Gold advanced, US Existing Home Sales and Consumer Confidence both coming in with better-than-expected readings

23 December 2021, 02:59

Market Focus

US stocks advanced on Wednesday amid risk-on market sentiment, continuing to climb for a second day as investors decided that the Omicron variant of the coronavirus won’t derail economic recovery. Meanwhile, the FDA has announced that it had approved Pfizer’s highly effective Covid-19 treatment pill for emergency use in the US. Moreover, three new studies have shown that infection with Omicron is significantly less likely to result in hospitalisation. Therefore, market sentiment is improving as more and more evidence indicates that the strain is potentially less severe than prior strains like Delta, which might give a boost to economic recovery in 2022. On top of that, some upbeat economic data also helped ease markets’ concerns about the epidemic, with US Existing Home Sales and Consumer Confidence both coming in with better-than-expected readings.

The benchmarks, S&P 500, Nasdaq 100 and the Dow Jones Industrial Average both rose on Wednesday as investors believe that the Omicron variant would only have a temporary impact on the economic activity. US equity markets have maintained Tuesday’s momentum. The S&P 500 was up 1.0%, and the Dow Jones Industrial Average also advanced with a 0.7% gain for the day. All eleven sectors stayed in positive territory as the consumer discretionary and information technology sectors are the best performing among all groups, rising 1.73% and 1.33%, respectively. The Nasdaq 100 climbed the most, with a 1.2% gain on Wednesday. The MSCI World index rose 1.0%, while the S&P 500 CBOE volatility index dropped more than 1.50 and is now back below 20.00.

Main Pairs Movement

The US dollar declined on Wednesday, staying in negative territory amid risk-on market mood and falling US bond yields. The DXY index reached a daily top during the late Asian session, then pulled back to under 96.05 level to surrender most of its intraday’s gains. The positive news about the Omicron variant lend strong support to the stock markets and dampened the demand for the safe-haven Greenback. The FDA has now officially authorised the Paxlovid pill from Pfizer to treat high-risk patients.

GBP/USD advanced 0.66% on Wednesday amid renewed weakness seen in the US dollar across the board. Investors’ optimism on the Omicron variant improved risk appetite and increased demand for risk-sensitive currencies like the British pounds. Cable touched a daily high above 1.335 level during the American session, and the next strong resistance sits at 1.3374. Meanwhile, EUR/USD climbed to a daily top above 1.133 level but then retreated to surrender some of its intraday’s gains. The pair gained 0.32% for the day.

Gold advanced and touched a daily top above $1804 in the late American session, as the broad US dollar weakness prompted investors to use gold to hedge higher inflation numbers. Meanwhile, WTI oil surged almost 2.5% for the day and climbed above the $72.0 level, as the improving risk appetite and bullish inventory data both acted as a tailwind for the black gold. The US Crude Oil Inventories declined more than expected at over 4.7M barrels.

Technical Analysis

XAUUSD (4- Hour Chart)

Gold steadily held below 1800 as the global rebound in stocks moderated, with the markets grappling with uncertainty over the new Omicron variant and an unclear economic outlook. For the technical aspect, the outlook of gold seems directionless on the 4- hour chart, looking to turn upside in the near- term as it is trading slightly above the 20 SMA at the time of writing. As the RSI is slightly above the 50 mark, gold bulls will attempt to test its psychological resistance at 1800 again. Further up, if buying resurges above the 1800 level, it will expose the opportunity to the upside toward 1815. On the flip side, a fresh downswing below the 20 SMA will turn gold to bearish in the near term.

Resistance: 1800, 1815, 1829

Support: 1782, 1770, 1765, 1753

BTCUSD ( Daily Chart)

Bitcoin edged near 49500 ahead of the Christmas holiday. Bitcoin seems to be back in trend as the markets are back in the green. From the technical perspective, the daily outlook of Bitcoin remains downside as it continues to trade within the lower bounce of the Bollinger band, suggesting that selling pressure still exists despite the recent rise. The current support at 46510 becomes a critical and robust level for Bitcoin; if Bitcoin falls below 46510, then it will accelerate its bearish momentum and re-confirm its bearish mode. On the flip side, Bitcoin needs to climb above 55103 — where the intersection of the resistance and the ascending line — to reclaim its bullish stance. As the time of writing, the upside momentum has the opportunity to keep up as the RSI is well below overbought condition, giving room for Bitcoin to rise further north.

Resistance: 55103, 58000, 68991

Support: 46510, 39566, 32621

AUDUSD (4- Hour Chart)

AUDUSD attracted some buyers, pushing the price above 0.7219, ahead of US employment data. From the technical perspective, the 4- hour outlook remains bullish as it stays within the bearish channel. However, any subsequent move up is likely to face a stiff resistance at 0.7227, and it is challenging to break through as trading above 0.7227 will become a monthly high. In the meantime, if the currency can clear the resistance decisively, then it can see a fresh trigger for a bullish trend toward 0.7277. The upside momentum might pause before heading north as the RSI has reached nearly overbought, limiting its momentum.

Resistance: 0.7227, 0.7277

Support: 0.7170, 0.6997