Oil prices continue their descent on fears of recession even as China eases pandemic curbs.

What You Need To Know

Oil prices continue to slip and have hit a yearly low trading below $72 per barrel. Markets expect that a global economic recession will hit next year, leading to a gloomy demand outlook for oil. The dollar edged slightly higher as the U.S. service PMI data is higher than forecasted, leading to expectations that the Fed will further increase the targeted interest rate to tame inflation. In addition, the U.S. CPI data will be released tomorrow (13th Dec) along with the FOMC rate decision conference on Wednesday; while the ECB and U.K. ‘s rate decision announcement will be made on Thursday. 

Look Out For

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

75 bps (25.3%) VS 50 bps (74.7%)

Market Overview

Economic Calendar

Market Movements

DXY

The Dollar Index increased slightly after the Producer Price Index (PPI) rose more than market expectation. According to the US Bureau of Labor Statistics, the US Producer Price Index (PPI) for last month came in at 0.30%, higher than economist forecast at 0.20%, which indicated that inflation is still hotter than expected. However, at a time when inflation is the determining factor of the US economy, investors are eagerly awaiting Tuesday’s CPI data. Economists predicted the quarterly rate of the US inflation would come in at 0.30%, compared with the previous reading of 0.40%.

The Dollar Index is trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 38, indicating the index is going into oversold territory.

Resistance level: 107.95, 110.25

Support level: 104.75, 101.50

XAU/USD

Heightened volatility and recession risk continued to be the wildcard to shake the investors’ sentiment across the global financial market, prompting investors to shift their portfolios into other safe-haven assets such as gold. Movements in the gold market could be volatile in the coming days ahead of crucial inflation data and the FOMC meeting. Investors are advised to be extra vigilant about risk management while keeping an eye out for the results for further trading signals.

The gold market is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 63, suggesting the commodity might trade lower as technical correction since the RSI retreated sharply from the overbought territory.  

Resistance level: 1810.00, 1875.00

Support level: 1730.00, 1680.00

EUR/USD

The USD gained some strength since last week as the U.S. service PMI report has a higher reading than the market expected. This result led the market to expect the Fed will set a higher targeted rate to tame inflation. The ECB rate decision announcement will be made on Thursday ( 15th Dec) and some movement for the pair is expected after the announcement. On top of that, the Eurozone PMI and CPI data will be released on the following day and the market may gauge the next monetary policy moves by the ECB. 

On the technical front, the pair has been poised at this level since early of the month. The RSI indicated a neutral signal as it dropped from the 63-level to 49-level with no movement bias at the moment. The MACD also depicts a fall in momentum for the pair as it stays flat above the zero line in the past few trading days. 

Resistance level: 1.0847, 1.1158

Support level: 1.0320, 1.0010

BTC/USD

BTC again was not able to stay above 17000 level but still remained extremely sideways this month. The gloomy economic outlook has deterred the investors from trading in the cryptocurrency market with the crypto Fear & Greed index remaining near the extreme fear zone. The U.S. CPI data will be released tomorrow (13th Dec), which might spur BTC’s price movement. 

On the technical front, BTC has been poised in a minimal price range in December at the level near 17000. The RSI has dropped from the 65-level to the 43-level, signal that the bullish bias has vanished. The MACD has also stayed flat and flows near to the zero line with no indication of bullish or bearish bias. 

Resistance level: 17060, 18325

Support level: 16203, 15667

DJ30

The Dow retreated as stronger-than-expected PPI data fueled concerns over the aggressive restrictive policy from the Federal Reserve, potentially leading to a recession. Meanwhile, global bonds had begun to signal a recession outlook, with a gauge measuring the worldwide yield curve inverting for the first time in at least two decades ahead of several central banks meeting this week. The inversion of the yield curve is typically seen as a recession indicator, which stoked a shift in sentiment toward other safe-haven assets while dragging down the appeal for the US equity market. 

The Dow is trading lower following prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 43, indicating the index will extend its losses since RSI stays below the midline.

Resistance level: 34340.00, 36810.00

Support level: 31370.00, 28760.00

GBP/USD

The pound was traded flat against the dollar at $1.2221 last Friday but still floating near the resistance level as the markets await a major central bank policy meeting on Wednesday. However, economists expect the BoE to increase by 50 basis points despite the economy falling into recession. In the longer term, we could expect the pound’s direction might remain neutral-positive as the market is currently pricing the worst-case scenario for the British economy. 

The MACD line is crossing upward, showing a neutral-bullish momentum. Investors could keep an eye on the next resistance level at $1.2343 as the pair moves upward. RSI hovers around 59, suggesting the trend is to remain neutral-bullish in the short term. 

Resistance level：1.2343， 1.2670

Support level： 1.1936，1.1649

NAS100

Nasdaq ended lower by (-0.70%) or -77.39 points to 11,004 last Friday. As investors assessed economic data and awaited a likely 50 basis point rate hike by the Fed at its policy meeting on Wednesday. At the same time, apparel company LuLulemon (LULU) slumped 12.85% following a disappointing profit forecast. In addition, the U.S. producer prices rose slightly above market expectations in November amid an increase in the cost of services, but the trend remained moderate, with annual inflation at the factory gate posting its smaller increase in 1-½ years. 

The MACD is moving down to the zero line, suggesting a bearish momentum ahead. The RSI is trading at 45, which also indicates a neutral-bearish momentum. 

Resistance level: 11997, 12647

Support level: 11445，10469

CL OIL

Oil prices suffered their worst week in nine months, driven by headlines about the inverted Treasury yield curve and recession risk. Global bonds had begun to join US peers in signalling a recession, with a gauge measuring the worldwide yield curve inverting for the first time in at least two decades. The inversion of the yield curve is typically seen as a recession indicator, with investors switching money to longer-term bonds due to pessimism over the short-term economic outlook. Stagflation risks are growing as recent economic data indicated that inflation in the US remained high, despite the earlier monetary tightening.

Crude oil prices are trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 36, indicating the commodity might trade higher as RSI rebounded sharply from the oversold territory.

Resistance level: 76.00, 83.10

Support level: 69.90, 64.70