Recession warnings have been sounded, sending equities dipping as risk appetites wane

What You Need To Know

U.S. equities markets tumbled after the pessimistic economic outlook from major banks. Players from Wall Street including Goldman Sachs, JP Morgan, and Morgan Stanley have posted a gloomy market outlook alongside predicted pay and job cuts. As such, the safe-haven dollar edged higher from its lowest since June with investors perceiving a bumpy road ahead. Meanwhile, China’s equities market may enjoy some gains as the economy is starting to reopen after the easing of Covid restrictions. In the cryptocurrency market, Bitcoin miner’s capitulation due to mining difficulties suggests that BTC’s price is near to its bottom and that selling pressures will ease

Look Out For

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

75 bps (23%) VS 50 bps (77%)

Market Overview

Economic Calendar

Market Movements

DXY

The Greenback continued to rise ahead of next week’s interest rate decision by the Federal Reserve. Investors continue to speculate on an aggressive rate hike from the Federal Reserve following the recent data indicating that the service and job sector in the United States remained resilient. More robust data could enhance the odds of the Fed continuing its rate path for longer. According to the FedWatch Tool, market bets point to a 91% probability that the US central bank might increase its rates by 50 basis points at its 13-14th December policy meeting. 

The Dollar Index is trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 40, indicating the index might extend its gains as the RSI rebounded sharply from the oversold territory. 

Resistance level: 107.95, 110.25

Support level: 104.95, 101.50

XAU/USD

Gold prices retreat from their critical levels as the strengthening US Dollar continues to weigh on the dollar-denominated gold. The US Producer Price Index for November, due +on Friday, will be closely monitored for any cues on the inflation prospect in the United States. Meanwhile, the Federal Reserve is set to meet next week in its final meeting for the year 2022. As the overall monetary policy decision remains uncertain, investors are advised to continue scrutinising further economic data and statements from the Fed member for further trading signals.

Gold prices are trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 58, indicating the commodity might extend its losses as RSI retreated sharply from the overbought territory. 

Resistance level: 1810.00, 1875.00

Support level: 1730.00, 1680.00

EUR/USD

The Euro fell yesterday, dragged down by risk-off sentiment with investors concerned about a global economic slowdown due to the earlier tightening interest rate policy. The European Central Bank, US Federal Reserve and Bank of England will all meet next week to discuss monetary policy. On the monetary policy front, ECB chief economist Philip Lane claimed that the European Central Bank will still increase interest rates several more times to tame inflation, even if headline inflation is now close to its peak. Investors will continue to eye on monetary decisions from ECB to gauge the likelihood trend for the Euro. 

The pair is lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, suggesting the pair might extend its losses as the RSI retreated sharply from overbought territory. 

Resistance level: 1.0515, 1.0735

Support level: 1.0290, 1.0010

BTC/USD

BTC has been exceptionally sideways for the past few trading days and stays near its resistance level at 17040. On the fundamental side, a measurement of total computing power for Bitcoin mining has its biggest decline since July 2021, with a drop of 7.3% over the week. With a sharp decline in BTC price and rising cost has deterred miners from mining more Bitcoin which will ease some selling pressure for the crypto. 

The cryptocurrency market has been quiet for the past few trading days with BTC having a mere 2.5% of change in price for the week. Although BTC is still trading above its uptrend support line, the MACD suggests that the bullish momentum has diminished as it flows toward the zero line. The RSI has been hovering near the 50-level which depicts a neutral signal where buying and selling power are offset by each other. 

Resistance level: 17859, 18690

Support level: 17040, 15663

DJ30

The Dow received further selloff yesterday as the looming recession fears continue to diminish risk appetite in the global financial market, dragging down the US equity market. According to Reuters, a growing number of Wall Street bankers had warned of a potential recession in 2023, especially with the higher borrowing cost in the financial market. Upbeat US economic data this week indicated that inflation would likely persist in the near term, a trend that could spur a more hawkish move by the Federal Reserve.  

The Dow is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 46, suggesting the Dow will likely extend its losses as the RSI stays below the midline.

Resistance level: 34390, 36810

Support level:  31370, 28760

GBP/USD

The pound dropped against the dollar on Tuesday as investors were still digesting the positive U.S. ISM data. The pair is trading at $1.2140 at the press time, and it could still struggle to make much movement as the overall market sentiment remains uncertain. In addition, the cost-of-living pressures and uncertainty about the economic outlook squeezed demand. 

The MACD line crosses downward to the zero line, showing bearish momentum. Retracement is continued as RSI moves downward, suggesting the trend is to remain bearish in the short term.

Resistance level：1.2343， 1.2670

Support level： 1.1936，1.1649

NAS100

The Nasdaq index has dropped 237 points, a little more than 2% last night as the economic outlook is gloomy. Major banks from Wall Street warn of a recession ahead and foresee pay and jobs cuts soon. With the latest service PMI data showing that inflation in the nation is still a challenge for the Fed, a tighter monetary policy from the Fed will harm the equities market and also the economy. 

The index has been trading sideways and is still within its bearish channel, it has also traded below its moving average line after a plunge from last night. The MACD has been flowing flat above the zero line suggesting that the momentum is eased. The RSI has also fallen to the 43-level from the 63-level depicting that the buying power has vanished. 

Resistance level: 12020, 12595

Support level: 11495，10920

CL OIL

Oil prices fell in frenzied trading on Tuesday to their lowest settlement levels this year. Brent crude is trading below $80 per barrel for the second time this year as investors fled the volatile market in an uncertain economy. Brent crude fell 4% to $79.35 a barrel, and WTI crude fell 3.5% to $74.23 a barrel, their lowest settlement this year. In addition, oil prices have been giving back most of the gains this year. A string of bearish news has unnerved investors despite an ongoing war in Ukraine and one of the worst energy crises in recent decades. Meanwhile, service-sector activity in China has hit a six-month low, and European economies have slowed due to the high cost of energy and rising interest rates.

Oil prices have dropped to a year low and are now trading at $74.62 at the press time. The MACD line is slipping, suggesting that bearish momentum is ongoing. At the same time, RSI is trading below 30 as of writing, indicating a bearish momentum ahead and hitting the oversold zone. It might have a slight technical rebound before it continues to drop. 

Resistance level: 81.31, 89.82

Support level: 73.52, 64.88