollars. The dollar thus cost 0.9204 (0.9179) euros. The euro was somewhat weighed down by robust economic data from the USA. According to a survey by the University of Michigan, consumer confidence brightened more than expected in January. Data from the US housing market were also better than expected. Which encouraged many to want to buy the US dollar again. And also put the US stock market, on the other hand, under pressure again.

Many investors remained cautious in the FX market as there are many important events coming up next week. With the ECB and the US Federal Reserve, the two most important central banks will decide on their interest rates. In addition, a number of important economic data are on the calendar in the euro zone and in the USA. For other important currencies, the ECB set the reference rates for one euro at 0.87885 (0.87945) British pounds, 141.10 (141.38) Japanese yen and 1.0017 (1.0002) Swiss francs. An ounce of gold was trading at $1,923 in London this afternoon. That was about $6 less than the day before.

Euro Little Moved In US Trading Session On Friday

The euro was little moved in late US trading on Friday. The European single currency cost around an hour before the market closed on Wall Street 1.0868 US dollars. On Friday night it was still trading at $1.09. The European Central Bank set the reference rate at 1.0865 dollars. The dollar thus cost 0.9204 euros.The euro was somewhat weighed down by robust economic data from the USA. According to a survey by the University of Michigan, consumer confidence brightened more than expected in January. Data from the US housing market were also better than expected. The interest rate decisions of the central banks in the USA and the euro zone in the coming week are already being eagerly awaited. In addition to US inflation data, producer prices are also published, as is the US trade balance. Which should put the US dollar under pressure again. So we stay long the EURUSD pair.

US Consumer Spending Falls More Than Expected And/Or US PCE Inflation Cools in December

Personal spending in the US dropped 0.2% month-over-month in December of 2022, worse than market forecasts of a 0.1% fall, and following a revised 0.1% decline in November. High-interest rates and rise in inflation levels started to impact consumer behavior. Spending fell on goods, namely gasoline and motor vehicle and parts and services, mainly housing, air transportation and health care. Adjusted for inflation, personal spending dropped 0.3%.

Core PCE prices in the US, which exclude food and energy, went up by 0.3% month-over-month in December of 2022, compared to a 0.2% increase in the prior month and in line with market estimates. The annual rate, the Federal Reserve’s preferred gauge of inflation, fell to 4.4% from 4.7% in November, marking the slowest increase in 14 months. Meanwhile, the headline index edged up 0.1% last month, the same as in November. In the 12 months through December, the index increased by 5.0%, the least since September of 2021, and below 5.5% in November.

US Pending Home Sales Unexpectedly Rise Rose On Friday As US Consumer Sentiment Revised Higher

Pending home sales in the US unexpectedly rose 2.5% month-over-month in December of 2022, the first rise since May, and beating market forecasts of a 0.9% drop. Sales were up in the South (6.1%) and the West (6.4%) but fell in the Northeast (-6.5%) and Midwest (-0.3%). Still, year-on-year, pending home sales sank 33.8%. “This recent low point in home sales activity is likely over. Mortgage rates are the dominant factor driving home sales, and recent declines in rates are clearly helping to stabilize the market. The new normal for mortgage rates will likely be in the 5.5% to 6.5% range”, said NAR Chief Economist Lawrence Yun.

The University of Michigan consumer sentiment for the US was revised higher to 64.9 in January of 2023, the highest since April, from a preliminary of 64.6. The gauge for expectations was revised higher to 62.7 from 62 while the current conditions subindex was revised lower to 68.4 from 68.6. Meanwhile, inflation expectations for the year were revised lower to 3.9% from 4% in the preliminary estimate and the 5-year outlook was revised lower to 2.9% from 3%.

Treasury Yields Sustain Rise After Key Data While DXY Steadies Below 102

The yield on the US 10-year Treasury note trimmed its sharp increase back to the 3.5% mark in late January, but held its increase to hover at the highest level inone week as investors assessed a batch of economic data for hints on whether the US economy may be able to achieve a soft landing as the Federal Reserve is set to continue its tightening campaign. Core PCE price inflation fell to a 14-month low on an annual basis, extending the decrease in consumer prices. Meanwhile, the US GDP expanded by 2.9% in the fourth quarter, beating market expectations of a 2.6% increase and underscoring the resilience of the US economy, adding leeway for the Federal Reserve to extend its hawkish momentum. Still, money markets expect the Federal Reserve to raise its key rate by a softer 25bps next week and end its tightening campaign at 5% in March before cutting the rate in November, compared to the central bank’s pledge of a 5.25% terminal rate for the whole year.

Wall Street Struggles For Traction

The Dow was trading virtually flat on Friday, while the S&P 500 and the Nasdaq 100 swung between gains and losses as investors digested a slew of economic data and earnings reports. The Fed’s preferred inflation measure, the US core personal consumption expenditures price index, slowed to an over one-year low of 4.4% in December, cementing expectations that the Federal Reserve could slow its tightening campaign next week. However, a different report showed that personal spending declined for a second consecutive month in December, heightening the impact of higher borrowing costs on consumer spending, which accounts for more than two-thirds of US economic activity. On the corporate side, Intel plunged more than 6% after a dismal first-quarter outlook, sending shockwaves through other chipmakers. For the week, the Dow is up about 1.6%, while the S&P 500 and Nasdaq 100 are down 1.9% and 3.1%, respectively.