What You Need To Know

Before the Fed’s chair Jerome Powell gave his speech later today, some of the Fed officials released relatively Hawkish statements and poured cold water on the stock market. Early gains in the U.S. stock markets have been wiped off after the Fed’s officials commented that the rate would rise to over 5% by the early second quarter of this year. Investors are optimistic over China’s economy after it pivoted from its Covid zero policy; China and Hong kong market indices have remained bullish since China imposed its economy growth focus policy. In addition, China ended its ban on Australian coal imports, which may have spurred the Aussie dollar. 

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, which trades its value against the basket of six major currencies slumped to a seven-month low as investors speculated that the recent pessimistic economic data would prompt the US central bank to slow down its aggressive rate hike path. Meanwhile, global risk appetite surged following China announcing to reopen its border, riskier currencies such as Pound Sterling and Euro had benefited from such sentiment. According to CME FedWatch Tool, the majority of the investors believe that the Federal Reserve will only increase their interest rates by 25 basis-point, instead of previous expectations of 50 basis points as the inflation and economic growth cool.

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 price retreated from its multi-day high as several investors decided to profit-taking from the gold ahead of crucial catalysts from the market. Moving on, investors should continue to observe Tuesday’s speech from Fed Chair Jerome Powell and Thursday’s United States Consumer Price Index (CPI) for December to make speculation for the US central bank’s future monetary decisions.

Gold prices are trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 62, suggesting the commodity is entering the overbought territory.   

Resistance level: 1870.00, 1915.00

Support level: 1820.00, 1770.00

EUR/USD

Although the NFP reading was higher than estimated, the growth rate is diminishing which allows the market to believe that the Fed may be more dovish in a rate hike, not to mention that the wage growth rate has dropped. The Euro has taken advantage of a weaker dollar to surge to its near resistance level. Jerome Powell, the Fed’s chair, will give his speech later today and his address may impact the dollar index and gradually increase the pair’s volatility. Besides, investors may also gauge the U.S. CPI index, which will be released on Thursday, to speculate Fed’s next moves.  

The Euro continued to be bullish and is trading near its resistance level after the NFP report was released. The bullish signal for the pair could be strong if it can break and trade above its resistance level. The RSI has surged to the overbought zone but it couldn’t stay in the zone suggesting that the buying power has eased. The MACD shows a promising bullish signal where it has been moving upward above the zero line in a broader gap in between. 

Resistance level: 1.0743, 1.0988

Support level: 1.0495, 1.0277

BTC/USD

The sentiment in the cryptocurrency market has been reviving lately and BTC has also broken through its 3 weeks price consolidation range. A weaker dollar strength and a fall in the supply of BTC bolstered BTC price. Hive Blockchain, a Canadian bitcoin miner listed company, has been cutting its power use due to higher costs and its production was down about 20% or 50 BTC month to month. Besides, the Fed’s chair is going to give a speech later today, a relatively dovish statement from the Fed may boost BTC price further with a weaker dollar. 

For technical discussion, BTC remains positive if it is able to stay above its psychological resistance level at 17000. The RSI has moved to the overbought zone but cannot stay for long, suggesting the buying power has eased slightly. The MACD obscurely moving in an uptrend manner depicts that bullish momentum is slowly building. 

Resistance level: 17746, 18465

Support level: 15843, 14975

DJ30

The Dow is trading flat amid mixed market sentiment from the US market yesterday. On a positive note, expectations of aggressive rate hikes from the Federal Reserve faded following the recent economic data indicating pessimistic figures. US treasury yields retreated while underpinning the US equity market. According to the CME FedWatch Tool, market participants are now speculating on a 77% probability of a 25-basis point rate hike in the Fed’s February policy meeting, compared to the previous expectation of 50 basis points. However, the gains experienced by the Dow are capped by global recession risks. With the uncertainty ahead, several investors decide to shift their portfolio into other safe-haven commodities such as gold to hedge against market volatilities.

The Dow is trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 56, 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 rose 0.28% to $1.2167  against a broadly weak dollar on Monday ahead of an announcement from the BoE. The weakened dollar drives the pair’s upward due to mixed economic data released last Friday. Furthermore, BoE’s chief economist Pill said that Britain is at risk of persistent inflationary pressure from a tight labour market, even if natural gas prices stabilise or fall, indicating further rate raise may be needed. as for now, markets forecasting the BoE rate peaking at 4.5% in June, while economist predicted a pear of 4.25% in the second quarter of 2023. Moreover, inflation has fallen slightly from a 41-year peak of 11.1% in October, and Britain’s economy appears to be entering a shallow recession. Therefore, investors could keep an eye on BoE’s next move on the monetary policy for further trading signals. 

As we can see that the MACD line is crossing up broadly, indicating a bullish momentum ahead. While RSI is trading at 62, 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 retreats on Tuesday morning trade, as comments from the Fed officials implied that China’s reopening might have pushed commodities higher. Therefore, the index slightly retraces as investors are cautious ahead of key inflation data. Investors are suggested to focus on upcoming inflation data from China for further trading signals. 

HK50 is still staying on the psychological resistance level above 20,000, suggesting that the overall sentiment remains strong. MACD has illustrated increasing bullish momentum. However, RSI is at 75, indicating the index has already entered into overbought territory and might have a slight retracement for days.

 Resistance level: 22520, 22885

Support level: 20000, 18838

CL OIL

Oil prices began the week with significant bullish momentum following China reopening its border, spurring optimism that the country was recovering from its previous Covid-related self-isolation. In addition, China issued a substantial increase in its crude import’s quotas for this year, signalling a surge in demand for the oil. According to Reuters, China raised the total crude oil import quotas for this year by 20%, compared to the same time last year. However, despite China’s reopening continues to be the main bullish catalyst for oil, fears of recession act as the major headwinds for the oil traders.

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