US equities rallied for a second day, as an improvement in consumer confidence and better-than-expected earnings boosted sentiment. Treasuries were mixed after Tuesday’s selloff following the Bank of Japan’s unexpected increase in its yield trading band ebbed. Market participants did not hear from Fed speakers this week, which also helped fuel the so-called ‘Santa rally’ in stocks.

The central bank’s policymakers are expected to become incrementally more dovish in 2023 with a new roster of senior officials. Apart from this, fresh US data on Wednesday also indicated that the Fed’s persistent rate hikes are serving their purpose by slowing the economy, but a recession may still be at bay. It’s also worth noting that Micron Technology, the largest US maker of memory chips, reported earnings after the markets closed on Wednesday.

The benchmark, both the S&P500 and the Dow Jones Industrial Average rose and the Nasdaq 100 snapped a five-day drop on Wednesday. All eleven sectors in S&P 500 stayed in the positive territory, especially the Energy sector performed the best among all groups, rising 1.89% daily for the day. Besides, the MSCI world index edged higher by 0.2% on Wednesday.

Main Pairs Movement

The US Dollar index edged higher by 0.27% daily for the day, as investors reassessed the Bank of Japan’s surprising increase in yield limit. The DXY index mildly moved upward on Wednesday, erasing part of the losses caused by a sudden policy adjustment by the Bank of Japan.

The GBPUSD tumbled by 0.83% daily for the day. In absence of an economic calendar, the pessimistic economic outlook dominated the movement of the pounds pair. The cables dropped hugely during the early US trading session. In the meantime, the EURUSD also edged lower by 0.18% on Wednesday.

The gold slid by 0.20% for the day, as the pair entered into a consolidation phase following a surge on Tuesday. The yellow metal has not made any decisive move on Wednesday, as the investors are awaiting more economic data for more clues.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD traded lower throughout Wednesday’s trading. The Euro struggled against the Dollar as U.S. treasury yields recovered. The benchmark U.S. 10-year treasury yield recovered above 3.6% after BoJ unexpectedly loosened its yield cap on the 10-year Japanese government bonds to 0.5%. The surprising hawkish tone from the BoJ triggered a global bonds market sell-off that pushed yields higher. Ahead of the holidays, the U.S. will release its quarterly GDP figures and weekly initial jobless claims figures during today’s American trading session, while no major economic data releases are coming out of the E.U.

On the technical side, EURUSD continues to trade below our previously estimated resistance level of 1.065. The pair is consolidating around the 1.06 price region as volatility remains subdued before the holidays. The short-term support level for the pair remains at around the 1.058 price region. RSI for the pair sits at 62.02, as of writing. On the four-hour chart, EURUSD currently trades below its 50-day SMA but above its 100 and 200-day SMA.

Resistance: 1.0650, 1.0695,  1.0785

Support: 1.0580, 1.0538,  1.0480

GBPUSD (4-Hour Chart)

GBPUSD gave up all gains from Tuesday and headed lower throughout Wednesday’s trading. The British Pound fared worse against the Dollar, which was buoyed by rising treasury yields and better-than-expected consumer spending. Positive earnings results from Nike and FedEx temporarily relieved recessionary fears that have loomed across markets since last week. The Dollar index snapped its two-day losing streak and rose more than 0.3% as demand for the Greenback returned. Volatility for Cable has subsided as markets head into the holidays. On the economic docket, Britain and the U.S. are both scheduled to release GDP figures during the European trading session and the American trading session, respectively.

On the technical side, GBPUSD continues to face strong selling pressure at around the 1.26 price region. Cable has exhibited a downward trending path over the last two weeks as the pair closes in on our previously estimated support level of 1.19. Short-term support levels for Cable remain at around 1.19 and 1.176. RSI for the pair sits at 33.54, as of writing. On the four-hour chart, GBPUSD currently trades below its 50 and 100-day SMA but above its 200-day SMA.

