Good Morning! Some recovery is seen in the currency pairs from the movements seen last week. Dollar Index has moved up well above 102 and could test 103-103.50 before coming off while Euro can test 1.0850-1.08. EURJPY looks sable within 158-154 while USDJPY can continue to trade above 141. Aussie and Pound have dipped slightly but Aussie keeps some hope alive to see an upmove from here soon. USDCNY could rise towards 7.15/16 while above 7.10. USDRUB could test 91. Rupee saw some strength on Friday but could move back towards 83.10/15 while above support region of 82.93-83.00 holds on USDINR. EURINR has scope to fall to 90-89. The US Treasury yields have dipped further. Outlook is bearish to see more fall from here. The German yields have come down to their key supports much faster than expected. Need to see if they can bounce-back from here or not. The 10Yr and 5Yr GoI have declined further. Outlook is bearish to see more fall. Dow Jones remain bullish to target news highs. DAX is consolidating in a narrow range but broader outlook is bullish to see a break on the upside. Nifty has scope to test its resistance. Need to see if it falls back from there or continues to rise further. Shanghai has scope to rise while above the support at 2925. Nikkei is bearish while it remains below the resistance at 33100-33500. Crude prices remain bullish for a rise towards their resistance in the near term. Gold and Silver have fallen back and can fall further if they stays below 2060 and 24.50 respectively. Copper needs to surpass 3.90-3.92 to strengthen the bullish momentum; else can be range bound for some time. Natural Gas continues to rise and has scope to test its key resistance. Visit KSHITIJ official site to download the full analysis

Asia is commencing the final full trading week of 2023 on Monday. The surge in risk appetite, fueled by the U.S. Federal Reserve's recent stance, has paused as S&P bulls are likely catching their breath at the open. Despite some pushback from Fed officials, interest rate futures markets are still currently pricing 150 basis points of rate cuts from the Federal Reserve next year. So, the recent decline in bond yields and the dollar is expected to underpin risk assets throughout the week. Asia's two major central banks appear to be moving in different directions, contributing to market uncertainty. The Bank of Japan (BOJ) is contemplating raising rates, while the People's Bank of China (PBOC) seems inclined towards easing policy to combat deflation and support sluggish growth. The lack of clarity on both policy fronts is causing some discord in Asian markets today.

Gold price is finding its feet near $2,020 amid a risk-off mood early Monday. US Dollar holds its recovery, as the US Treasury bond yields remain sluggish.   A bullish daily technical setup continues to favor Gold price upside. Gold price is holding its calm near $2,020 in the Asian session on Monday, following a sharp pullback that ended a volatile week on Friday. Progressing toward the pre-Christmas lull, Gold price awaits the key US inflation report due later this week for repricing of the US Federal Reserve (Fed) interest rate cut expectations for next year. Gold price calms down, as focus shifts to US PCE inflation this week Ahead of Friday's US PCE Price Index inflation data, the Bank of Japan's (BoJ) monetary policy decision will hold the key for fresh trading impetus in the US Treasury bond yields and the US Dollar, eventually impacting Gold price. Markets are widely expecting the BoJ to move away from its negative interest rate policy (NIRP) and a hint confirming the same is expected from the Japanese central bank when it concludes its two-day monetary policy review on Tuesday. Any surprise in the BoJ's policy announcements is likely to spike up volatility around the USD/JPY pair, having a US Dollar-led 'rub-off' effect on the Gold price. In the meantime, Gold price will continue to find support from the dovish Fed pivot, as the US central bank affirmed bets of rate cuts next year after keeping the interest rates unchanged between the 5.25% to 5.50% target range. At the time of writing, the US Dollar is clinging to the previous recovery but subdued US Treasury bond yields are weighing on the Greenback, cushioning the downside in Gold price. Gold price booked a weekly gain but ended Friday in the red, as investors took profits off their long positions, following an eventful Fed week while gearing up for this week's US PCE inflation data and thin trading conditions. Gold price technical analysis: Daily chart Despite Fiday's pullback in Gold price from near eight-day highs of $2,048, the path of least resistance still remains to the upside. The daily technical setup for Gold price will conitnue to favor bullish traders so long as the 14-day Relative Strength Index (RSI) indicator holds above the midline and the price manages to defend the 21-day Simple Moving Average (SMA) at $2,016. A daily closing below the latter could fuel a fresh decline toward the 50-day SMA at $1,982. However, the $2,000 threshold could be a tough nut to crack for Gold sellers. On the flip side, acceptance above the $2,040-$2,050 region is critical to resuming the Gold price recovery toward the $2,100 psychological level. The next bullish target is envisioned at the all-time highs of $2,144.

