What You Need To Know

Asian markets fell as worries about the surging number of Covid-19 cases in China stoked fears that a longer wait is needed for this giant economy to reopen to the world. Elsewhere, markets expect that the Fed will continue its hawkish approach to rate hikes as economic data in the US continues to outperform expectations. On the other hand, the European region is rushing to fill up on Russian diesel before the EU sanctions on Russian oil products, which will be effective by 5th February next year. 

Look Out For

Current rate hike bets on 14th December Fed interest rate decision: 

75 bps (19.4%) VS 50 bps (80.6%)

Market Movements

DXY

The Dollar Index rebounded, with investors bracing for a more hawkish tone from the Federal Reserve, stoking concerns about a deeper recession. The Federal Reserve meeting minutes, due on Wednesday, will be the crucial event for this week as investors will scrutinise for any indication that the pace of rate hikes may moderate after the aggressive hikes this year. Earlier, St. Louis Federal Reserve President James Bullard insisted that the Fed should increase its interest rate more significantly to reach a sufficiently restrictive level to combat the inflation rate. Nevertheless, despite the recent minor rebound for the US Dollar, the currency still tracks to post its most significant quarterly loss since the second quarter of 2017. 

The Dollar Index is trading higher following the prior rebound from the support level. Nonetheless, MACD has illustrated increasing bullish momentum, while RSI is at around the midline, suggesting the index would hover from 107.80 and 106.15. 

Resistance level: 107.80, 109.65

Support level: 106.15, 104.75

XAU/USD

The strong US Dollar, supported by the hawkish statement from James Bullard, has put pressure on the dollar-denominated gold. According to Reuters, St. Louis Federal Reserve Bank James Bullard claimed that the US inflations remain unacceptably high for the Fed to moderate the aggressive rate hike decision. James Bullard also reiterated that he would prefer rates to peak at least 5% and 5.25% from the current 4% rate. Nevertheless, Federal Reserve meeting minutes, due on Wednesday will provide further perspective from several Monetary Policy Committee (MPC). Market participants should continue to eye on the development for further trading signals. 

The gold market is trading lower following prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 41, suggesting downside is more favoured as the RSI stays below the midline.   

Resistance level: 1770.35, 1809.25

Support level: 1727.20, 1681.85

EUR/USD

The Euro has been strong against the dollar since last month and broke through its uptrend resistance after the U.S. CPI report release. The uptrend momentum seems to have eased after the Fed has reiterated its hawkish approach to rate hikes to curb the strongest inflation in 4 decades. However, the ECB has also addressed the high inflation in the region by escalating its interest rates in the future. This would allow the euro to offset the dollar’s strength when the Fed raises higher interest rates in the future. 

It is clear that the pair’s bullish momentum is diminishing where the MACD has dropped near to the zero line and the RSI has fallen below the 50-level region. However, if the pair is able to stay above its support level at 1.0245, the bullish trend for the pair is still intact. 

Resistance level:1.03521, 1.04950

Support level: 1.02475, 1.01247

BTC/USD

BTC is now trading in its lowest region since November 2020 after the collapse of the second-largest cryptocurrency broker. It is known that FTX owed nearly $3.1 billion to its top creditors and more than 100 affiliated firms were affected in this incident. 

BTC has downwardly broken through its consolidating price range between 17040 to 16100 and is now approaching its crucial support level at 15900. The MACD line is not able to cross above the zero line and is now converged. The RSI has also fallen below 30-level suggesting that the selling power is stronger than the buying power. 

Resistance level: 17040, 17600

Support level: 15900, 15160

DJ30

The US equity market was trading within a range amid mixed sentiment for the US market, while market participants continue to digest downbeat CPI and PPI data against the hawkish tone from Federal Reserve policymakers. Ahead in the week, market participants will continue monitoring the outcome of the FOMC’s meeting minutes and fresh economic data from the United States for further trading signals. 

The Dow is trading within a range while currently near the support level. MACD has illustrated diminishing bullish momentum, while RSI is at 65, suggesting the index is going into overbought territory. 

Resistance level: 34320, 35720

Support level: 33065, 31045

GBP/USD

The pound has been trading on the sidelines from 1.17 to 1.20 after the announcement of the UK’s Autumn Statement released last Thursday. It came to a halt rising but stayed within the range as investors await the release of the US durable goods order data, which will be released on Wednesday. 

MACD is trading above the zero line, illustrating a bullish momentum ahead. At the same time, RSI is trading around 55, which also indicates bullish momentum in the short term. Investors could keep an eye on the next resistance at 1.2000.

Resistance：1.200, 1.2266

Support： 1.1779, 1.1464

USD/JPY

The dollar was weak after the release of the U.S. CPI data last week, which led the market to believe that inflation had peaked. The pair is now consolidating in the range between 140.74 to 137.582 at the time of writing. With the Fed reiterating that the tightening monetary policy is still firmly ongoing, we could expect the pair to be trading sideways until other significant economic data is released. 

The MACD depicts a bullish signal for the pair flowing toward the zero line from below and the gap widening. However, the RSI traded around 50, a middle line which suggests that both directions are possible. 

Resistance level: 140.74, 146.04

Support level: 137.82,  135.07

CL OIL

Oil prices dipped significantly last Friday, posting a second weekly decline as the concern about weakening oil demand in China outweighed fears of oil supply disruption from Russia after the implementation of tighter EU sanctions on its crude exports came into force. From a macro perspective, China is battling Covid-19 outbreaks in numerous major cities, including Chongqing and Beijing. Several Chinese refiners have requested Saudi Aramco to reduce its December oil import because the Covid-19 restrictions have weakened fuel demand. US oil prices slumped by more than 4%, hitting their lowest price since September.

Crude oil prices are trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 32, indicating the commodity is going into oversold territory. 

Resistance level: 83.05, 85.25

Support level: 79.50, 76.20