Resistance: 1.2320, 1.2600

Support: 1.19, 1.176

XAUUSD (4-Hour Chart)

Gold, the haven asset, has continued to remain above $1800 per ounce after BoJ’s surprise yield move roiled markets. The yellow metal continues to find support at current price levels as market participants weigh recessionary fears and continued geopolitical tensions. As of writing, Ukrainian president Volodymyr Zelensky is on his way to meet with U.S. President Joe Biden. President Zelensky is also scheduled to address the U.S. Congress on his first known foreign trip since the Russian invasion began. The scheduled visit by President Zelensky comes ahead of the U.S. congress’ vote on a key spending bill which will exclude approximately $45 billion to aid Ukraine in military and economic spending for the coming years.

On the technical side, XAUUSD could not breach our previously estimated resistance level of $1824 per ounce. The short-term support level for the yellow metal remains at around the $1777 per ounce price region. RSI for the precious metal sits at around 66.54, as of writing. On the four-hour chart, XAUUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1840

Support: 1800, 1790

Economic Data

The US Dollar index dropped 0.73% daily on Tuesday, tumbling following a sudden announcement from the Bank of Japan(BoJ). Despite the Bank of Japan keeping their policy rate unchanged, the increase in the upper band limit on the yield target caused the surge of Yen and weighed on the DXY index.

US stocks oscillated between gains and losses throughout a volatile session on Tuesday, with technology shares still under pressure after last week’s hawkish central bank turn. Treasuries slumped, with the global bond market digesting the Bank of Japan’s sudden increase in its yield trading band.

FedEx Corp. and Nike Inc. reported earnings after the markets closed. FedEx posted fiscal second-quarter earnings that beat analysts’ estimates, buoyed by price increases and cost cuts that helped make up for a decline in package volume. While Nike Inc. reported another quarter of inventory buildup, its quarterly sales and gross margin exceeded Wall Street’s estimates. Shares of both firms rose postmarket. Treasuries broadly held losses, with the 10-year rate climbing to around 3.69%. Yields rose after a hawkish move from the Bank of Japan sent the yen soaring more than 4% against the dollar at one point.

The benchmark, the S&P500 ended the session with a modest gain, snapping a four-day losing streak. Seven out of eleven sectors stayed in the positive territory, and the Energy sector got the best performance among all groups, rising 1.52% daily for the day. It’s also worth noting that Consumer Discretion performed the worst among all groups, falling 1.13% on Tuesday.  The Dow Jones Industrial Average edged higher by 0.3%, the Nasdaq 100 little moved lowed 0.1%, and the MSCI World index dropped by 0.7% on Tuesday.

Main Pairs Movement

The DXY index dropped almost 0.6% during the BoJ Press Conference and further declined during the US trading hour to end below the 104 level.

The GBPUSD edged higher by 0.28% daily for the day, the positive traction mainly comes from the US Dollar pullback. The pair climbed to a daily high above the 1.2200 level when BoJ’s surprising policy adjustment, then rapidly retreated to the 1.2150 level. In the meantime, the EURUSD ended with mild growth on Tuesday, as the weak greenback provide some support.

The gold surged by 1.70% daily, benefiting from risk-aversion sentiment caused by BoJ’s surprising policy adjustment. The XAUUSD suddenly gained strong fresh transactions during UK trading sessions and stand firmly above the $1800 mark in the US trading hours.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD surged on Tuesday, trading higher to 1.0651, as the dollar sold off during the Asian trading course following the BoJ monetary policy decision. The Boj left its benchmark interest rate unchanged at -0.1% and kept the 10-year JGB yield at 0.00%, which fits the expectation. However, they allowed the 10-year JGB yield to fluctuate between -0.5% and 0.5%, compared to -0.25% and 0.25% previously and noted that they will review yield curve control operations. On Wednesday, Germany will release the GFK Consumer Confidence Survey, to be expected at -38 in January. US will publish December CB consumer Confidence, foreseen at 101 in December.

On the technical side, the 4-hour chart shows that the pair is neutral, swinging around a slightly bearish 20-day SMA, while the longer moving averages hold a bullish slope below the shorter ones. Meanwhile, technical indicators are stuck near the midline with no directional strength. However, it is worth adding that buyers continue to defend the downside as it slips below the 1.0600 thresholds.