Markets The bears might still have a case, and one must acknowledge the known and unknown uncertainties until the year's end. However, as of mid-December, the prospects for those betting against a Santa Rally appeared less promising. It's worth noting that U.S. equities surged for a seventh consecutive week, propelled by a dovish stance from the Federal Reserve. Even though John Williams expressed some resistance, it seemed the market had largely tuned out dissenting voices by that point. The equity rally played a crucial role in alleviating tight financial conditions, complemented by a substantial decline in bond yields since October and a pronounced weakening of the dollar. As the S&P approaches record levels, market participants appear undaunted. The prevailing sentiment seems to be that there is no compelling reason to fade this rally until concrete evidence surfaces indicating significant economic or inflation headwinds. While PMI data released on Friday provided some indications that the recent easing in financial conditions( FCI) may have started seeping into the U.S. services sector, conclusive evidence that FCI easing is jeopardizing the "last mile" of the inflation fight may take months to emerge. And with bulls on a stampede, the Fed might not realize it until it's too late. However, there is currently no clear evidence of a hard landing on the horizon, evident neither in the labour market nor in consumer spending. Last week, risk assets experienced a broad rally following the Federal Reserve's policy announcement, accompanied by a further decline in Treasury yields, including a significant rally in the short end of the curve. In summary, as per the Federal Reserve statement, Chair Powell's press conference, and the dot plot, the Fed has concluded its rate-raising cycle, is not anticipating a recession, foresees a robust job market in the foreseeable future, and expects inflation to continue decreasing toward the target, setting the stage for rate cuts (75 bps) in the coming year. However, it's crucial to note that the Fed will likely require additional improvement in inflation figures before initiating these cuts. This factor contributes to the belief that the actual rate pivot may not happen as swiftly as the current market expectations. Nevertheless, the market has achieved a substantial psychological victory, gaining clarity that this vicious tightening cycle has ended and at least three "insurance cuts", barring an inflationary relapse, are coming down the pipe. Notably, the bond market has rapidly priced in nearly a 25 bps Federal Reserve rate cut by March 2024, anticipating 150 bps of easing by the end of the following year. This has led to an approximately 80 bps decline in 2-year Treasury yields since the October high and a 110 bps decrease in 10-year yields since reaching 5% around the same period. This signifies a noteworthy easing in financial conditions, and it remains to be seen whether the Fed will allow this trend to persist or take measures to downplay the likelihood of rate cuts. On Friday, key Federal Reserve lieutenants Williams and Bostic attempted to temper the rally. However, their efforts seemed as effective as throwing ice water on a penguin. Nevertheless, the U.S. CPI report for November didn't present a particularly bullish picture, even though it largely met expectations. The headline inflation rate was reported at 3.1% year-on-year, matching the lowest level since inflation began to surge in March 2021. Core inflation, as anticipated, remained stubbornly high at 4.0% year-on-year. While progress has been made, these ongoing high run rates in core inflation underscore that the Fed will likely need to maintain a stance of leaning into inflation for an extended period with restrictive policy rates. This outlook suggests a projection of 100 basis points of Fed easing in the coming year, but it is not expected to begin until the year's second half. The 6 trillion Dollar question Heading into 2024, one of the most critical questions for market participants revolves around the future of the $6 trillion parked in money market funds. The decision on how this substantial sum will eventually be deployed or invested is the 6 trillion dollar question for stock market operators. The inherent paradox that Money Market Funds (MMFs) served as potential buffers for an extended market rally lies in the fact that these very same balances were, to a significant extent, responsible for systemic stability in 2023. They played a crucial role in supporting risk asset resilience by parking cash in the Fed's Reverse Repurchase Agreement (RRP) facility. This cash absorption in the RRP facility helped manage the substantial wave of Treasury issuance, alleviating reserve drain and indirectly facilitating a relatively smooth Federal Reserve Quantitative Tightening (Q.T.) process. One could build a compelling case that a mass exodus from MMFs has the potential to be destabilizing, especially considering the uncertainty surrounding the threshold for reserve scarcity. As...

