More unrest on the Russia-Ukraine front has buoyed oil prices that have been weighed down by a build in US oil inventories

What You Need To Know

The tension between Russia and Ukraine has intensified with Russia launching the largest aerial attack targeting Ukraine’s energy infrastructure. Geopolitical uncertainty, especially involving Russia, one of the largest crude oil exporters, might push oil prices higher. On the other hand, U.S. crude oil inventories reported a surprise build in inventories that imply oil demand has decreased. Oil prices are also suppressed by the worries that China opening up its border might elevate some of the top oil-importer countries’ pandemic cases and economic activities might slow down if pandemic measures are once again imposed. 

Look Out For

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

25 bps (71.3%) VS 50 bps (28.7%)

Market Overview

Economic Calendar

Market Movements

DXY

The U.S. Dollar slipped 0.51%  on Thursday, with optimism over China’s reopening fizzling out, and a rise in U.S. jobless claims reading. Markets are weighing the impact of China’s rapid loosening of its COVID restriction with a surge in new infections. On the other hand, the dollar slipped as the market reacted to the in-line estimates reading of U.S. jobless claims data, which rose by 9,000 to a seasonally adjusted 225,000 for the week. But it remains at levels indicating the U.S. job market remains tight.

The Dollar Index is trading flat as the market is usually silent at the year’s end. The MACD remains flat, indicating low-volume trading. Investors could wait for more economic data for further trading signals. While RSI is trading at 42, indicating a neutral-bearish momentum in the short term. 

Resistance level: 105.05, 108.35

Support level: 101.30, 99.05

XAU/USD

Gold prices rose by 0.51% against the weakened dollar to $1814 on Thursday. Markets are worried about the war in Ukraine and weighing the impact on China’s reopening. Investors might tend to escape from the global risk by shifting their direction into the gold market. 

Gold prices were trading higher against the dollar yesterday. MACD is trading above the zero line, indicating that the pair remain bullish in the short term. While RSI is trading at 59, indicating a bullish moment as well. 

Resistance level: 1820.00, 1870.00

Support level: 1770.00, 1730.00

EUR/USD

The pair has continued to trade sideways and in the price range between 1.0578 to 1.0740 for the past 2 weeks. The pair’s volatility is extremely minimal and since the New Year celebration is around the corner, the trading volume is also expected to be thin. The U.S. dollar index has dropped slightly and is traded below 104. The U.S. initial jobless claims for unemployment benefits rose by 9000 to 225000 in the previous week, suggesting that the labour market has loosened slightly. Investors may gauge the employment data in the country to speculate on the Fed’s next monetary policy moves. A slowdown in the labour market may ease the inflation rate and gradually slow down the Fed rate hike pace.  

As of now, market participants are on holiday; the pair has been consolidating with a low trading volume. The RSI has spiked slightly to the 63-level but is still hovering within a range indicating a neutral signal for the pair. Meanwhile, the MACD stays flat and close to the zero line, indicating that the pair’s movement is minimum. 

Resistance level: 1.0743, 1.0988

Support level: 1.0495, 1.0277

BTC/USD

BTC has stayed extremely sideways and is consolidating in the price range between 16206 to 17030 for the past 2 trading weeks. Entering the festive season when the market enjoys the Christmas and New Year holiday will see the trading volume be very thin and the minimum price fluctuation. The dollar index dropped slightly as it reacted toward an increase in U.S. initial jobless claims which eased the bearish momentum of BTC. A cooling labour market may ease the inflation rate in the country and slow the Fed’s rate hike pace. However, geopolitical uncertainty in the Eurozone may deter investors from investing in riskier assets including cryptocurrency. 

Following the low trading volume during the year-end holiday season, the pair’s movement remains low fluctuation. The RSI indicates that the selling power for BTC is easing as it rebounded from the near oversold zone to the 40-level as of writing. The MACD failed to break through the zero line from below suggesting that the bullish momentum is not strong.

Resistance level: 17640, 18397

Support level: 16166, 15448

DJ30

The Dow rose by 1.05% or 345.09 points to 33220 on Thursday. It led by growth stocks in thin trading, as U.S. unemployment data signalled the Federal Reserve’s interest rate hikes might be starting to soothe labour market strength in its bid to fight inflation. However, investor preference for high-dividend yielding stocks with steady earnings has limited losses in the Dow Jones Industrial Average (.DJI), which is down just 8.5% for the year. 

The Dow is trading from 32600 to 34200 in the short term. However, MACD has illustrated a bearish momentum. While RSI is trading at 49, the index might remain in the sideways trend over the year’s end. 

Resistance level: 34109, 35320

Support level: 32620, 31165

GBP/USD

The pound has been almost trading flat for a few days. It is due to a lack of data or news at the end of the year. The trading volume is still low as investors are ahead of the new year holiday. Investors could keep an eye on upcoming data next year for further trading signals. 

The pound is hovering within a narrower range. The MACD trades below the zero line, indicating a neutral-bearish momentum. While RSI is trading at 48, it hovers around the middle line for a few days, indicating neutral-bearish momentum. 

Resistance level: 1.2345, 1.2670

Support level: 1.1935,1.1650

USD/JPY

The pair dropped by 0.33% and is traded below 133. The dollar index has extended its loss as it reacted to the increase in U.S. initial jobless claims. The unemployment benefits claim sees an increase of 9000 to 225000 suggesting that the labour market could be softer. Investors gauge that a cooling labour market might ease the inflation in the country and speculate that the Fed might slow down its rate hike pace. In addition, the BoJ Governor who initiated the ultra-loose monetary stimulus program is expected to step down in April next year; it is still being determined that such aggressive monetary policy will still be implemented after a new Governor takes charge. 

USD/JPY dropped by 1.3% from yesterday’s peak and is trading at below 133 as of writing. The RSI has fallen from the 64-level to the 38-level suggesting that the selling power has surpassed the buying power. The MACD also indicates that the pair lacks bullish momentum as it is not able to stay above the zero line and start dropping. 

Resistance level: 134.97, 137.67

Support level: 131.61, 129.99

CL OIL

Oil prices went sideways over the night with several factors affecting the oil demand and supplies. The Russians launched the largest air-strike by far to Ukraine has intensified the geopolitical issue. Geopolitical tensions will push the oil price higher not to mention that Russia is one of the largest crude oil exported in the world. However, investors worried that China opening up its border and issuing visas for its citizens to travel might cause pandemic cases, especially in top oil-importing countries. In addition, the U.S. crude oil inventories have a surprise built up which in contrast with the forecasted a drop in inventories, suggesting that the demand for crude oil in the country has slowed down and oil prices will be at ease. 

Crude oil prices are trading lower while currently testing the support level. MACD has illustrated increasing bearish momentum as it flows toward the zero line, while RSI is at 50, suggesting the commodity might extend its losses after it successfully breakout below the support level as the RSI retreats sharply from the overbought territory.  

Resistance level: 81.55, 86.15 

Support level: 77.45, 73.70