RSI(14) for the pair sits at 50.79, as of writing. On the four-hour chart, EURUSD currently trades above its 50, 100 day SMA, but below 200 days SMA.

Resistance: 1.0650, 1.0695,  1.0785

Support: 1.0580, 1.0538,  1.0480

GBPUSD (4-Hour Chart)

The cable is recovering ground above 1.2150 in the European trading course. It extends recovery, as the US dollar loses further ground across the board. Markets remain unnerved after the surprise of the BoJ policy move, spiking up US treasury yields. On the monetary policy side, Fed remained relatively hawkish, while the BoE’s MPC was split on the extent of interest rate hikes, with two members voting to keep rates unchanged. This pushed GBPUSD sharply lower, down 1.99% on the day. The Fed’s firm hawkish stance is likely to continue to support the dollar trend, putting further downward pressure on the cable. In terms of economic data and event risks, UK’s final annualized GDP for the third quarter is due on Thursday. In addition, the release of the US core PCE data on Friday could be a catalyst for the cable’s post-market movement, as the Fed’s preferred measure indicator of inflation, the core PCE data will help confirm whether the US inflation has peaked.

Cable is holding in about the middle of the past week’s range between support at 1.2090/00 and resistance at 1.2240/50. Trend signals are mixed and weak across the shorter-term studies, suggesting more sideways-range trade in the near term. RSI(14) for the pair sits at 48.13, as of writing. On the four-hour chart, GBPUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.2320, 1.2600

Support: 1.2100, 1.2000, 1.1940

XAUUSD (4-Hour Chart)

Tuesday’s surprise move by the BoJ to widen the target range for the 10-year government bond yield from -0.5% to 0.5%, was seen as a sign of softening its easing stance, causing the dollar to plummet against the yen and dragging down the performance of the dollar index. The retreat in the dollar index supported a rebound in gold prices, which have now regained stability at the 1800 level.

However, the US Treasury bond yields are rallying 3.50% to 4% across the curve, with the benchmark 10-year US rates above 3.70%, at the moment. Surging US Treasury yields are acting as a big hurdle to Gold’s upswing. On the other hand, as the world’s biggest gold consumer, China. The country reported five new Covid deaths on Monday, this made markets remained unnerved.

On the technical side, the gold price surged over 1.5% from today’s opening to now, the price has broken through the last estimated resistance level of 1,820 and dropped at current today’s high of 1,821. RSI(14) for the yellow metal sits at 48.13, as of writing. On the four-hour chart, XAUUSD currently trades below its 100 and 200-day SMA but above its 50-day SMA.

Resistance: 1840

Support: 1800, 1790

Economic Data

As global investors worry about a recession, U.S. stocks fell on Monday. The Dow fell 162.92 points to 32757.54. S&P 500 dropped 34.7 points to 3817.66. Tech-heavy Nasdaq rose 159.38 points to 10546.03. The Fed, BoE, and ECB raised rates by 50 basis points last week to curb inflation.

The benchmark 10-year U.S. government yield rose to 3.596% yesterday. The S&P500 lost 0.9% and the DJIA 0.5%. Communication Service had the worst day, dropping 2.19%. Ten of eleven sectors were negative. On Monday, only the Energy sector rose 0.13%.

Main Pairs Movement

Investors were cautious on Monday, keeping the US Dollar index flat. In the first part of the day, the DXY index fell dramatically to a daily low of around 104.1 in the middle of UK trading. In the second part of Monday, the US dollar recovered most of its losses.

As market players await stories indicating more economic pain for the UK and the next move of the safe-haven greenback, the GBPUSD has not moved today. In the morning, the pair rose to 1.2240 before turning south. Late UK trading erased the cables’ daily gain. The EURUSD fell sharply in the late UK trading hour and gained 0.2% on Monday.

No catalyst changed sentiment, therefore Gold fell 0.3%. After reaching a daily high at $1799, the XAUUSD fell below $1787 in the American trading session.

