. These data might urge the Fed to keep hiking interest rates in fear of higher inflation with such a robust economy, the dollar edge slightly higher after the data release.

What You Need to Know

U.S. economic growth in the 3rd quarter was stronger-than-expected; U.S. GDP increased by 3.2%, higher than the previously estimated at 2.9%. On the other hand, initial jobless claims rose less than forecasted, suggesting that the labour market continues to flourish. These data might urge the Fed to keep hiking interest rates in fear of higher inflation with such a robust economy, the dollar edge slightly higher after the data release. The same case goes for Japan, with a key inflation gauge accelerating, leading the market to speculate BoJ will surprise the market again with tighter monetary policy. 

Look Out For

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

25 bps (72%) VS 50 bps (18%)

Market Movements

DXY

The US Dollar surged yesterday after the United States released a string of upbeat economic data. According to the Department of Labour, the number of Americans filing for unemployment benefits came in less than economists expected, with a reading of 216K compared with the market expectations of 222K. Meanwhile, US economic growth in the third quarter also showed some optimistic reading, reflecting upward revisions to consumer spending and business investment. According to the Commerce Department data, inflation-adjusted gross domestic product (GDP) increased by a 3.2% annualised rate, exceeding the market expectation of 2.9%. 

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 extend its losses as the RSI stays below the midline.  

Resistance level: 105.05, 108.35

Support level: 101.30, 99.05

XAU/USD

Gold prices retreated from their multi-month high of $1820 amid the strengthening US Dollar. The recent upbeat GDP and Initial Jobless Claims figures from the United States had continued to spark market demand for the US Dollar, with investors bracing for a hawkish tone from the Federal Reserve. As for now, investors are waiting for the Core PCE Price Index from the United States, one of the crucial inflation indicators, which will be released at 15:30 (GMT+2) on Friday, 23rd December 2022.

The gold market is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 40, indicating the commodity might trade lower as the RSI stays below the midline.

Resistance level: 1820.00, 1870.00

Support level: 1770.00, 1730.00

EUR/USD

In the past trading week, the pair has been consolidating in a price range between 1.0580 to 1.0740. The dollar index gained slightly last night after U.S. economic data was released. The U.S. GDP came stronger than expected with a reading at 3.2% higher than forecasted. Meanwhile, the initial jobless claims are less than forecast, suggesting that the labour market’s demand is still high. The data reflect that the economy of the U.S. is still robust and might lead to a higher inflation rate. As such, the market speculates that there is a high chance that the Fed will continue its Hawkish approach to monetary policy which will eventually strengthen the dollar. 

The pair has been sideways on the technical front after it touched its highest level at 1.0736 since June this year. The slight dollar gain had little effect on the pair while the price remained high. The RSI has been moving in a smaller range near to the 50-level which gives a neutral sign for the pair. The MACD has remained flat and flows close to the zero line which also signals no bias in either way of the future trend. 

Resistance level: 1.0743, 1.0988

Support level: 1.0495, 1.0277

BTC/USD

BTC has tumbled nearly 10% over the weekend and fell below its psychological support level at 17000. But the bearish momentum eased and climbed back to near 17000 level last night. The Dollar index edged higher than the previous night after the U.S. economic data was released. The data reading suggests that the U.S. economy is still robust with higher-than-expected GDP and a strong labour market. These data will validate the case that the Fed will keep hiking the interest rate. As a result, BTC will be under pressure with a higher interest rate and a stronger dollar. 

On the technical front, BTC crashed by nearly 10% after it touched its highest point in a month at 18366. The RSI has rebounded slightly from near the oversold zone and climbed above the 50-level, suggesting that the selling power is eased. There is also a sign of slow down in bearish momentum as the MACD line is rising toward the zero line and the MACD histogram is building up. 

Resistance level: 16870, 17640

Support level: 16166, 15448

DJ30

The Dow edged lower yesterday as solid economic data from the United States heightened concerns about the aggressive restrictive monetary policy for a longer-than-expected period. Yesterday, the data showed an upward revision to GDP and relatively low claims for unemployment benefits, spurring some bullish momentum on the US Treasury yields while dragging down the appeal for the equity market.

The Dow is trading lower while currently testing the support level. However, MACD has illustrated diminishing bearish momentum, while RSI is at 48, indicating the index might trade sideways as the RSI stayed near the midline. 

Resistance level: 34110.00, 35320.70

Support level: 32620.00, 31165.00

GBP/USD

The pound dropped 0.69% to $1.2045 on Thursday as UK GDP data showed -0.3% quarterly compared with the previous estimate of 0.2%. Economists predict that the British economy remains unfavourable in a stagflationary environment. However, the ECB claimed to raise rates at a stable pace to fight inflation, while the BoE is supposed to be closer than the ECB to the end of its tightening cycle. Higher rates are prone to support currencies, but market participants fear the BoE’s excessive monetary tightening might trigger the British economy and weaken the pound. 

Therefore, the overall trend for the pair is moving downward. As we can see, the pound has a very low volume trading ahead of the Christmas holiday. The MACD is trading on the sidelines below the zero line, indicating sideway-bearish momentum ahead. At the same time, RSI is trading at 37, which indicates a bearish movement ahead. We expect the pair’s movement to stay on the sidelines until further economic data is released. 

Resistance level：1.2343，1.2664

Support level： 1.1936， 1.1697

NAS100

The Nasdaq dropped 2.18% or -233.25 points to 10,476.12 on Thursday, weighed by the pressure from the technology sector as investors worried about hawkish rate hikes in future. Moreover, the U.S. GDP data showed a 3.2% quarterly growth, more than the expected 2.9% growth. At the same time, the initial jobless claims data showed an increase of 2,000 to 216,000 for the week, pointing to a still-tight labour market. It would increase the chance for the Federal Reserve to continue its hawkish rate hike decision to keep tackling inflation. 

Due to the hawkish signal from the economic data, the nasdaq dropped. The MACD is moving downward with a broader range, suggesting the index is still trading in bearish momentum. At the same time, RSI is trading at 36, indicating a bearish momentum.

Resistance level: 11479, 12158　

Support level: 10487, 9765

CL OIL

Oil prices gave up their daily gains amid the appreciation of the US Dollar, with investors bracing for hawkish expectations from the Federal Reserve following the release of upbeat economic data. A stronger US Dollar weighs on oil prices as it might make the dollar-denominated commodity more expensive for holders of other currencies. Meanwhile, spiking Covid-19 cases in China continue to spur concerns about the oil demand in future. According to Reuters, a Shanghai hospital told its staff to prepare for a “tragic battle” with Covid-19 as it expects half of the city’s 25 million people will get infected by the end of next week. Besides, airlines cancelled nearly 2,000 US flights scheduled for Thursday and Friday due to thunderstorms, disrupting holiday travel and sending bearish signals for the oil demand.

Crude oil prices are trading lower while currently testing the support level at 77.45, MACD has illustrated diminishing bullish momentum, while RSI is at 54, suggesting the commodity might trade lower as the RSI retreats sharply from the overbought territory. 

Resistance level: 81.55, 86.15

Support level: 77.45, 73.70