What You Need To Know

Stock markets in the U.S. and major Asian economies edged higher as investors are optimistic over the U.S. CPI index and the initial jobless claims. The dollar index continues to trade at its lowest range in 6 months with the hope that the CPI index will prove that the consumer price growth rate in the U.S. has peaked. On the other side, higher-than-expected inflation and retail sales data in Australia led the market to bet the Australia Reserved Bank may increase its benchmark interest rate further which may have spurred the Aussie dollar. Elsewhere, the World Bank slashed the economic growth forecast of 2023 to the lowest in 20 years outside the 2009 and 2020 economic recession; the gloomy economic outlook may suppress oil prices.  

Look Out For

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

25 bps (79.2%) VS 50 bps (20.8%) 

Market Overview

Economic Calendar

Market Movements

DXY

The Dollar Index was traded flat, hovering at its weakest level in seven months as investors trade cautiously ahead of crucial inflation data, which is due later this week to gauge the likelihood of interest rates expectations from the Federal Reserve. The US Bureau of Labour Statistics will release the US CPI data for December. Investors are advised to continue monitoring the December inflation numbers after witnessing a cooling down in November. On the other hand, US Federal Reserve Chair Jerome Powell claimed that the Fed’s independence is essential to battle inflation. At the same time, they will continue to use monetary tools to achieve the goals of maximum employment and price stability.

The Dollar Index is trading lower following the prior breakout below the previous support level. MACD has illustrated diminishing bullish momentum, while RSI is at 39, suggesting the index might extend its losses as the RSI stays below the midline.

Resistance level: 105.20, 108.35

Support level: 101.30, 99.05

XAU/USD

Gold prices traded flat near the eight-month high as a growing number of speculations on dovish stances from the Federal Reserve continue to spur significant selloff for the US Dollar, underpinning the dollar-denominated gold. Investors are increasingly speculating on a 25-basis-point increase at the Fed’s first two meetings of 2023 instead of the earlier expectations of 50 basis points. As for now, investors will continue to scrutinise the latest updates regarding the CPI figures for further trading signals.

Gold prices are trading flat while currently testing the support level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 65, suggesting the commodity is entering the overbought territory.   

Resistance level: 1915.00, 1980.00

Support level: 1870.00, 1820.00

EUR/USD

The Euro continues to trade close to its resistance at 1.0743 against the U.S. dollar. At least before the U.S. CPI data is released on Thursday this week, the dollar index is yet to get out of its bearish trap. Regardless of the data, investors are convinced that the inflation rate in the U.S. has peaked and believe that the Fed may be lenient in upcoming rate hikes. If the CPI data came in a cooler reading than the market forecast, the Euro might advance further with a weak dollar.

The Euro continued to be bullish and is trading near its resistance level before the crucial U.S. CPI data was released. The bullish signal for the pair could be strong if it can break and trade above its resistance level. The RSI has fallen from the overbought zone but it remained above the 60-level suggesting that the buying power is still intact. The MACD turned flat after it broke above the zero line depicting that the bullish momentum has eased. 

Resistance level: 1.0743, 1.0988

Support level: 1.0495, 1.0277

BTC/USD

BTC prices are gradually increasing above its psychological support level at 17000. Data showed that big investors who hold BTC between 1000 to 10000 units have been picking up the pace to accumulate more bitcoin over the week. The willingness to buy more bitcoin at this level implies that big players in the crypto market believe that BTC prices have hit its bottom. Notwithstanding the fact mentioned earlier, trading in the cryptocurrency market has to consider various factors such as global economic conditions, Central Banks’ monetary policies and such. A gloomy economic outlook may deter investors from trading in riskier assets such as cryptocurrency. 

For technical discussion, BTC prices seem positive as it is steadily increasing after breaking its psychological resistance level at 17000. The RSI has been flowing in between the overbought zone suggesting that the buying power is still intact. The MACD also shows that the bullish momentum is building but in a slower manner. 

Resistance level: 17746, 18465

Support level: 15843, 14975

DJ30

The Dow edged higher yesterday ahead of crucial inflation data, which due later this week. Investors are now anxiously waiting for the US Consumer Price Index report Thursday, which is expected to show some easing inflation signs in December, according to economist forecasts. The overall interest rate expectations are mostly data-dependent. The pessimistic economic outlook after the release of downbeat economic data had sparked expectations of dovish stances in future, increasing the appeal for the US equity market. Investors are increasingly speculating on a 25-basis-point increase at the Fed’s first two meetings of 2023 instead of the earlier expectations of 50 basis points.

The Dow is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish 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 dropped 0.33% to $1.2152 against the dollar on Tuesday as downbeat comments from the BoE reminded investors that inflation remains high even as domestic energy prices retreat. According to the spending data, the in-store chains rose by 6.9% in annual terms in December, but this was a long way off consumer price inflation, which hit 10.7% in November. Moreover, the pound has recovered nearly 20% against the dollar since September, but it remains 10% below where it was last year. As the weakened dollar mostly drives the pair’s apparent strength. Investors are suggested to focus on upcoming UK inflation data for further trading signals. 

As we can see, the pair still hovers within the range in the short term. The MACD line remains above zero line, indicating a bullish momentum ahead. While RSI is trading at 58, indicating the pair remains in bullish momentum.

Resistance level: 1.2345, 1.2670

Support level: 1.1935, 1.1650

HK50

The Hong Kong stock market remains strong in the early trade on Wednesday, as China’s reopening from the pandemic controls has boosted investor sentiment. Therefore, the index opened 0.6% higher at the start of the day. But some investors still would take profits on doubts over the sustainability of the market’s rebound. Investors are suggested to look at the property and tech sectors as these are the hottest sectors that markets trade on currently. 

HK50 successfully stayed above the resistance level of 21,000, suggesting that the overall sentiment remains strong. MACD has illustrated increasing bullish momentum. However, RSI is at 79, 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 edged higher yesterday, with investors bracing for the optimistic demand outlook for this black commodity after China decided to reopen its economic activity and the depreciation of the US Dollar continued to underpin the dollar-denominated oil. According to the US Short-term Energy Outlook, global petroleum consumption will reach 102.2 million barrels per day in 2024, driven primarily by growth in countries such as India and China.

Crude oil prices are trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 45, suggesting the commodity might trade lower as the RSI stays below the midline.  

Resistance level: 77.10, 81.55

Support level: 73.25, 70.20