 Technical Analysis

EURUSD (4-Hour Chart)

EURUSD rose Monday. Euro bullishness peaked throughout the European trading session due to the better-than-expected German Ifo Business Climate index. Today, the U.S. Greenback struggled. The U.S. Dollar began the day trading lower and only found bidding towards the conclusion of the European trading session, but support for the Greenback faltered during the American trading session as U.S. equities suffered another selloff. On the 22nd and 23rd, the U.S. will report quarterly GDP and PCE.

Technically, EURUSD is below our 1.0785 resistance line. Short-term support for the pair is around 1.05, but longer-term support is around 1.035. RSI is 63.58 for the pair. EURUSD is above its 50, 100, and 200-day SMA on the four-hour chart.

Resistance: 1.0785

Support: 1.0538, 1.031

GBPUSD (4-Hour Chart)

After Thursday’s selloff erased all weekly gains, GBPUSD is below its opening price. The pound tumbled from highs to lows, breaking through three key support levels before stabilising above the 20 and 200-day averages. Price rose 0.33% today, slipping below 1.2200 at writing. This may prevent a short-term drop to 1.1940 and 1.1907. Christmas may boost the pound. Despite many unfavourable variables, the Cable price may fall further if the UK Q3 GDP report disappoints. As the Fed’s preferred inflation gauge, Friday’s US core PCE price index, forecast to rise to 4.6% from 5%, may potentially benefit sellers.

The pair may not test last week’s high of 1.2447, but the medium-term technical view is encouraging. Despite last week’s rising wedge break, the bullish 21-day moving average at 1.2146 supports GBP bulls.

RSI(14) is 48.67 for the pair. GBPUSD is below its 50, 100, and 200-day SMA on the four-hour chart.

Resistance: 1.2320, 1.2600

Support: 1.2100,1.1940, 1.1907

XAUUSD (4-Hour Chart)

Spot gold rose to $1,798.68 per troy ounce before falling to $1,786. The US currency fell today. As COVID-19 restrictions lifted, some multinational technology companies resumed operations in China, boosting market sentiment. Next year, local authorities will boost spending and help the private sector to boost the economy. Stocks fell and government bond yields rose before the US opened. Since the mood changed for no reason, the dollar’s gains were restricted. Gold price failed to achieve $1,804 again and again in the past three weeks, indicating that gold prices stabilised above $1,770, but if the market loses, it could fall to $1,740.

Technically, gold fell after touching $1,800, but the dollar weakening restrained losses. The daily chart shows that it is losing upward momentum, although the 20-day SMA is advancing below a mildly bearish 200-day SMA, offering intraday support around $1,776.40. The yellow metal’s RSI(14) is 45.24. On the four-hour chart, XAUUSD is below its 100 and 200-day SMA but above its 50-day SMA.

Resistance: 1798.70, 1810, 1824.50

Support: 1776.4, 1765, 1752.80

Economic Data

The financial markets will be monitoring the Bank of Japan policy statement this week. The central bank is expected to keep its short-term interest rate at -0.1%, the same as the previous month. 

Meanwhile, Canada will also be under scrutiny, as its Consumer Price Index is expected to rise by 0.4% in November.

Here are the upcoming events for this week:

Bank of Japan Monetary Policy Statement (20 December)

In its October policy statement, the Bank of Japan kept its key short term interest rate at -0.1% and that for 10-year bond yields around 0%. However, it revised its inflation forecast to 2.9% from 2.3% in July, citing surging prices of energy, food, and durable goods.

Analysts expect the bank to keep its policy unchanged for this month.

Canada’s Consumer Price Index (21 December)

Canada’s Consumer Price Index (CPI) increased by 0.7% in October over the previous month. According to analysts, Canada’s CPI is expected to rise a further 0.4% in November.

Canada’s Gross Domestic Product (23 December)

The Canadian economy expanded by 0.1% in September, reversing an upwardly revised 0.3% increase in August.

Economists expect the country’s gross domestic product to be unchanged in October.

US Core PCE Price Index (23 December)

The US Core PCE Price Index, excluding food and energy, increased by 0.2% month-on-month in October compared with 0.5% in September.

