The Bank of England is gearing up to impose its biggest hike in 3 decades after inflation continues to break record highs

What You Need To Know

The highest reading of U.K.’s inflation, which hit 11.1% in October, has urged the Bank of England (BoE) to impose its biggest rate hikes in over 30 years. The BoE will likely raise the rate to 3.5% in December and investors speculate that the rate will reach as high as 5.25% in mid-2023. Oil prices plunged to its lowest since December 2021 as the U.S. equities markets declined and treasuries yield flashed warning signs of the risk of recession despite China easing Covid curbs. In addition, the U.S. initial jobless claims will be released later today and investors may refer to it to gauge the Fed’s next monetary policy move.

Look Out For

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

75 bps (21.8%) VS 50 bps (78.2%)

Market Overview

Economic Calendar

Market Movements

DXY

The US Dollar was traded flat ahead of several crucial economic data, including weekly jobless claims, consumer sentiment and Producer Price Index (PPI), due this week. Investors will continue monitoring for clues on what to expect from the Fed on 14th December 2022. Meanwhile, some investors have been speculating the Fed will soon slow its rate tightening pace after Fed Chairman Jerome Powell unleashed his dovish tone during the previous press conference. However, the recent upbeat US employment and services data has added further uncertainty over the Fed’s policy prospect.  

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 might trade higher as the RSI rebounded sharply from the oversold territory. 

Resistance level: 107.95, 110.25

Support level: 104.95, 101.50

XAU/USD

The gold market continued to trade sideways as the mixed sentiment from the US market spurred further uncertainty toward the market trend for gold. Upbeat US economic data this week have reinvigorated talk that the Federal Reserve might turn aggressive again on its rate hikes decision in 2023 despite the earlier dovish statement from Fed Chairman Jerome Powell. As for now, investors will continue to monitor further crucial economic data due to release this week for further trading signals. 

The gold market is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 62, indicating the product will probably extend its losses as RSI retreats sharply from the overbought territory. 

Resistance level: 1810.00, 1875.00

Support level: 1730.00, 1680.00

EUR/USD

The Euro surged, with investors bracing for an optimistic economic outlook following the release of upbeat economic data. European Statistics Agency Eurostat showed on Wednesday that Eurozone Gross Domestic Product (GDP) increased slightly more than initially estimated, with household spending and business investment boosting the economy. The GDP growth in the third quarter notched up from the previous reading of 0.20% to 0.30%, exceeding the market forecast at 0.20%. 

The pair is higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 64, suggesting the pair to be traded lower in short-term as technical correction since the RSI retraced sharply from the overbought territory. 

Resistance level: 1.0515, 1.0735

Support level: 1.0290, 1.0010

BTC/USD

BTC continues to trade sideways and has been consolidating for a month after the collapse of FTX. Given that the global market sentiment is pessimistic with a gloomy economic outlook ahead, the cryptocurrency market will be a market investors try to avoid amid uncertainties. Bitcoin’s fear and greed index have also reached the 25-level which has entered the extreme fear zone for the coin. Meanwhile, the U.S. federal prosecutors have begun to investigate the FTX’s collapse and the unexplained $8 billion shortfall in funds and hope this will restore the confidence of the cryptocurrency investors. 

On the technical front, BTC has once again traded below 17000 and has fallen below its uptrend support line. The MACD has also dropped below the zero line along with the RSI dropped to the 40-level signal for a bearish bias for BTC. 

Resistance level: 17859, 18690

Support level: 17040, 15663

DJ30

The Dow dipped  as the recent upbeat US employment and services data had sparked further hawkish expectations for the Federal Reserve. Meanwhile, rising fears upon the recession continue to linger in the financial market, which stoked a shift in sentiment into other safe-haven assets while dragging down the appeal for the high risk equity market. The CBOE volatility index, which is known as Wall Street’s fear gauge, came in at 22.68, reaching its highest level since 18^th November.

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 edged higher against the dollar on Wednesday as the new government reversed most of the previous administration’s mini-budget plan. Moreover, investors also awaited crucial BoE, Fed and ECB meetings for further trading directions. However, the BoE is expected to continue pushing back against market pricing of UK interest rates, which could weigh on the pound,’’ according to the UK currency strategist. 

The pair could remain trading within 1.19 to 1.23 in the short term. The MACD line is trading on the sidelines near the zero line, showing a neutral-bullish momentum. Sideway is continued as RSI hovers around 50, suggesting the trend is to remain neutral-bullish in the short term. The direction could be trading sideways until the following rate hike announcement from the Federal Reserve. 

Resistance level：1.2343， 1.2670

Support level： 1.1936，1.1649

NAS100

Amid uncertainties and a gloomy economic outlook, the Nasdaq index has little changed with a drop of 52.3 points or 0.25%. With the treasuries yield recorded the largest negative gap between the 10-year yield and the 2-year yield since 1981, it is a warning signal that a risk of recession is around the corner. The U.S. initial jobless claims data released later today will also gauge investors’ outlook on the U.S. 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 is approaching the zero line from above, suggesting that this might be a turning point of the momentum switch. The RSI has also dropped to the 43-level, showing that a  downtrend bias is forming. 

Resistance level: 12020, 12595

Support level: 11495，10920

CL OIL

The oil prices fell to their lowest level this year on Wednesday, giving back all of its gains since Russia’s invasion of Ukraine and worsening the global energy supply crisis in decades. The oil market has been firmly declining throughout the year as worldwide growth has weakened due to increased energy costs. Oil prices received further bearish momentum following the higher-than-expected data from the U.S. fuel stocks. However, the data showed that China’s crude oil imports rose 12% in November, from a year earlier to their highest in 10 months. Besides, G7 nations implemented a price cap to restrict Russian exports that could cause that nation to reduce output in the coming year. Investors are advised to continue eyeing such developments for further trading signals. 

Oil prices have broken through the support level yesterday, trading at 72.40 as of writing. However, MACD has illustrated bearish momentum ahead, while RSI is at 31, reaching the oversold zone, indicating a bearish momentum as well.

Resistance level: 81.31, 89.82

Support level: 73.52, 64.88