The U.S. equity markets have surged on expectations of a softer CPI reading, which will pave the way for a slower pace of rate hikes

What You Need To Know

The U.S. equities markets surged last night with S&P having its best performance in 2 weeks before the CPI report that will be released later today. October’s CPI report came softer than the market expected last month and if the CPI report for November is also softer-than-expected, this will allow the markets to believe that inflation has peaked. On the other hand, oil prices edged slightly higher amid China signalling further easing Covid restrictions in the country and pivot to growth-focus policies. Elsewhere, the disgraced co-founder of FTX, Sam Bankman-Fried, was arrested in the Bahamas as U.S. prosecutors filed a criminal indictment against him. 

Look Out For

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

75 bps (25.3%) VS 50 bps (74.7%)

Market Overview

Economic Calendar

Market Movements

DXY

The Dollar Index is trading flat ahead of several critical economic data and the FOMC meeting on Wednesday. Consumer Price Index (CPI), a measure of the price of consumer goods, will be closely monitored on Tuesday. Economists forecasted the reading would increase by 7.3% in November annually, slowing from the 7.7% increment in the previous month. A cooler-than-expected inflation reading would be spurring hopes for a less aggressive rate hike decision by the Federal Reserve, and vice versa.

The Dollar Index is trading lower while currently testing the support level. However, MACD has illustrated increasing bullish momentum, while RSI is at 38, indicating the index is going into oversold territory.

Resistance level: 109.05, 113.50

Support level: 104.75, 101.50

XAU/USD

Gold prices retraced from their crucial resistance level at $1800 as traders continued to wait for key inflation data and the FOMC decision. Rate hikes are still the primary catalyst for the gold market, which is viewed as a haven bet against a flagging economy. As market participants widely expect a 50-basis point rate hike from the Federal Reserve in December, investors will focus more on the statement from Chairman Jerome Powell after the rate decision. 

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 might trade lower as technical correction since the RSI retreated sharply from the overbought territory.  

Resistance level: 1800.00, 1870.00

Support level: 1725.00, 1675.00

EUR/USD

The most traded pair in the forex market, EUR/USD, is calm before the important interest rate decision announcement made by both countries central banks. The DXY is poised to stay near 105 before the crucial inflation report that will be released later today. The pair is expected to gain if the US CPI report for November was softer-than-expected as the Fed will slow down the pace of rate hikes next year. 

On the technical front, the pair has been poised at this level since early the month. The RSI indicated a neutral signal with no movement bias at the moment. The MACD also depicts a fall in momentum for the pair as it stays flat above the zero line in the past few trading days. If the pair is able to break through its strong resistance level at 1.0600, this will be a bullish signal for the pair. 

Resistance level: 1.0600, 1.0819

Support level: 1.0355, 1.0025

BTC/USD

BTC has been extremely sideways in December. All eyes will be on the CPI report that will be released later today and will gauge by investors to pivot to riskier asset classes. Besides, the disgraced co-founder of FTX, Sam Bankman-Fried, was arrested in Bahamas as the U.S. prosecutor has filed a criminal indictment against him for misusing client funds before the organisation collapsed. Some movement for BTC is expected if the FTX scandals come to an end and the CPI report is favourable for the cryptocurrency market. 

On the technical front, BTC has been poised in a minimal price range in December at a level near 17000. Both the RSI and the MACD have depicted a neutral signal for BTC where RSI constantly flows near the 50-level and the MACD hovers near the zero line. 

Resistance level: 17060, 18325

Support level: 16203, 15667

DJ30

The Dow surged yesterday as investors dip-buying ahead of several crucial inflation data and FOMC meeting due later this week. Energy stocks led the gains for the Dow, as oil prices rebounded following the easing of Covid-19 restrictions in China. Meanwhile, technology stocks had also shrugged off an ongoing climb in US Treasury yields as investors expected the inflation data would show some easing pressures. Nonetheless, the overall trend for the US equity market could remain vague, and investors are advised to continue scrutinising the latest updates regarding the economic reading and FOMC decision to gauge the likelihood trend for the index.

The Dow is trading higher while currently testing the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is at 55, suggesting the index will extend its gains after it successfully breakout the resistance level as the RSI stayed above the midline. 

Resistance level: 34390.00, 36810.00

Support level: 31370.00, 28760.00

GBP/USD

The pound was traded steady against the dollar on Monday as a shadowy economic growth outlook outweighed positive data for October ahead of BoE’s next policy decision, due later this week. Data released yesterday showed Britain’s economy rebounding in October, a little stronger than expected compared to September. GDP grew by 0.5% after September’s 0.6% contraction, but fears of a long-winded UK recession are still weighing on market sentiment. The overall outlook of the UK economy is increasingly difficult, as CPI is still rising, tax hikes and spending cuts are coming next April, and interest rate/mortgage rates are rising. 

The MACD line crosses upward at a slow pace, showing a neutral-bullish momentum. Investors could keep an eye on the next resistance level at $1.2343 as the pair is still hovering flat. RSI hovers around 54, suggesting the trend is to remain neutral-bullish in the short term. 

Resistance level：1.2343， 1.2670

Support level： 1.1936，1.1649

NAS100

Nasdaq rose by (1.26%) or 139.12 points to 11,143 on Monday, lifted by the gains from Microsoft and Pfizer. Microsoft (MSFT.O) rose 2.89% following the tech giant’s deal to buy a 4% stake in the London Stock Exchange Group (LSEG.L), helping to boost each of the three major indexes. Investors are ready for inflation data, which will be released later on Tuesday, and a monetary policy announcement from the Fed on coming Wednesday. Investors could monitor closely for consumer inflation data on Tuesday, and it is expected to show prices increased by 7.3% in November on an annual basis, 7.7% on a monthly basis. 

The MACD is moving down to the zero line, suggesting a neutral-bearish momentum ahead. The RSI is trading at 52, which also indicates a neutral-bearish momentum. 

Resistance level: 11997, 12647

Support level: 11445，10469

CL OIL

As most of the technical charts have indicated that oil prices are currently in the oversold situation, the asset began to rebound as technical correction ahead of several data. Besides that, oil prices edged higher amid heightened fears of supply disruption following a critical pipeline supplying the United States closed. According to Reuters, TC Energy shut the pipeline after the spill was discovered late last Wednesday in Kansas. The company reiterated that they have not yet determined the cause or timeline for a restart. Nevertheless, the overall long-term trend for this black commodity remains bearish amid the worsening global economic outlook that still weighs on oil demand.

Crude oil prices are trading lower following the prior breakout below the previous support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 36, indicating the commodity might trade higher as RSI rebounded sharply from the oversold territory.

Resistance level: 76.55, 84.40

Support level: 66.05, 56.65