Analysts expect the index to rise by another 0.2% in November.

US stocks confronted the longest weekly losing streak since September, as investors were concerned that the Federal Reserve’s resolve to keep raising rates could tip the economy into a recession. Market participants had cheered the softer-than-expected inflation data earlier this week.

However, that euphoria faded as Fed officials hammered home the message that rates will go higher for longer until they’re confident inflation has been subdued. While the Fed raised rates by an expected 50 basis points on Wednesday, risk assets have been on the back foot ever since policymakers signalled a peak rate that was above market expectations. A wave of rate hikes and hawkish outlooks from central banks across the globe, including the European Central Bank, further bruised sentiment this week.

The benchmarks, the S&P500 and the tech-heavy Nasdaq 100 closed the session lower for a third day. The S&P500 dropped lower with 1.11% on Friday and the Nasdaq 100 was down by 0.9% for the day. All eleven sectors of the S&P500 stayed in the negative territory, as the Real Estate sector performed the worst among all groups, falling by 2.96% on a daily basis. Meanwhile, the Dow Jones Industrial Average edged lower by 0.9% on a daily basis and the MSCI world index tumbled by 2.4% on Friday.

Main Pairs Movement

The US Dollar edged higher by 0.27% on a daily basis, as investors are consuming the Federal Reserve’s resolve to raise interest rates higher and longer. The DXY index extended its upside momentum since late UK trading and ended at a level above 104.8.

The GBPUSD slid by 0.25% for the day, as the Bank of England raised its policy rate by 50 basis points following the December policy meeting as expected. The pair dropped to a daily low level below 1.2120 during the UK trading session. Meanwhile, the EURUSD dropped nearly 0.55% during the US trading hour with investors consuming that European Central Bank announced that it raised key rates by 50 basis points. The pair fell 0.4% on Friday.

The XAUUSD surged by 0.91% for the day, managing to erase some losses from the biggest weekly loss in four. The gold price witnessed some positive traction during the UK trading hours, regaining the huge fall from last Thursday.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD traded lower on the last trading day of the week. Despite falling on the last two trading days of the week, EURUSD still posted a weekly gain of more than 0.5%. The Euro underperformed against the Dollar on the last two trading days as recessionary fears and risk-off sentiment prevailed across markets. Released during last Friday’s American trading session, the lower-than-expected U.S. PMI figure dragged on U.S. equities as market participants reassess the slowing down of purchasing and the U.S. economic outlook. Furthermore, the higher-than-anticipated European region CPI did little to boost sentiment surrounding the Euro. The ECB’s decision to hike rates on the 15th did not create the expected upward boost for the Euro, rather the decision is criticized as being a late reaction, which is proven by Friday’s CPI upside surprise. On the economic docket, U.S. GDP and weekly initial jobless claims will be released on the 22^nd, while no major economic data releases are scheduled for the Euro.

On the technical side, EURUSD continues to retreat from our previously estimated resistance level of 1.0785. The 76.4% Fibonacci retracement level of 1.0538 now presents itself as a short-term support level for the pair. RSI for EURUSD sits at 42.44, as of writing. On the four-hour chart, EURUSD is currently trading below its 50, 100, and 200-day SMA.

Resistance: 1.0785

Support: 1.0538,  1.031

GBPUSD (4-Hour Chart)

The pound looks set to be under severe pressure against the dollar by the end of the week, with weak economic data on Friday stoking fears of a recession. BoE raised interest rates by 0.5%, bringing the benchmark rate to its highest level since 2008 (3.5%). However, it was not strong enough to prevent the Cable from suffering the biggest decline in past six weeks in one day. Although six of the nine Monetary Policy Committee members were in favour of the decision, and one wanted stricter action, the market still interpreted the move as a dovish rate hike. BoE Governor Andrew Bailey said we may see a glimmer of hope that inflation may be slowing. But even so, he said that further rate hikes may still be appropriate given the tightness of local labour conditions. Nevertheless, the market made its choice and the pound fell. Also, the December PMI data showed that the dominant service sector remained in expansionary territory, while manufacturing improved slightly this month. Companies reported that price pressures eased further from this year’s record highs. However, these figures do not dispel market fears of a recession in the UK and have put pressure on the pound during the European session.

