What You Need to Know

Oil prices advanced to near $80 as China further eases its Covid-restrictions while the coldest Christmas in decades in the region has also pushed  energy demand higher. In East Asia, there is tension between North Korea and its neighbouring countries as the communist government fired more test missiles – an uneasy geopolitical climate will see demand for safe-haven assets such as gold and oil to surge higher. Meanwhile, Japan’s jobless rate fell to 2.5% in November, indicating an intensifying labour shortage and wage growth in the country. A relentless job market and a robust economy will lead the market to believe that the BoJ might drop its long-time ultra-loose monetary policy in 2023 to meet the targeted inflation rate of 2%. 

Look Out For

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

25 bps (63.4%) VS 50 bps (36.6%)

Market Movements

DXY

Global risk appetite surged as positive sentiment from China’s rollback of Covid-19 restrictions and easing key inflation figures in the United States stoked a shift in sentiment toward other riskier assets while dragging down the appeal for the safe-haven Dollar. Beijing and Shanghai commuters crowded subway trains following China’s two biggest cities edged closer to living with the disease despite the spiking Covid-19 cases in China. The virus has spread significantly across the country, but no new Covid-19 deaths have been reported for the six days.

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 38, suggesting the index might trade lower in short-term as the RSI stayed below the midline.

Resistance level: 105.05, 108.35

Support level: 101.30, 99.05

XAU/USD

Pessimistic economic data from the United States have recently boosted market demand for dollar-denominated gold. However, due to the lack of major economic data during the rest of the week due to the holiday season, the overall trend for gold is likely to continue to trade within a certain range. Investors will continue to monitor the development surrounding the Russia-Ukraine war and China’s Covid-19 development for further trading signals.

Gold prices are trading higher following the prior rebound from the support level. The MACD has illustrated diminishing bearish momentum, while the RSI is at 52, suggesting the commodity might trade higher as the RSI stays above the midline. 

Resistance level: 1820.00, 1870.00

Support level: 1770.00, 1730.00

EUR/USD

The pair has been in the price range between 1.0578 to 1.0740 for the past week. Entering into the festive season while the world is celebrating Christmas and New year, the trading volume is minimal and the pair is less volatile. However, with the cooling inflation measure in the U.S., the equities market in the country rose slightly and the dollar strength declined. A relatively higher inflation rate in the European region and a Hawkish stance from the ECB will see the Euro appreciate against the USD if the Fed further eases its monetary policy next year. 

As for now, market participants are on holiday; the pair has been consolidating with a low trading volume. The RSI has a slight rebound from the 43-level to the 55-level but it still remains neutral. The MACD stays flat and close to the zero line, indicating that the pair’s movement is minimum. 

Resistance level: 1.0741, 1.0929

Support level: 1.0585, 1.0469

BTC/USD

BTC has stayed extremely sideways and is consolidating in the price range between 16505 to 17015 for the past 10 trading days. Entering the festive season where 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 has dropped slightly with the cooling inflation measures in the U.S. and this potentially leads to a more dovish move from the Fed next year. A lower interest rate with a weaker dollar will definitely favour BTC. 

Following the low trading volume during the year-end holiday season, the pair’s movement remains low fluctuation. The RSI has rebounded from the 33-level to 51-level suggesting a slightly bullish signal for BTC. The MACD has also rebounded and stayed closely under the zero line and there will be a bullish bias if the MACD line is able to break above the zero line. 

Resistance level: 17729, 18431

Support level: 16080, 15618

DJ30

The Dow Jones futures are trading higher amid risk appetite grew following China’s announcing it will scrap its Covid-19 quarantine rule for inbound travellers – a major step towards easing restrictions on its borders. Although the virus has spread significantly across the country, no new Covid-19 deaths have been reported for the six days, reducing concerns for the future re-implementation of the Covid-19 lockdown in China. Meanwhile, the US equity market edged higher, with investors bracing for the less hawkish tone from the Federal Reserve after the downbeat inflation data was released last Friday.

The Dow is trading within the range while currently testing the support level of 32620. However, MACD has illustrated a bearish momentum. While RSI is trading at 48, it indicates the index might remain in the sideways trend over the year’s end. 

Resistance level: 34110, 35320

Support level: 32620, 31165

GBP/USD

The pound rose 0.5% to $1.2097 against the weakened dollar on Monday. In addition, there was news of China potentially taking extraordinary measures to support growth, dragging down the appeal of the safe-haven dollar. As the dollar dropped, it led the pound to go up. Moreover, the trading volume for the pair remains low, and the market remains subdued as many countries were having their holiday season yesterday. 

The pound is trading sideways amid the holiday season with the thin trading condition. The MACD is trading on the sidelines below the zero line, indicating sideways momentum ahead. At the same time, RSI is trading at 51, which suggests the pair is also trading on the sideline. We expect the pair’s movement to stay on the sidelines within the year-end timeframe. 

Resistance level：1.2343，1.2664

Support level： 1.1936， 1.1697

USD/JPY

USD/JPY is recovering from the previous losses as a technical correction after the Bank of Japan announced a policy shift. Last week, USD/JPY slumped more than 4.80% following the Bank of Japan’s vow to widen the yield curve on long-term bonds from 0.25% to 0.50%. With most financial markets closed on Monday, trading volume remains subdued. Investors are advised to continue monitoring additional monetary decisions from the Bank of Japan (BoJ) to gauge the likelihood trend for the Japanese Yen.

USD/JPY is trading higher following the prior rebound from the support level. MACD has illustrated increasing bullish momentum, while RSI is at 37, indicating the pair might trade higher as the RSI rebound sharply from the oversold territory. 

Resistance level: 134.00, 138.25

Support level: 131.30, 126.40

CL OIL

Oil prices rose as China will ease its quarantine policy for inbound travellers in early Jan, putting the country on track to emerge from three years of self-imposed global isolation under The Covid Zero policy that battered its economy. Loosening its isolation requirement for travel within its country will likely boost its domestic tourism revenue, which dropped  26% over the week-long National Day Holiday in October compared with last year’s same period. According to the National Health Commission, inbound travellers must get a negative Covid test result within 48 hours of departure. The country has turned the coronavirus into a common respiratory disease. Besides, several largest U.S. refineries closed due to freezing weather, while output shut in Texas and North Dakota, causing a decrease in supply, and oil prices up. 

Crude oil prices are trading towards its resistance level at 81.31. MACD has illustrated a bullish momentum, while RSI is trading at 61, suggesting the commodity seems to be moving upward in the short term. 

Resistance level: 81.31, 89.87

Support level: 77.55, 73.52