Oil prices plunge as EU sanctions and the G7 price cap on Russian oil take effect

What You Need To Know

The EU and G7 sanctions on Russian oil products kick in with a $60 per barrel price cap. Meanwhile, OPEC+ has agreed to maintain oil production at its current level as oil prices plunged by more than 6% last night. U.S. market closed lower due to a stronger-than-expected service PMI report and investors’ concern over whether the Fed will prolong its rate hike program, causing the dollar to edge higher. Meanwhile, the Reserve Bank of Australia is expected to increase another 25 bps today and the market is still determining if the officials will end the monetary tightening cycle as the nation still needs to meet its targeted inflation rate. 

Look Out For

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

75 bps (23%) VS 50 bps (77%)

Market Overview

Economic Calendar

Market Movements

DXY

The Dollar Index edged higher on Monday as better-than-expected economic data from the services sector prompted investors to reassess whether the Federal Reserve could increase its interest rate more extensively. The data published by the Institute for Supply Management showed on Monday that the US ISM Non-Manufacturing Purchasing Managers Index (PMI) printed 56.5 in November, which came in better than the market expectations of 53.3 and indicated that the US economy stayed resilient amidst an aggressive tightening cycle by the Federal Reserve. 

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

Resistance level: 107.95, 110.25

Support level: 104.95, 101.50

XAU/USD

After upbeat US service sector data spurred concerns that the Federal Reserve could continue its aggressive rate hike path, the gold market retreated from its crucial resistance level. According to the Institute for Supply Management, US services industry activity unexpectedly improved in November, combined with a resilient job market in the US offering more speculations over the rate hike decision from the Fed. The US Dollar rebounded yesterday, which continues to weigh on the demand for dollar-denominated gold.

The gold market is trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bullish momentum, while RSI is at 58, indicating the product will probably extend its losses as RSI retreated sharply from the overbought territory. 

Resistance level: 1810.00, 1875.00

Support level: 1730.00, 1680.00

EUR/USD

The strong US Dollar, buoyed by upbeat US Non-ISM Manufacturing data, has continued to pressure other regional currencies on a relative basis; EUR/USD seems to have gone into a consolidation phase. On the monetary policy front, Governing council member Gabriel Makhlouf claimed that the European Central Bank will likely increase their interest by 50 basis points (bps) by next week amid ongoing inflationary concerns. With policymakers due to discuss the monetary decision from the European Central Bank next week, market participants are advised to continue monitoring further developments to gauge the likelihood trend for the Euro. 

The pair is trading higher while currently testing the resistance level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 64, suggesting the pair is entering overbought territory.

Resistance level: 1.0515, 1.0735

Support level: 1.0290, 1.0010

BTC/USD

With the aftermath of the collapse of FTX fading away, BTC has picked up and traded above its near resistance at 17040. However, the latest U.S. service PMI report showed a better-than-expected result last night and is worrying the market as this will lead to high inflation. The DXY index edged higher the previous night as the market speculated that the Fed might prolong its rate hikes program and this will put pressure on BTC. 

BTC’s bullish momentum is weak after breaking through its near resistance at 17040. However, BTC is still trading on its uptrend support line and if the crypto is able to stay above 16850, it is still a bullish bias for the crypto. The MACD and the RSI showed that the bullish momentum has vanished as the MACD flows flat above the zero line and the RSI has fallen to the 51-level as of writing. 

Resistance level: 17859, 18690

Support level: 17040, 15663

DJ30

The Dow edged lower as investors continued to digest the better-than-expected data from the services sector in the United States while re-evaluating the monetary policy decision from the Federal Reserve. According to the Institute for Supply Management, US ISM Non-Manufacturing Purchasing Managers Index (PMI) recorded 56.5 in November, exceeding the market forecast of 53.3. US Treasury yields rose significantly following the release of positive data. The 10-year Treasury yield was increased by 9 basis points to 3.589% as of writing.

The Dow is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 52, suggesting the Dow will likely extend its losses as the RSI retreats sharply from the overbought territory. 

Resistance level: 34390, 36810

Support level:  31370, 28760

GBP/USD

The pound dropped on Monday as the dollar strengthened after positive U.S. ISM data was released. The pair fell 1.3% against the dollar at $1.2198 at the press time. Moreover, the pound rose by 5.2% in November, its most robust one-month performance since 2020. Still, it could struggle to make much movement as an illustratively gloomy economic picture in Britain and a tricky political issue. In addition, Britain’s services sector data shrank slightly for a second month in November, as cost-of-living pressures and uncertainty about the economic outlook squeezed demand. 

The MACD line is crossing downward, showing a bearish momentum. As mentioned yesterday, it might have a slight retracement when the RSI hits the overbought territory, suggesting the trend is changing to a neutral bearish momentum in the short term.

Resistance level：1.2302， 1.2654

Support level： 1.1950，1.1627

NAS100

The index has been trading sideways since September and has remained trading in a bearish channel. The better-than-expected U.S. service PMI data has worsened the situation as investors worry that this will lead to higher inflation. If the Fed imposed a higher interest rate, this will not be friendly for the equities market, and tighter monetary policies will suppress the Nasdaq. 

The MACD has been hovering near the zero line depicts that there is lack of momentum for the index to surge higher. The RSI has fallen to the 52-level from above and shown that there is lack of buying power for the index.  

Resistance level: 12020, 12595

Support level: 11495，10920

CL OIL

Oil prices dropped over 3% on Monday after U.S. service sector data raised worries that the Federal Reserve could continue its aggressive policy tightening path. Brent crude futures dropped $2.89, or 3.4%, to $82.68 a barrel. At the same time, WTI fell $3.05, or 3.8%, to $76.93 a barrel. Both benchmarks had earlier risen more than $2 before reversing direction. U.S. services industry activity unexpectedly picked up in November, with employment rebounding, offering more evidence of underlying momentum in the economy as it braces for an anticipated recession next year. The news caused oil and stock markets to take back their gains.

Crude oil prices have been quite volatile in recent trends. However, MACD has illustrated diminishing bullish momentum, while RSI is at 39, indicating a bearish momentum ahead. 

Resistance level: 83.10, 91.90

Support level: 76.00, 69.90