As the week leading up to Christmas unfolds, market participants will likely show limited interest and engagement with economic releases and market events due to the proximity to the holiday season. However, the Bank of Japan (BoJ) remains a key focus. Earlier in the month, comments from Kazuo Ueda and a speech by Deputy Governor Ryozo Himino sparked speculation that the BoJ might be contemplating an exit from negative interest rates. The term "imminent" is used cautiously, as the timing of any potential policy changes remains uncertain. Since taking over from Haruhiko Kuroda, Ueda has adjusted the parameters of the BoJ's yield-curve control program twice, with the most recent tweak in October as an acknowledgment that the existing framework may be outdated. Despite discussions around the possible exit from negative rates, a rate hike at the upcoming BoJ meeting is considered more of a tail risk than a highly probable outcome. Reports suggest that the central bank does not perceive an urgent need for significant policy changes before the end of 2023. This week will bring a wealth of housing data in the United States. The schedule starts with builder sentiment on Monday, housing starts and permits on Tuesday, existing home sales on Wednesday, and new home sales on Friday. These reports are particularly noteworthy as they cover a multi-week period marked by a substantial decline in mortgage rates. This shift comes after several months of increases that led to new 23-year highs in mortgage rates. The housing market has been experiencing a roller coaster ride, and these reports will offer insights into the effects of recent fluctuations in interest rates. From the October highs near 8%, the 30-year fixed mortgage rate has experienced a significant drop, thanks to a remarkable rally at the long end of the US Treasury curve. Freddie Mac's weekly update shows the six percent levels for the first time since August 10. In the US, builder sentiment is anticipating its first monthly increase in five months, while existing home sales are expected to register another decline, marking the 20th drop in 22 months. Other key economic indicators in the US include personal income and spending data for the world's largest economy, along with an update on PCE (Personal Consumption Expenditures) prices. Personal spending is forecasted to show a 0.3% increase, aligning with last week's positive surprise in retail sales. The interpretation of good news as bad news and vice versa on the US macro front is a matter of perspective. Some see constructive data as a hawkish signal for the Fed, prompting selling, while soft data is viewed as a recession warning, also signalling a sell-off. Considering November's mixed CPI report and the Fed's dovish pivot context, the PCE price updates will be closely monitored. The consensus expects a 0.2% month-on-month increase in the core PCE print. Suppose the PCE inflation readings come in slightly higher than expected. In that case, critics of the Fed may use the opportunity to express their dissatisfaction with what they perceive as a dangerously premature policy pivot. However, the timing of the data release, scheduled for the last trading session before the long Christmas weekend, may lead to a lack of immediate market reaction, as many participants may be preoccupied with holiday festivities. I caution here as Algo's never party and will be tuned to the inflation metrics, so given the fall off in liquidity, there could be some outsized market moves. Additionally, the week will feature the final reading on Q3 GDP and the Conference Board consumer confidence data release. The December University of Michigan sentiment index indicated an improvement in Americans' perceptions earlier in the month, and the final read on Michigan sentiment is expected on Friday.

