Oil prices have edged higher after Russia placed a ban on price-capped exports, while North America gears up for a winter with record colds

What You Need To Know

Oil prices edged higher last night as the Russian ban on exports to buyers with an oil price cap which tighter the oil supply. Meanwhile, the extremely cold temperature in the North American region pushes energy demand higher. The equities market slumped in the U.S. and the sentiment spread to the Asian markets, worried over China’s relaxation on pandemic measures. Investors are worried that China reopening its economy will add further inflation to the global economy. In addition, millions of workers are protesting for higher wages in countries including Germany, South Korea, and the U.S. Increasing labour costs will negatively impact the economy with the worry of stagflation, where economic growth slows with high unemployment and high inflation.

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

The overall trend for the US Dollar remains subdued as investors wait for further economic data for fresh clues about future rate decisions and economic outlook in 2023. On the positive front, US Treasury yields surged yesterday as investors tried to reassess the path of interest rate hikes from the Federal Reserve. The yield on 10-year Treasuries surged by 10 basis points to the highest level since mid-November, as positive economic outlook following China easing its Covid-19 restrictions 

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 41, 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

Gold prices continued to extend their gains yesterday as the weakening US Dollar sparked market demand for the dollar-denominated commodity. Market participants are awaiting the housing and jobs data from the United States, which is due later this week to gauge the trend’s likelihood of movement.

Gold prices are trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 60, suggesting the commodity is entering into overbought territory. 

Resistance level: 1820.00, 1870.00

Support level: 1770.00, 1730.00

EUR/USD

The pair have been in the price range between 1.0578 to 1.0740 for the past week. Entering into the festive season while the world celebrates Christmas and New year, the trading volume is minimal and the pair is less volatile. Meanwhile, China’s further relaxation of pandemic measures and announced to resume issuing visas for its citizens to travel positively impact the Euros. However, there is also a worry that China reopening its market will worsen the global inflation crisis which might lead to a further increase in interest rates by central banks. 

As for now, market participants are on holiday; the pair has been consolidating with a low trading volume. The RSI has dropped slightly from the 62-level to the 53-level but it still remains neutral on the future trend. 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 16505 to 17015 for the past 11 trading days. 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. Workers unions around the globe including Germany, South Korea and the U.S. have gone on to protest for higher wages; increasing labour costs might lead to higher inflation and slower economic growth which will eventually suppress the demand for riskier assets including Cryptocurrencies.  

Following the low trading volume during the year-end holiday season, the pair’s movement remains low fluctuation. The RSI has dropped from the 54-level to the 33-level suggesting a slightly bearish signal for BTC where the selling power is higher. The MACD has rebounded but stayed closely under the zero line suggesting that the bullish momentum has vanished. 

Resistance level: 17640, 18397

Support level: 16166, 15448

DJ30

The Dow hovered near its support level on the first day of a holiday-shortened last trading week of the year as investors reassessed the path of hiking decisions from the Federal Reserve. The yield on 10-year Treasuries surged by 10 basis points to the highest level since mid-November, with market participants disgesting prospects for growth and inflation after China decided to ease its Covid-19 isolation measures. The move in bond yields has continued to put pressure on growth stocks, dragging down the appeal of the equity market.

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 dropped 0.6% to $1.2015 against the dollar on Tuesday, within a narrow trading range as the county was still on holiday. We expect that the pair’s movement will remain subdued on the following days as markets usually are silent during year-end. 

The pound remains sideways amid the holiday season with the thin trading condition. The MACD hovers below the zero line, indicating sideways-bearish momentum ahead. At the same time, RSI is trading at 38, which suggests the pair is trading sideways in the short term. 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

NASDAQ

The tech-heavy Nasdaq Index edged lower yesterday, weighed down by rising US treasury yields and a gloomy prospect for the major technology company (Tesla). Tesla Inc dipped by more than 10% yesterday following the company’s announcement to reduce their production at the Shanghai plant, sparking concerns of a drop in demand for the world’s biggest electric car market.

The Nasdaq stock index is trading lower while currently near the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 34, suggesting the index is entering oversold territory. 

Resistance level: 11480.00, 12160.00

Support level: 11480.00, 9765.00

CL OIL

Oil prices steady as China will remove its quarantine requirement for inbound travellers starting on 8th January. The country has also removed more covid travel restrictions and started issuing new passports and Hong Kong travel permits to mainland residents. Stepping into Covid endemic could help spur global economic growth and fuel price increases. Besides, President Vladimir Putin has responded to the Western price cap and announced that it bans the supply of crude oil and oil products to the countries that implement price caps starting on 1st February for five months. A significant sales disruption would impact global energy supplies as Russia is the world’s second-largest oil exporter. 

Crude oil prices are moving upward to its resistance level of 81.31. MACD has illustrated a bullish momentum, while RSI is trading at 56, suggesting the pair remain in bullish momentum. 

Resistance level: 81.31, 89.87

Support level: 77.55, 73.52