What You Need to Know

Global equities markets stumbled and the dollar gained after Hawkish signals from major central banks including ECB and the Fed. In addition, the BoJ will announce its interest rate decision tomorrow (20th Dec). Still, the market expects the Japanese official to keep its monetary stimulus program given that other major central banks have slowed down their tightening pace. In New Zealand, the worsening economy in the nation has led the country to revise its monetary tightening policy. Investors believe that the Reserve Bank of New Zealand is unlikely to deliver a 125 bps rate hike which was initially projected for 2023.  

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 Dollar index extended its gains last Friday following the global central banks’ vow to maintain their restrictive monetary policy, which stoked a shift in sentiment toward the safe-haven US Dollar. Meanwhile, New York Fed President John Williams claimed that the Federal Reserve could continue increasing its interest rates by more than it expects next year. The Fed projected the peak fed funds rate at 5.1% during the previous FOMC meeting. Nevertheless, in the week heading into the Christmas holidays, we could expect the overall market movement will remain subdued

The Dollar Index is trading higher while currently testing the resistance level. MACD has illustrated increasing bullish momentum, while RSI is at 39, indicating the index is going into oversold territory.   

Resistance level: 105.70, 109.05

Support level: 101.20, 97.70

XAU/USD

Gold prices rebounded from its short-term key support level as a technical correction, while investors are waiting for the US economic data for clearer directions. To confirm the weekly trend in the gold price, investors will pay attention to Core Personal Consumption Expenditures (PCE), which are due later this week for further trading signals. The PCE Price Index is known to be the Fed’s preferred inflation gauge; hence, the reading could affect the gold movement significantly.

The gold market is trading flat while currently seesawed between resistance and support level. However, MACD has illustrated diminishing bullish momentum, while RSI is at 58, suggesting the commodity might trade lower in short-term as RSI retreats sharply from the overbought territory.

Resistance level: 1810.00, 1870.00

Support level: 1770.00, 1725.00

EUR/USD

After the Fed announced an increase of 50 bps of a rate hike last Wednesday, the ECB also went for the same increment of a rate hike and raised its deposit rate to 2%. The pair stayed sideways on top after the announcement as both Central Banks signalled a more hawkish monetary policy move next year, which offset the news. The dollar has gained slightly with the DXY index gaining 1% from its recent low. More U.S. economic data will be released, including U.S. GDP and initial jobs claims this week, and investors will gauge if the Hawkish monetary approach from the Fed remains.

The pair has been sideways on the technical front after it touched its highest level at 1.0736 since June this year. The bullish momentum ease as the MACD has flown from above approaching the zero line. The RSI has also dropped to the 50-level as of writing depicting a neutral signal from the indicator. 

Resistance level: 1.0743, 1.0988

Support level: 1.0495, 1.0277

BTC/USD

BTC has tumbled for nearly 10% over the weekend and fell below its psychological support level at 17000. The dollar has strengthened slightly after a more hawkish signal from the Fed as previously, the market expected a more dovish move from the U.S. central bank. The investors’ risk appetite was quickly wiped off after the ECB has also signalled a hawkish monetary policy approach as inflation in the region is extremely high. U.S. economic data will be released this week including U.S. GDP and initial jobs claim, and investors may gauge the Fed’s next monetary policy moves which will eventually affect the performance of the dollar. 

On the technical front, BTC crashed by nearly 10% after it touched its highest point in a month at 18366. The king of coin turned bearish as it broke below its crucial psychological support level at 17000. The RSI has dropped to near the oversold zone depicts that the selling power is strong over the weekend. The MACD has also crossed below the zero line and the gap between the signal line and the MACD line has widened, suggesting a bearish bias for BTC.

Resistance level: 16870, 17640

Support level: 16166, 15448

DJ30

The Dow fell for a third straight session as rising US Treasury yields with rate hikes expectations from the Federal Reserve continue to weigh on the high-risk equity market. Economists also predict that the US unemployment rate will rise to 4.6% by the end of 2023, meaning roughly 1.6 million more Americans will be out of work. Meanwhile, they also forecast the US economy will grow at an annualised rate of just 1.9% during its fourth quarter, down from its previous expectation of 2.70%. Heightened recession risks across the board will cause high-risk assets to be less attractive as investors look at another stronger safe-haven investment as a substitution. 

The Dow is trading lower following the prior retracement from the resistance level. MACD has illustrated increasing bearish momentum, while RSI is at 39, suggesting the index might extend its losses as RSI stays below the midline. 

Resistance level: 34390.00, 36810.00

Support level: 31370.00, 28760.00

GBP/USD

The pound traded flat against the dollar at $1.2184 on Friday as the BoE claimed that inflation has peaked, and other central banks flagged they are far from finished with rate hikes. The bank expects that the recession is ongoing and will get entrenched next year, so the pair didn’t manage to stand firm above the previous resistance level. 

As we can see, the pound was traded flat last Friday. The MACD line crosses below the zero line, indicating bearish momentum ahead. At the same time, RSI is trading at 42, suggesting a bearish momentum ahead. 

Resistance level：1.2343，1.2664

Support level： 1.2120， 1.1950

NAS100

Nasdaq dropped by (-0.97%) or -105.11 points to 10,705 and suffered a second straight week of losses on Friday as recession fear continued to rise. Investors worry that the Fed’s campaign to arrest inflation would tilt the economy into recession. According to the Fed project, the rate hike path would continue to be above 5% in 2023, a level not seen since the economic downturn. While the prospects of a ‘’Santa Claus rally’’ in markets this year seem dimmed, as the majority of global central banks carry on with their tightening policies. 

The overall market sentiment remained pessimistic as recession fear continued to rise. The MACD is moving down to the zero line, suggesting a neutral-bearish momentum ahead. The RSI is trading at 36, indicating a neutral-bearish momentum. 

Resistance level: 11445, 11997

Support level: 10469, 9778

CL OIL

Oil prices surged on the news that the Biden administration will start refilling the heavily drawn-down US Strategic Petroleum Reserve (SPR) in February with an initial purchase of 3 million barrels. Earlier, the Biden administration had drawn some 200 million barrels from the SPR over the past year to stabilise the oil prices and inflation rate, sending the oil inventories in reserve to 38-year lows. However, the overall long-term trend for oil prices remains bearish, weighed by renewed fears of recession and contractionary monetary policy from the global central banks.

 Crude oil prices are trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 48, near the midline, suggesting the commodity might continue to trade within a range between 77.50 and 73.75.    

Resistance level: 77.50, 82.30

Support level: 73.75, 70.25