Source: PaxForex Premium Analytics Portal, Fundamental Insight
The US IBD/TIPP Economic Optimism Index for January is predicted at 41.7. Forex traders can compare this to the US IBD/TIPP Economic Optimism Index for December, reported at 42.9.
US Wholesale Inventories for November are predicted to increase by 1.0% monthly and Wholesale Trade Sales by 0.5% monthly. Forex traders can compare this to US Wholesale Inventories for October, which rose by 1.0% monthly, and US Wholesale Trade Sales, which expanded by 0.4% monthly.
Financial markets began 2023 with volatile trading, which was expected during the first week as portfolio managers corrected adjustments made to end 2022 and started to prepare for this year. The four dominant trends of 2022, inflation, central bank action, recession fears, and corporate earnings, will dominate 2023. Inflation is expected to cool gradually from 40+ years highs but remains stubbornly high, extending the cost of living crisis and harming personal well-being and economic activity. Global central banks could reach terminal interest rates during the first quarter. They could use other tools to tighten monetary policy and are unlikely to lower borrowing costs despite an expected recession due to high inflation. Today’s speech by US Federal Reserve Chairman Powell could confirm both trends.
Expectations for a global economic recession remain, which could last into 2024, and threats for years of stagflation increase unless the expected recession is long and deep. Corporate earnings held up reasonably well last year but could start to disappoint in 2023 and 2024. The combination may pressure equity markets to a 33%+ correction. Throughout history, no bear market ended before a recession, and 2023 could deliver the long path ahead for bulls to find a bottom.
The forecast for the Dow Jones 30 has turned bearish after its horizontal resistance area rejected this equity index. Confirming the lack of bullish momentum is the flat Kijun-sen, which trades above the flat Tenkan-sen. Expectations increase for the next directional move to be to the downside, resulting in a bearish crossover and a rise in bearish pressures. The Ichimoku Kinko Hyo cloud also trends sideways but has begun to contract, with the Senkou Span descending and the Senkou Span B drifting higher. Traders should also monitor the CCI in extreme overbought territory after recording a peak and moving lower. A breakdown below 100 could spike selling pressure in this equity index. Can bears overpower bulls and regain control over price action before pushing the Dow Jones 30 into its horizontal support area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the Dow Jones 30 Index remain inside the or breakdown below the 33,365 to 33,710 zone, PaxForex recommends the following trade set-up:
Should price action for the Dow Jones 30 Index breakout above 33,710, PaxForex recommends the following trade set-up:
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