EURUSD, GBPUSD, Gold

EURUSD: Euro faces another challenging year

The dollar was under pressure at the start of the year due to expectations of a dovish Federal Reserve. However, those dismal predictions have not come true, and the dollar is anticipated to finish the year unchanged. Despite the near certainty of a Fed rate drop, dollar’s bulls may struggle to draw a higher trajectory. In 2023, inflation was the leading story.

The euro edged out the dollar in 2023 despite high inflation, poor growth, and constant negative news. ECB policy will be a focus in 2024. The market expects around 140 bps of rate decrease, with the first 25 bps fully considered by April 2024. For this scenario to occur, the ECB must cut its 2024 inflation predictions, and a recession should become more likely.

Technically, EURUSD is hovering within a consolidation area in 2023 with strong resistance at 1.1275, which is a 17-month high and support at 1.0450, which is a ten-month low. If the market overcomes the 200-week exponential moving average (EMA), then it may hit the 200-week simple MA at 1.1150 ahead of 1.1275. A move higher could switch the bias to bullish. However, any movements beneath the 50- and the 100-week SMAs would take the market until 1.0450 and below that the 1.0200 psychological mark would be closely watched for further losses.  

GBPUSD: Pound will have a rough year ahead

Even though the BoE was slow to act, and inflation was extremely high, cable nonetheless managed to beat its key trading partners in 2023. With a general election possibly taking place after the summer vacation next year, it might be a pivotal year for the UK economy. As the election date draws near, this raises the prospect of a pound-negative reaction.

In FX markets, GBPUSD has been stubbornly pushing for some recovery without success lately as the market needs to surpass the 200-week EMA and the 200-week SMA to produce more gains. A challenging point for traders to have in mind is the 15-month peak of 1.3140 ahead of the high of 2022 at 1.3750 and the 2021 peak at 1.3980. In the negative scenario a drop below the 23.6% Fibonacci of the up leg 1.0325-1.3140 at 1.2480 and the 50- and 100-week SMA would confirm a bearish correction in the broader outlook.

Gold: Rally could continue in 2024 

In 2023, gold experienced a significant recovery after a lackluster performance in 2022. It reached new highs on two occasions and was poised to achieve a yearly increase of over 10%. The precious metal experienced a downward trend solely during the period from May to early October. However, after reaching a low point of 1,810 on October 6, the market was dominated by bullish investors who pushed the metal to a new record of 2,144.90 in early December, although it subsequently experienced a correction. Any movements above the all-time high could drive the market towards the next round numbers such as 2,200 and 2,300.

The decline observed from May to October was caused by the occurrence of robust US data, which in turn led to a surge in both Treasury yields and the value of the US dollar. However, the confrontation between Israel and Hamas halted the decline and led to a significant short-term increase in the market, as the economic statistics in the US started to weaken, indicating an upcoming economic downturn and bringing forward the dates of possible rate cuts.