What You Need To Know

The Japanese Yen starts the year with a modest gain against the dollar up by 0.3% and is traded below $131. The BoJ surprised the market by widening its yield curve control (YCC) which has led to speculation that the Japanese authorities may have a monetary policy shift. Investors gauge from mixed U.S. economic data that the Fed might opt for a more dovish approach for its upcoming monetary policy move despite a Hawkish statement given by the Fed last month. Elsewhere, oil prices have gained slightly, perhaps due to the geopolitical uncertainty in the Eurozone and a weakened dollar. 

Look Out For

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

25 bps (71.3%) VS 50 bps (28.7%)

Market Overview

Economic Calendar

Market Movements

DXY

 The U.S. Dollar dipped to its lowest since early June 2022, trading at 103.49 as of writing. The volatility of the DXY has remained flat and has been trading below 105 for the past 2 weeks. The Chicago PMI is at a current reading of 44.9 and is up from the previous month reading of 37.2. The reading is still at below the 50 level but a rebound from the previous month suggests a slight expansion in the manufacturing sector. On the other hand, the Non-farm payroll data which will be released on coming Friday is estimated to stay moderate. Investors may gauge the data and speculate on the Fed’s next monetary policy move. 

The Dollar Index is trading flat as the market is usually silent at the year’s end. The MACD has dropped slightly from the zero line and the gap between the MACD line and the Signal line is widening, depicting a lack of bullish momentum for DXY. The RSI has fallen and is approaching the oversold zone suggesting that the selling power is strong. 

Resistance level: 103.97, 108.33

Support level:101.29, 99.06

XAU/USD

Gold prices rose by 0.49% against the weakened dollar to $1823 on the last trading day of 2022. Markets are worried about the war in Ukraine and weighing the impact on China’s reopening. Investors might tend to escape from the global risk by shifting their direction into the gold market. The Non-farm payroll which will be released on the coming Friday (6th January), and the FOMC meeting minutes which are set to release on 5th January will be gauged by investors on the Fed’s next monetary policy move. A dovish move from the Fed will allow gold prices to continue to trade on its bullish trend. 

Gold prices were trading higher against the dollar yesterday and have continued to trade on its bullish trend since early November 2022. The MACD moving uptrend from the zero line depicts that the bullish momentum for gold prices is positive. The RSI has also moved toward the overbought zone and stayed at 64.4 as of writing suggesting that the buying power is strong. 

Resistance level:1848.86, 1915.74

Support level:1762.86, 1707.12

EUR/USD

The pair has continued to trade sideways with a slight gain and is approaching its near-resistance level. The mixed U.S. economic data led investors to bet that the Fed may have a relatively dovish approach for its next monetary policy move given that the inflation rate seems to have peaked and worries over economic recession in the country. Besides, the ECB’s chair has given a Hawkish comment in her latest interview, reiterating the urgency to stop wage growth that will accelerate the inflation rate in the region. 

As of now, market participants are on holiday; the pair has been consolidating with a low trading volume. The RSI has spiked slightly higher and is approaching the overbought zone suggesting that the buying power is strong for the pair. The MACD has a slight rebound from above the zero line, depicting the building of bullish momentum. 

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 16206 to 17030 for the past 2 trading weeks. BTC remained calm entering the year of 2023 with a relatively low trading volume. The dollar index has plunged as investors bet that the Fed may opt for a more dovish monetary policy approach with downbeat U.S. economic data. Inventors may gauge the Non-farm payroll data for Fed’s next moves; a cooling labour market may ease the inflation rate in the country and slow the Fed’s rate hike pace. 

Following the low trading volume during the year-end holiday season, the pair’s movement remains low fluctuation. The RSI indicates that the selling power for BTC is easing as it rebounded from the near-oversold zone but the signal remained neutral. The MACD failed to break through the zero line and is hovering underneath it, suggesting that the bullish momentum is not strong.

Resistance level: 17640, 18397

Support level: 16166, 15448

DJ30

The Dow Jones slipped on Friday by 0.22% and closed at 33147. The U.S. equities market concluded the year of 2022 with the worst result since 2008. The Dow Jones has fallen 8.9% over the year in 2022 and the tech-heavy index, Nasdaq, has declined by 33%. The Spike in inflation leading to an aggressive monetary move by the Fed hindered the equity market from performing better. The investors highly anticipate the FOMC meeting minutes to gauge for the Fed’s next moves; a dovish approach in monetary policy will favour the equities market. 

The Dow has been trading from 33460 to 32620 in the past 2 weeks. However, MACD has illustrated a bearish momentum with the MACD line hovering underneath the zero line. While RSI is trading at 49, the index might remain in the sideways trend with a neutral signal given by the indicator. 

Resistance level: 34109, 35320

Support level: 32620, 31165

GBP/USD

The pair has remained flat with the price consolidating within the range of 1.2143 to 1.2001. The Sterling is not able to take advantage of a weaker dollar as the DXY index has traded at its lowest since early June 2022. On the other hand, a contractionary fiscal policy that the UK’s government will impose will see a contraction in the nation’s aggregate demand. As a result, the demand for the British Pound may drop and the value may depreciate. The Non-farm Payroll and the FOMC meeting minutes are closely watched to gauge the Fed’s next move. 

The cable has stayed flat after it plunged from its recent peak at 1.2446 and the price is consolidating within a small range. The MACD depicted a positive signal for the pair as it is moving upward for the past 2 weeks and is approaching the zero line from below. The RSI has a slight rebound but it remains neutral. 

Resistance level:1.2263, 1.2610

Support level: 1.1752, 1.1451

USDJPY

The Japanese Yen extended its gain with the pair drop by 1.46% and is traded at its lowest since early June 2022. Investors speculate that the BoJ may pivot from its current ultra-loose monetary policy as it has surprised the market by widening its yield curve control (YCC). Besides, the Non-farm payroll which will be released on coming Friday will be closely watched by inventors. A cooling labour market would let the market speculate the Fed will adopt a more dovish approach for its monetary policy and the Japanese Yen may continue its bullish trend. 

USD/JPY dropped by 1.46% from yesterday’s peak and is trading below 132 as of writing. The RSI has fallen from the 64-level to the oversold zone suggesting that the selling power is strong. The MACD also indicates that the pair is trading with bearish momentum as the MACD line has fallen below the zero line and the gap between the MACD line and the Signal line is widened. 

Resistance level: 134.34, 137.67

Support level:129.99, 128.08

CL OIL

Oil prices have rebounded just before the end of the year 2022 with a surge of 2.22% and is once again traded above $80. The intensified geopolitical issue in the Eurozone, especially involving Russia, one of the world’s largest crude oil exporters, will lead to a more volatile oil price. In addition, the Caixin manufacturing PMI data that will be released today (2nd January) may be gauged by the investor to see if the China economy is picking up. China, the largest crude oil importer in the world, would affect the demand for crude oil if the country’s economic growth is optimistic. 

Crude oil prices have rebounded by 2.2% on the last trading day of 2022. The oil price is currently testing its near resistance level at 81.31. The MACD stayed close to the zero line despite the oil price rebound, suggesting that the bullish momentum is lacking. On the other hand, the RSI has picked up from the 46-level and surged to 61.1-level suggesting that the buying power has picked up. 

Resistance level: 81.31, 85.16

Support level: 76.97, 73.52