IC Markets Asia Fundamental Forecast | 14 February 2023

What happened in the US session?

The DXY weakened overnight as the equity markets climbed higher in the lead-up to the US CPI data release today.    

What does it mean for the Asia Session?

Look for the major currencies to consolidate in anticipation of the US CPI data release. 

The Dollar Index (DXY) 

Key news events today

USD CPI m/m 

USD CPI y/y 

USD Core CPI m/m  

What can we expect from DXY today?

The DXY is likely to see significant volatility today with the US CPI (Forecast: 6.2% Previous: 6.5%) due to be released. A slowdown in inflation growth, with CPI of 6.2% or less, could see the DXY trade significantly lower, with markets likely to anticipate a decreasing likelihood of further interest rate hikes from the Federal Reserve. With the DXY currently trading along the 103.10 price level, weakness in the DXY could see the price slide lower toward the key support level of 102.50. 

Central Bank Notes:

• Federal Reserve hiked rates by 25bps taking interest rates to 4.75%
• Next meeting is on 23 March 2023
• Ongoing rate increases will be expected 

Next 24 Hours Bias

Medium Bearish

Gold (XAU)

Key news events today

No major news events. 

What can we expect from Gold today?

Through the trading session yesterday, Gold traded slightly lower, breaking out of the consolidation along the 1860 price level to test 1851. However, as the DXY weakened, this spurred some upside in Gold with the price bouncing off the 1851 price level. Anticipating further weakness in the DXY, Gold could trade significantly higher. Look for the price to break above the 1865 price level strongly to signal further upside, with the next key resistance level at 1875.   

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events. 

What can we expect from AUD today?

The AUDUSD traded up to the 0.6970 price area before reversing lower, following the downward move from the NZDUSD. While the AUDUSD has been trading between the range of 0.69 and 0.70 in the short term, look for a breakout potential following the high-impact news on the US CPI to be released today. A significant drop in the DXY could see the AUDUSD breakout to the upside, beyond the 0.70 price level, to retest the key resistance area of 0.7130. 

Central Bank Notes:

• Cash rate stands at 3.35% 
• Future rate rises are expected as RBA targets the 2-3% inflation target.
• Next meeting on 7 March 2023

Next 24 Hours Bias

Weak Bullish

The Kiwi Dollar (NZD)

Key news events today

NZD Inflation Expectations q/q  

What can we expect from NZD today?

The NZDUSD climbed steadily to the upside, rejecting the 0.63 price level to reach an overnight high of 0.6370. However, with the release of the inflation expectations q/q today at 3.30% (Previous: 3.62%) indicating that inflation is on track to approach the RBNZ target of 2-3%, the NZDUSD reversed lower to the 0.6330 price level. The NZDUSD could continue to fluctuate between the price range of 0.63 and 0.6370. However, if the price breaks strongly beyond 0.64, the next key resistance is at 0.6530. 

Central Bank Notes:

• Cash rate stands at 4.25% 
• Central bank is likely to continue with the current path of rate adjustment
• Next meeting is on 21 February 2023

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 traded higher overnight to approach the 133 price area before retracing significantly lower to trade along the round number support of 132. While this move lower was due to the weakness of the DXY, anticipate further choppy price action for the Japanese Yen as markets speculate on the monetary policy stance of the new BoJ Governor. If the USDJPY bounces from the 132 price level, the price could climb to retest the 133 price level again. However, if the DXY were to weaken, the USDJPY could trade significantly lower, down to the key support level of 130.45. 

Central Bank Notes:

• Cash rate stands at -0.1%  
• Expanded range for 10 year JGB yield fluctuations to 0.5%
• Next meeting is on 8 March 2023 

Next 24 Hours Bias

Weak Bullish