50 bps is More Favourable By the Fed Officials

What You Need To Know

Stock rose and the dollar fell after Fed’s minutes released. The majority of the Fed officers lean toward a more moderate pace of rate hike with most likely to raise just 50 bps in December. Oil prices fell after the EU considered a more generous price cap on Russian oil production and more lenient penalties. The more severe Covid-19 pandemic in China also suppresses oil prices and the demand outlook for oil is gloomy. In addition, the tension between Russia and Ukraine is escalating with the Russian strike on Ukraine’s critical energy infrastructure led to a blackout in some regions. 

Look Out For

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

75 bps (24.2%) VS 50 bps (75.8%)

Market Overview

Economic Calendar

Market Movements

DXY

The Greenback dipped across the board while Wall Street’s major indexes ended with solid gains following FOMC meeting minutes, indicating that most policymakers at the central bank are more tilted toward a dovish tone as for now. A substantial majority of the Monetary Policy Committee (MPC) agreed it would probably slow down the pace of interest rate hikes, according to the FOMC meeting minutes. Investors speculated the Fed minutes would affirm officials’ softening stance as the recent data had shown a pessimistic outlook in economic conditions. US Initial Jobless Claims increased to a three-month high last week as rising layoffs in the technology sector 

The Dollar Index is trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum, while RSI is at 32, suggesting the index extends its losses after successfully breaking down below the support level since the RSI stays below the midline.

Resistance level: 107.95, 109.60

Support level: 106.05, 104.75

XAU/USD

Gold prices surged following the US Dollar marking its biggest daily slump in two weeks as the Federal Reserve officials discussed the need to slow down the rate hikes path. In addition, the US Dollar extended its losses over the backdrop of a string of downbeat economic data. According to the Department of Labor, the US Initial Jobless Claims rose the most since June to 240K, worse than the market forecast of 225K, dragging down the US Dollar appeal.

The gold market is trading higher following prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 56, suggesting a neutral-to-bullish stance as the RSI stood above the midline.

Resistance level: 1785.00, 1815.00

Support level: 1730.00, 1680.00

EUR/USD

The euro surged up 1% to 1.0435 as the dollar further extended its weakness after the FOMC meeting signals that the Fed would likely increase 50 basis point rate hikes in future. Although the Fed Officials agreed to slow down the rate hikes, the policymakers acknowledged there had been little demonstrable progress on inflation and that rates still needed to rise.

The pair spurred up near the previous resistance level, which is 1.0481. The MACD line turned above the zero line, indicating a bullish momentum ahead. While RSI is trading around 71, it reached an overbought zone, indicating that buyers are more than sellers now. If the pair breaks through 1.0481, the pair might continue to have a bullish momentum till the next resistance level of about 1.0646.

Resistance level: 1.0481，1.0646

Support level: 1.0388，1.0288

BTC/USD

BTC has gained nearly 9% from its recent low at 15449. Given that the Fed is likely to increase just 50 bps instead of 75 bps in December, the dollar lost its strength, with the DXY index trading just below $106. There is still uncertainty and instability after the collapse of FTX. Hence, the fundamentals for BTC are wobbly at the moment. 

Notwithstanding that the recent uptrend is due to the weakening dollar, the indicators also show some promising bullish signals. The MACD has crossed the zero line and the MACD histogram is also expanding. The RSI has also shown some buying power for BTC with the reading staying above the 60-level as of writing. 

Resistance level: 17050, 17860

Support level: 15650, 15000

DJ30

The U.S. stock market edged higher after releasing the Fed’s minutes as there is a more dovish signal for the following rate hikes. A 50 bps rather than 75 bps rate hike is expected in December has inspired the Dow Jones to gain 0.28% higher at 34194.07. Perhaps due to a more cooling labour market and worry over the market recession, the Fed is willing to slow down the pace of rising rates. However, as the festive season is around the corner, the equities market is expected to be less volatile despite the dovish signal from the Fed favouring the equities market.  

On the technical side, there is a strong resistance to the index at 34190. It will be a more promising bullish momentum if the index is able to stay above this level. The RSI has been hovering above the 50-level and has now touched the overbought zone suggesting the buying power for the index is strong. However, the MACD depicts that the bullish momentum is lacking. 

Resistance level: 34190, 36810

Support level: 31370, 28760

GBP/USD

The Pound Sterling surged over a string of upbeat economic data. According to Markit Economics, UK Composite Purchasing Managers’ Index (PMI) came in at 48.3, exceeding the market forecast of 47.2. Meanwhile, UK Manufacturing and Services Purchasing Managers Index (PMI) also came in at 46.2 and 48.8, which both fared better than the expectation of 45.7 and 48.0, respectively. Such upbeat economic data had dialled up the market optimism toward the economic progression in the United Kingdom, insinuating market demand for Pound Sterling.  

The Pound Sterling is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum. However, RSI is at 78, suggesting the product is going into overbought territory. 

Resistance level: 1.2240, 1.2655

Support level: 1.1725, 1.1135

NAS100

The Nasdaq rose by 0.99% to 11,285 points on Wednesday. Trading volume was low amid the Thanksgiving holiday on Thursday, with the U.S. stock market open for a half session on Friday. Mixed economic data released on Wednesday led to a drop in yield on the benchmark of the 10-year T-note, helping to boost the stock market. 

MACD hovers above the zero line, which suggests the indices remain in bullish momentum. At the same time, RSI is trading around 58, indicating a bullish momentum ahead.

Resistance level ：12096，12750

Support level ：11230， 10459

CL OIL

Oil prices slumped more than 3% yesterday following the rumours indicating that the Group of Seven (G7) nations considered a price cap on Russian oil above the current market level. G7 nations are discussing a price cap on Russian seaborne oil in the range of $65-70 per barrel, according to a European official. The range is well above Russia’s cost of production as the production costs are estimated at around $20 per barrel. Hence, implementing a price cap would still make it profitable for Russia to sell its oil. 

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

Resistance level: 83.10, 91.90

Support level: 76.45, 69.90