On the technical side, GBPUSD failed to reach our previously estimated resistance level of near the 1.26 price region. The short-term support level for the pair remains at around the 1.19 and 1.176 price region. RSI(14) for the pair sits at 44.77, as of writing. On the four-hour chart, GBPUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.2666, 1.3000

Support: 1.1900, 1.176

XAUUSD (4-Hour Chart)

Gold raise more than 0.5% as of writing during Friday’s trading session. After the hawkish message from the US Federal Reserve on Wednesday, the ECB followed right behind the pace, making it clear that there would be more than 50 basis points of rate hikes in the following meetings. This took markets surprised and triggered a rally in EURUSD, but was reversed immediately as the Fed remains in the lead. In other gold-related news, India plans to invite tenders to extract gold from 50 million tons of processed ore from colonial-era mines in the southern state of Karnataka, Reuters reported, citing a senior government official with direct knowledge of the matter. The potential increase in gold supply has negatively impacted the outlook for gold prices.

In other gold-related news, India plans to invite tenders to extract gold from 50 million tons of processed ore from colonial-era mines in the southern state of Karnataka, Reuters reported, citing a senior government official with direct knowledge of the matter. The potential increase in gold supply has negatively impacted the outlook for gold prices.

On the technical side, if the price stabilizes above $1,790 and confirms that level as support, it could test $1,800 in the near term and then aim for $1,830 (50% Fibonacci retracement of the long-term downtrend). RSI(14) for the yellow metal sits at 57.66, as of writing. On the four-hour chart, XAUUSD currently trades below its 50, and 100-day SMA but above its 200-day SMA.

Resistance: 1800, 1810, 1830

Support: 1790, 1775

Economic Data

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This Friday, after hawkish signals from central banks, sparked a rout in US and European shares and a rally in the dollar. The S&P 500 closed at its lowest level in more than a month and the dollar climbed the most since September as investors sought haven assets after warnings by the Federal Reserve and the European Central Bank of more pain to come. The greenback rallied since early Asia, as China published discouraging macroeconomic figures. On Thursday, The Bank of England, the Switzerland National Bank and the European Central Bank announced their decisions. The three banks hiked rates by 50 bps, the risk-off mood comes as central banks this week eased back from the larger hikes seen for much of this year but revised up their expectations for how high rates may need to go, which cause US indexes to plummet, and the dollar soared.

The Dow Jones Industrial Average has dropped 2.25% to close at 33202.22. The S&P 500 dropped 2.49% to close at 3895.75. The tech-heavy Nasdaq Composite dropped 3.23% to close at 10810.53. China and Hong Kong no longer face an acute threat of being booted off American stock exchanges. Weakening sentiment though is the US government blacklisting Yangtze Memory Technologies Co. and dozens of other Chinese tech companies, leads the huge fall of U.S. equity. This year, the global economy could be pushed into a recession and weighed heavily on riskier assets such as equities. Further, the US Treasury bond yields raised. U.S. 10-year treasury yield sits at around 3.464%. The policy-sensitive 2-year treasury yield sits at 4.252%.

Main Pairs Movement

The US Dollar bounced back from its 4 months lowest point, the risk-aversion drowned the Wall Street benchmarks and favoured the US Treasury bond yields, which in turn allowed the US Dollar Index (DXY) to print the biggest daily gain in 10 weeks, moreover, renewed fears of higher rates and recession weigh on the price while preliminary readings of the December month PMIs for the UK, Europe and the US will be crucial to determine the risk-off currency further downside.

The Gold price had been pressured by the ascending trend of DXY, which dropped 1.69%, price closed at $ 1776.875, and still can’t break the resistance at $1810, besides, a broad gamut of 0.50% rate hikes by the US Federal Reserve, Bank of England, Swiss National and the European Central Bank raised fears of higher rates across the board and weighed on the market sentiment, as well as the Gold price.

