What You Need to Know

Wall Street sentiment was boosted by the favourable NFP reading and a slower wage growth rate last week and the sentiment spread to Asian markets today. The dollar index dropped by nearly 1.8% as the market believes a diminishing labour demand and slower wage growth will lead to a more dovish monetary approach by the Fed. The U.S. core CPI data which will be released Thursday this week is much anticipated to gauge the Fed’s next move. Oil prices stayed firm after China opened its border last Sunday but a pessimistic economic outlook pressured the oil price to surge. Amazon Inc is about to lay off some 18000 employees and Goldman Sachs will cut about 3200 jobs due to slowing businesses and uncertain market outlook. 

Look Out For

Current rate hike bets on 1st February Fed interest rate decision: 

25 bps (59.1%) VS 50 bps (40.9%) 

Market Overview

Economic Calendar

Market Movements

DXY

The US Dollar tumbled significantly despite the release of upbeat jobs data from the United States last week, as market participants paid more attention to the decrease in average hourly earnings. According to the Bureau of Labour Statistics, US Nonfarm Payroll data released last week indicated the US added another 223,000 jobs to the economy for December, while the unemployment rate fell to 3.5%. Both data had fared much better than market expectations. Though, the deterioration of wage growth and the contracting services sector could diminish the inflation risk in future, allowing the Fed to slow its interest rate increases during their next meeting on 1st February. Average hourly earnings increased by 4.6%, much lower than the market expectations of 5%.

The Dollar Index is trading flat while currently testing the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 43, suggesting the index might trade lower in short-term as the RSI stays below the midline.  

Resistance level: 105.20, 108.35

Support level: 101.30, 99.05

XAU/USD

With investors bracing for cooling wages growth, US dollar depreciation had underpinned the dollar-denominated gold. The deterioration of wage growth and the contracting services sector could diminish the inflation risk in future, allowing the Fed to slow its interest rate increases during their next meeting on 1st February 2023. Average hourly earnings increased by 4.6%, much lower than the market expectations of 5%.

Gold prices are trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 70, suggesting the commodity is entering the overbought territory.   

Resistance level: 1870.00, 1915.00

Support level: 1820.00, 1770.00

EUR/USD

The NFP result was 223000 for December 2022 and is higher than the market expectation of 200000. A sign of a weaker in strength of the labour market and a slowdown in wage growth allows the market to believe the Fed might be more dovish in the upcoming monetary policy moves. The dollar index fell by more than 1.8% and is traded close to its crucial support line at 103.4. As such, the Euro has taken advantage of a weaker dollar to gain more than 1.7% against the dollar. Suppose the inflation risk in the Euro region is much higher; a more aggressive monetary policy from the ECB will see the Euro extend its strength in the future.

The strength of the Euro to gain over 1.7% in the last trading day is reflected in the indicators. The RSI has rebound strongly from the oversold zone to the 63-level suggesting there is a strong buying power for the pair. The MACD has also broken through the zero line depicting the building of bullish momentum. 

Resistance level: 1.0743, 1.0988

Support level: 1.0495, 1.0277

BTC/USD

The dollar index plummeted due to a rather dismal reading of the NFP and the slowdown of wage growth in the U.S. BTC took the advantage to edge higher and is once again trading above 17000, it has also broken above its price consolidation range. Besides, the low volatility of BTC in the past month has seen the number of holders for BTC increase including large investors and retailers. In addition, a large number of mining machines shut down due to low BTC prices and higher costs, which has tighter the supply of BTC. Those abovementioned factors suggest that BTC prices have a higher chance of moving upward. 

For technical discussion, the RSI has once again moved to the overbought zone after more than 2 weeks suggesting the buying power is strong for BTC. Although the MACD has been moving flat above the zero line, there is a sign for the MACD to move upward depicting the bullish momentum for BTC is slowly building. 

Resistance level: 17746, 18465

Support level: 15843, 14975

DJ30

The Dow Jones experienced their best day in more than a month last Friday as investors speculated that the slowdown in wage growth and an unexpected service sector contraction would dampen the Federal Reserve’s aggressiveness to increase their interest rates. US Treasury yields edged lower last Friday, underpinning the US equity market. Market participants are now focusing on corporate earnings and inflation as the main catalysts. The December Consumer Price Index (CPI), which is due on Thursday, will be closely watched for signs of easing price pressure on consumers and companies as the data will help influence the aggressiveness of the Federal Reserve’s next rate hike.

The Dow is trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 57, suggesting the index might trade higher as the RSI stays above the midline. 

Resistance level: 34110, 35320

Support level: 32620, 31165

GBP/USD 

The pound rose 2.35% to $1.2132 against the weakened dollar on Friday as economic data released last week stoked hopes that the Fed would likely slow its pace of interest rate hikes. as the U.S. nonfarm payroll showed a higher than forecast reading of 223,000 in December, which slightly dropped from November of 256,000. Furthermore, the data of average hourly earnings for December, based on nonfarm payrolls, slowed to 0.3%, slightly dropping under November’s 0.4% increase. While the unemployment rate ticked lower to 3.5%, it remained between 3.7% and 3.5% since early 2022. notably, unemployment remains at a five-decade low. Therefore investors expect that the Fed might slow down its pace of interest rate hikes due to mixed economic data released. It led to the dollar dropped and the pound spiking up. 

As we can see that the MACD line is crossing up to the zero line, indicating a bullish momentum ahead. While RSI spikes up to 62, indicating the pair is heading into a bullish momentum.

Resistance level: 1.2345, 1.2670

Support level: 1.1935, 1.1650

HK50

The Hong Kong stock market rallies on Monday, as hopes for a more dovish tone from the Fed and China’s borders bolsters the outlook for the global economy. The Hang Seng index rose 1.6% or 344.28 points to 21333 points at press time. Moreover, economists predict that China, as the second-largest economy in the world, would likely benefit from a cyclical uptrend in 2023 and expect the market to move upwards from multiple expansions and 10% EPS growth. Investors are suggested to continue monitor on China’s reopening action. 

HK50 is trading higher following the prior breakout above the resistance level. The index remained consolidated above 20000, suggesting that the sentiment remains strong. MACD has illustrated increasing bullish momentum. However, RSI is at 73, indicating the index has already entered into overbought territory and might have a slight retracement in the coming days.

 Resistance level: 22520, 22885

Support level: 20000, 18838

CL OIL

Oil prices slipped into negative territory due to global recession concerns. The recent pessimistic economic data from the United States and United Kingdom region continues to spark uncertainty toward the global economic outlook. According to the Institute for Supply Management, US ISM Non-Manufacturing Purchasing Managers Index (PMI) declined from 56.5 to 49.6, missing the market forecast at 55.0. On the other hand, UK Construction Purchasing Managers Index (PMI) came in at 48.8, which is also worse than the market expectations of 49.6. Meanwhile, the world’s top crude exporter, Saudi Arabia, reduced its selling prices for the Arab light crude for Asia to its lowest level since November 2021 amid the global recession risk damping the oil demand

Crude oil prices are trading lower while currently testing the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 42, suggesting that the commodity might trade lower in short-term as the RSI stays below the midline.

Resistance level: 77.10, 81.55

Support level: 73.25, 70.20