It's here. The FINAL full week of the trading year! While liquidity will begin to thin as we close in on the festive holiday, a number of tier-1 data are in the headlights this week. Tuesday Tuesday entertains the minutes from the Reserve Bank of Australia (RBA) and the Bank of Japan (BoJ) Policy Rate announcement, followed by CPI inflation numbers out of Canada. 12:30 am GMT welcomes the RBA minutes; this will provide traders and investors with an in-depth review of the central bank's latest rate decision. You may recall that the RBA held the Cash Rate at 4.35%, as expected, which followed a 25bp hike in October. Notes from the latest rate announcement saw the policy statement echo the data-dependent tone. The no-change follows inflation cooling to 4.9% on a year-on-year basis for October, according to the monthly CPI indicator, and Aussie unemployment jumping to 3.9%. The next quarterly inflation number due on 31 January next year will be an important watch, just ahead of the next central bank meeting on 6 February. According to rate pricing, markets are currently pricing in another no-change for this meeting. At 3:00 am GMT, the BoJ policy announcement is scheduled to hit the wires and the central bank is widely anticipated to leave its Policy Rate unchanged at -0.10%. Expectations of a policy shift out of negative territory increased exponentially recently on the back of commentary from BoJ Governor Kazuo Ueda, noting that 'handling monetary policy will get tougher from the year-end and through next year'. This, of course, sparked demand for the Japanese yen (JPY) and weighed on the USD/JPY currency pair. However, reports later surfaced that Ueda's comments were not intended to provide direction of a potential rate change, which naturally caused the yen sell-off only to later rebound following the Fed's dovish turn on Wednesday. Ultimately, though, according to a Reuters poll, the BoJ is expected to put a cap on negative interest rates by the end of 2024. Reuters also noted: 'While none of the economists in the poll predicted changes at this week's meeting, six of 28 economists, or 21%, said the BoJ would start dismantling current monetary conditions in January'. 1:30 pm GMT will see the latest inflation numbers from Canada. Current expectations for headline inflation is that consumer price inflation is anticipated to nudge back under 3.0% in the twelve months to November on the back of slowing prices in food and gasoline, down from 3.1% in October. Interestingly, a sub-3.0% print would mark the second time since early 2021 that we have been under 3.0% (the only other time, of course, was June 2023 at 2.8%). The estimate range for the release is currently between 3.0% and 2.7%. The most recent policy statement (6 December) erased October's language regarding increasing inflationary risks, though it retained that it remains ready to act 'if needed'. The post-rate statement added that the Governing Council 'wants to see further and sustained easing in core inflation, and continues to focus on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour'. Wednesday Wednesday welcomes UK CPI inflation data at 7:00 am GMT. The current median estimate for UK inflation data (All Items) for November is for the year-on-year measure to slow to 4.4%, down from 4.6% in October, alongside the core measure, which excludes energy, food, alcohol and tobacco, to also cool slightly to 5.5% over the same period, down from 5.7%. Following the Bank of England's (BoE) hawkish hold at 5.25% last week, and the MPC expressing that the Bank Rate will need to remain in restrictive territory for 'sufficiently long' to bring inflation back down to the 2.0% target, the BoE also kept the door ajar for further policy tightening in the event of 'persistent inflationary pressures'. However, while the central bank essentially backed away from the idea of rate cuts at this point (unlike the Fed), OIS swaps are pricing around 110bps of cuts for 2024. Friday Friday's headline event will be the Fed's favoured measure of inflation at 1:30 pm GMT: the Core PCE Price Index. Following the Fed's dovish turn last week, the focus will be November's US Core PCE Price Index release. As of writing, the year-on-year measure is forecast to cool slightly to 3.4% in November from 3.5% in October (the estimate range is currently between 3.5% and 3.1%), while from October to November, forecasts are for a 0.2% increase, matching the prior month. Should data come in as expected, rate pricing and the buck are unlikely to see much change. A miss, on the other hand, could increase the odds for a March rate cut (63% probability according to Fed Fund futures pricing) and encourage dollar shorts and underpin equities and bonds. Additional data of...