What You Need to Know

Global equities slumped after hawkish signals from central banks in the European region and the U.S. a double-digit inflation rate in the region, including the U.K., urged central banks to be more aggressive in rate hikes and risking economic recession as a consequence. ECB officials reiterated that there is no chance for the ECB to pivot from its current monetary policies approach. Meanwhile, Russia’s oil flow to Asia seems to be disrupted by the E.U. sanction as they struggle to secure tankers for cargo after the E.U. imposed a price cap for Russian Oil. Elsewhere, Binance, the largest crypto trading platform, saw large withdrawals from customers as a sign that the investors’ confidence in the crypto sector is wobbly. 

Look Out For

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

25 bps (72%) VS 50 bps (18%)

Market Overview

Economic Calendar

Market Movements

DXY

The Dollar Index, which trades against the basket of six major currencies, rebounded yesterday as the heightened risk of recession following the major central banks’ announced their restrictive monetary policy to stabilise the inflation rate. Recently, the European Central Bank and the Bank of England, along with the Federal Reserve, had raised their key interest rate for the fourth time in a row while pledging further rate hikes as part of its fight against spiking inflation rate. With massive uncertainty ahead, risk appetite had started to diminish while stoking a shift in sentiment toward safe-haven assets such as the U.S. Dollar.

The Dollar Index is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 39, indicating the index is going into oversold territory.   

 Resistance level: 105.70, 109.05

Support level: 101.20, 97.70

XAU/USD

Gold prices tumbled on Friday following several major central banks increasing their interest rates. Rising interest rates from the global central bank pushed up the opportunity cost of holding non-yielding assets, prompting the government bond to overtake gold as the market’s favoured haven, despite growing fears of a U.S. recession.

The gold market is lower following prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 54, indicating the commodity to extend its losses as RSI retreated sharply from the overbought territory.  

Resistance level: 1810.00, 1870.00

Support level: 1725.00, 1675.00

EUR/USD

After the Fed announced an increase of mere 50 bps of a rate hike on Wednesday, the ECB also went for the same increment of a rate hike and raised its deposit rate to 2%. The pair stayed sideways on top after the announcement as both Central Banks signaled a more hawkish monetary policy move next year, which offset the news. The inflation situation is far worse in the EU region as compared to the U.S. with double-digit inflation rates. The ECB stressed that they would not pivot from its current monetary policy approach to tame inflation and put economic recession at risk. 

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. It is still a bullish bias if the pair is able to stay above the level. However, the RSI showed that the gaining power has diminished as it dropped to 56-level as of writing. The MACD has also been flat above the zero line, suggesting that the bullish momentum is not strong. 

Resistance level: 1.0819, 1.1052

Support level: 1.0604, 1.0355

BTC/USD

The dollar has strengthened slightly after a more hawkish signal from the Fed as previously, the market expected a more dovish move from the U.S. central bank. The investors’ risk appetite quickly wiped off after the ECB has also signalled a hawkish approach to monetary policies as inflation in the region is extremely high. Binance, the largest crypto trading platform, has also seen a massive withdrawal from customers as a sign of a lack of confidence from investors in the crypto market. 

On the technical front, the bullish momentum has eased after BTC hit its monthly high at 18366. The RSI is not able to stay above the overbought zone for long and has dropped to 48-level as of writing. The MACD line has also crossed with the signal line suggesting the bullish momentum is diminishing. However, if BTC is able to stay above 17100, the bullish momentum is still intact. 

Resistance level: 18326, 19134

Support level: 17060, 16200

DJ30

The Dow dipped by more than 700 points, suffering its biggest daily slump in weeks, with investors bracing for restrictive monetary policy from several major central banks yesterday. The Fed’s target inflation is only 2% over a year. Nonetheless, the inflation rate, measured by the Consumer Price Index (CPI), still grew by 7.10% in the year to November, indicating the restrictive monetary policy will continue to persist on a long-term basis while dragging down the appeal for the equity market.

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

Resistance level: 34390.00, 36810.00

Support level: 31370.00, 28760.00

GBP/USD

The pound dropped nearly 2% against the dollar to $1.2216 on Thursday as the BoE raised the interest rate by 50 basis points. In contrast, investors expect that the central bank might get close to the end of its interest rate hike, but in fact, it indicated more hikes were likely to happen in future. In addition, the labour market data showed evidence of inflationary pressures in domestic prices and wages that could indicate a further forceful monetary policy response, and investors fear recession risk.

As we can see, the trend for the pair is turning down after the BoE’s announcement yesterday. The MACD line crosses downward to the zero line, indicating bearish momentum ahead. At the same time, RSI slumps from 69 to 39, suggesting a bearish momentum ahead. 

Resistance level：1.2343，1.2664

Support level： 1.1950， 1.1627

NAS100

Nasdaq slumped by (-3.23%) or -360.36 points to 10,810 on Thursday as the Federal Reserve heightened recession fear. Most of the major stocks suffered their biggest daily drop in weeks, as market fears about the Federal Reserve’s battle against inflation using aggressive rate hikes, which could lead to a recession. As the Fed projected, the rate hike path would continue to be above 5% in 2023, a level not seen since the economic downturn. 

The overall market sentiment remained pessimistic as most U.S. economic data showed a steeper-than-expected reading. The MACD is moving down to the zero line, suggesting a neutral-bearish momentum ahead. The RSI is slipping from 52 to 38, indicating a neutral-bearish momentum. 

Resistance level: 11997, 12647

Support level: 11445, 10469 

CL OIL

Oil prices retreated on Thursday as the Keystone pipe reopened from closure. Meanwhile, the appeal of risky assets such as equity and the oil market came under new selling pressure following several major central banks announcing to continue their restrictive monetary policy. According to Reuters, T.C. Energy Corp has restarted a section of the main trunk of its Keystone pipeline from Hardisty, Alta, to the U.S. Midwest, as well as a branch extending eastward to Illinois.

Crude oil prices are trading flat while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 57, suggesting the commodity might trade lower as the RSI retreated sharply from the overbought territory.   

Resistance level: 77.50, 83.00

Support level: 70.95, 65.70