Risk-on sentiment has hit the markets as investors foresee a more dovish Fed at upcoming meetings

What You Need To Know

Equities markets in Asia opened high, spurred by the risk-on sentiment in the U.S. equities markets. The CPI report released last night came in softer-than-expected, making the markets believe that the inflation has peaked with the reading decelerating for 2 months in a row. As such, the softer CPI reading also weakens the dollar with the Fed is expected to slow down its pace in rate hikes. Besides, oil prices are slightly higher due to the weaker dollar. However, higher-than-expected U.S. crude oil stockpiles and China’s pessimistic economic data will hinder oil prices to surge higher. 

Look Out For

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

75 bps (20.6%) VS 50 bps (79.4%)

Market Overview

Economic Calendar

Market Movements

DXY

The Dollar Index slumped across the board over the backdrop of downbeat inflation data from the United States region, spurring expectations that the Federal Reserve will moderate the rate hikes during their two-day meeting on Wednesday. According to the US Bureau of Labor Statistics, the US Consumer Price Index (CPI) rose modestly in November annually. It came in at 7.1%, the smallest gain since December 2021, following a 7.70% increment in October. 

The Dollar Index is trading lower following the prior breakout below the previous support level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 33, suggesting the index is going into oversold territory.  

Resistance level: 104.75, 109.05

Support level: 101.20, 97.70

XAU/USD

Gold prices surged significantly yesterday, marking a six-month high as the weakening US Dollar continues to spark demand for dollar-denominated gold. The US Dollar tumbled as the US Consumer Price Index rose by 7.1% annually, indicating the smallest inflationary growth in almost a year while much lower than the economist forecast at 7.3%.

The gold market is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 59, suggesting the commodity is entering the overbought territory.

Resistance level: 1810.00, 1870.00

Support level: 1725.00, 1675.00

EUR/USD

The CPI report came softer-than-expected, leading the market to believe that inflation has peaked. The Fed is expected to slow down its pace in rate hikes and this will harm the dollar. As such, the pair has broken through the strong resistance at 1.0604 but the momentum is not strong. Besides, the ECB rate decision that will be released tomorrow will be the key to gauging the movement for the pair. 

On the technical front, the pair has broken through the resistance level at 1.0604 after it consolidated below the level for the past 2 weeks indicates a bullish signal. The MACD has also slightly pick-up from the zero line, showing some bullish strength for the pair. On the other hand, the RSI is yet to touch the overbought zone, implying that the gain for the pair is not strong. 

Resistance level: 1.0819, 1.1052

Support level: 1.0604, 1.0355

BTC/USD

BTC has finally broken through its consolidation price range, had a gain of more than 4%, and recorded a monthly high last night. The CPI report released last night of 7.1% reading, lower than the market expectation and it is favouring the market to opt for riskier assets. The market believes that the inflation has peaked and the Fed will slow down its pace in rate hikes; this will weaken the dollar and benefit BTC to edge higher. 

On the technical front, it is a bullish signal for BTC after it broke through its sideways price range near 17050. The RSI has reached the overbought zone, depicting a strong gaining power for BTC. The MACD has also rebounded from the zero line and the gap between the MACD line and the Signal line is getting wider, suggesting a bullish signal for BTC as well. 

Resistance level: 18326, 19134

Support level: 17060, 16200

DJ30

The Dow surged, with investors bracing for an unexpectedly small consumer price index increase. US Treasury yields ended sharply lower yesterday and helped to boost rate-sensitive gauges like the US equity market to their highest intraday levels in nearly three months. Market participants now see even smaller Fed rate hikes of basis point at the Federal Reserve’s February meeting. Nonetheless, the equities market pared some gains as volatilities remain ahead of the Fed’s policy statement on Wednesday, in which the central bank is widely expected to increase their rate by only 50 basis point.

The Dow is trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 59, suggesting the index might extend its gains after it successfully breakout above the resistance level. 

Resistance level: 34390.00, 36810.00

Support level: 31370.00, 28760.00

GBP/USD

The pound hit its previous resistance level and now trading at $1.2349 against the dollar at the time of writing. The U.S. CPI data showed a below-market forecast reading, which led to a drop in the dollar, and the pound went up on Tuesday. Besides, Britain’s jobless data showed that some of the labour market’s inflationary heat is cooling as the economy stumbles, including a rise in older people looking for work. Investors could focus on the upcoming BoE’s rate hike decision, which will be released on Thursday. 

The MACD line is moving upward, indicating bullish momentum. Investors could focus on it to see whether it could stand firm on the latest support level. RSI is trading at 64, suggesting a bullish momentum ahead. 

Resistance level：1.2664， 1.3057

Support level： 1.2343，1.1950

NAS100

Nasdaq rose by (1.01%) or 113.08 points to 11,256 on Tuesday after the U.S CPI data was released. It showed a slight consumer price increase giving optimism that the Federal Reserve could soon dial back its inflation-taming interest rate hikes, leading to the index rally at the beginning. However, it flowed back due to concerns that the central bank could stay aggressive. Shares traded in Nasdaq, Moderna Inc (MRNA.O) surged 19.63% after its experimental vaccine showed promising results in a skin cancer study. Investors could focus on the Federal Reserve rate hike decision later on Wednesday for further trading signals. 

The MACD trades near the zero line, suggesting a neutral-bullish momentum ahead. The RSI is trading at 57, which also indicates a neutral-bullish momentum. 

Resistance level: 11997, 12647

Support level: 11445，10469

CL OIL

Oil prices edged higher and recorded their most significant daily gains over a month, buoyed by the weakening US Dollar following the release of downbeat inflation data from the United States. The weaker US Dollar makes the dollar-denominated oil cheaper, boosting the market demand. In addition, oil prices received further bullish momentum as the ongoing shutdown of the Canada-to-United States Keystone crude pipeline continued to spark concerns about supply disruptions. Nonetheless, the gains experienced by oil prices are still limited by bearish inventory data from API. According to American Petroleum Institution (API), US API Weekly Crude Oil Stock increased significantly from the previous reading of -6.426M to 7.819M, higher than the market expectation of -3.913M

Crude oil prices are trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 41, suggesting the commodity might receive some bullish momentum as the RSI rebounded sharply from the oversold territory.  

Resistance level: 76.55, 84.40

Support level: 66.40, 56.65