December Fed minutes suggest extended status.

The Fed’s December meeting minutes which were released during yesterday’s American session, tended to verify that the bank has likely reached its terminal rate and that rate cuts are on the “menu” for this year, as policymakers “ baseline projections implied that a lower target range for the federal funds rate would be appropriate by the end of 2024”. Yet, market participants who may have been hoping for a validation of the current market expectations of 6 rate cuts this year, may be somewhat disappointed, as several policymakers “observed that circumstances might warrant keeping the target range at its current value for longer than they currently anticipated”, a view we tend to agree with. As such, we may see support for the dollar, should the Fed follow through on its intentions, as it may reduce the market’s expectations of 6 rate cuts this year. The US ISM Manufacturing PMI figure for December came in better than expected, seemingly contradicting the S&P Manufacturing PMI figure for the same period, which may have alleviated some pressures on the greenback. In the commodities markets, oil prices moved higher yesterday, as supply concerns appear to be on the rise. In particular, Libya’s top oilfield production appears to have been disrupted due to protests according to Reuters. Per the report, the oilfield produced 300,000 barrels per day, as such in the event that further disruptions occur, we could see upwards pressures on oil prices as supply concerns continue to rise. Moreover, the US API weekly crude oil inventories figure was indicative of a greater drawdown than what was expected by economists, implying that demand for oil remains elevated, which may have aided to rising oil prices.

USD/JPY appears to be moving in an upwards fashion, having broken above resistance turned support at the 143.00 (S1) support level. We maintain a bullish outlook for the pair and supporting our case is the upwards moving trendline which was incepted on the 2^nd of January, in addition to the RSI indicator currently registering a figure of 60, implying a bullish market sentiment. For our bullish outlook to continue we would like to see a clear break above the 144.45 (R1) resistance level, with the next possible target for the bulls being the 146.30 (R2) resistance line. On the other hand, for a bearish outlook, we would like to see a clear break below the 141.50 (S1) support line, with the next possible target for the bears being the 141.50 (S2) support base. Lastly, for a sideways bias, we would like to see the pair remain confined between the 143.00 (S1) support level and the 144.45 (R1) resistance line.

EUR/USD appears to be moving in a downwards fashion. We maintain a bearish outlook for the pair and supporting our case is the downwards-moving trendline which was incepted on the 28 of December 2023, in addition to the RSI indicator below our chart which is currently running along the figure of 30, implying a bearish market sentiment. For our bearish outlook to continue, we would like to see a break below the 1.0835 (S1) support level, with the next possible target for the bears being the 1.0735 (S2) support base. On the other hand for a sideways bias, we would like to see the pair remain between the 1.0960 (R1) resistance line and the 1.0835 (S1) support level. Lastly, for a bullish outlook, we would like to see a clear break above the 1.0960 (R1) resistance line with the next possible target for the bulls being the 1.1065 (R2) resistance level.

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On today’s European session we note the release of France’s and Germany’s preliminary HICP rates for December and the Eurozone’s and the UK’s final Services and Composite PMI figures for the same month. In the American session, we note from the US the release of the ADP National employment figure for December as well as the weekly initial jobless claims figure, while oil traders may be more interested in the release of the weekly US EIA crude oil inventories figure.