EUR/USD has found an intermediate cushion around 1.0600, the downside remains favoured on risk-off mood, and ECB sees two more 50 bps interest rate hikes consecutively to combat ramp-up inflation. The commentary from ECB President that food and energy inflation will continue to rise from January has created havoc among investors in the Eurozone economy. The country will face tremendous pressure due to the higher headline Consumer Price Index (CPI) and further escalation in catalysts will dampen the market mood.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD saw an extremely turbulent trading session throughout Thursday’s trading. The ECB announced a 50 basis point interest rate hike and a signal for further tightening. The hawkish move by the ECB sent the Euro-Dollar pair to its highest level since June during the European trading session, but the pair could not preserve momentum and soon met selling pressure, which forced the pair down into correction territory. Another key economic event that worked against the Euro was the surprisingly low U.S. retail sales figure, which triggered a quick sell-off of the Dollar and a subsequent rally that overshadowed the first wave of selloffs. U.S. equities retreated dramatically after Fed Chair Jerome Powell’s statement yesterday echoed through markets. All three major U.S. equity indices saw a drop of more than 2% as recessionary fears continue to grow. On the economic docket, E.U. CPI will be released during the final hours of today’s European trading session.

On the technical side, EURUSD could not break through our previously estimated resistance level of 1.0785, despite hawkish signals from the ECB. An upside surprise from today’s CPI release could provide the momentum that is needed for the Euro to finally advance above its short-term resistance. The support level for EURUSD remains at around the 1.031 price region. RSI for the pair sits at 48.76, as of writing. On the four-hour chart, EURUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1.0785

Support: 1.046,1.031
 
GBPUSD (4-Hour Chart)

Cable dropped more than 1.7% throughout Thursday’s trading. The BoE, which raised interest rates by 50 basis points, failed to fuel the Pound upwards; instead, the slightly less hawkish signal from the BoE combined with a downward surprise of the U.S.’ retail sales figure sent Cable tumbling below the 1.22 price region. Despite a 50 basis point interest rate hike by the BoE, who raised rates by 75 basis points last time, the central bank continues to echo the Fed and its determination to bring inflation down as soon as possible. The BoE faces unique domestic and regional price pressures that the U.S. has not had to deal with; furthermore, with a gloomy economic outlook on the horizon, the Bank of England has decided to take a more cautious route as the bank navigates the British economy into 2023. On the economic docket, Britain will release its PMI figures during the latter part of today’s European trading session.

On the technical side, GBPUSD failed to reach our previously estimated resistance level of near the 1.26 price region. The short-term support level for the pair remains at around the 1.19 and 1.176 price region. RSI for the pair sits at 35.95, as of writing. On the four-hour chart, GBPUSD currently trades below its 50, 100, and 200-day SMA.

Resistance: 1.2666, 1.3000

Support: 1.1900, 1.176

XAUUSD (4-Hour Chart)

Gold fell more than 1.5% throughout Thursday’s trading. The yellow metal failed to find any traction throughout Thursday as global central banks raise rates in unison. Moreover, the downbeat industrial production and retail sales data from China amplified the losses for the precious metal. The lower-than-expected U.S. retail sales figures also hurt Gold prices as recessionary fears rise with consumer spending dropping more than analyst estimates. The Dollar index snapped its two-day losing streak and gained more than 0.9% to close out Thursday. The Greenback has recently been on a steady downward trend as interest rate expectations ease; however, the tumbling equities market could attract market participants into other asset classes such as fixed-income securities, which have been trading at a discount over the past two months due to soaring treasury yields. The yellow metal, on the other hand, remains a non-yielding asset class whose pricing is highly dependent on global geopolitical tensions and the performance of the Greenback.

On the technical side, Gold successfully defended our previously estimated support level of $1775 per ounce. The lower support level for Gold forms around the $1736 per ounce price region. RSI for the yellow metal sits at 35.81, as of writing. On the four-hour chart, XAUUSD currently trades below its 50-day SMA but above its 100, and 200-day SMA.

Resistance: 1810,1830

Support: 1800, 1795, 1775

Economic Data

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US stocks turned lower after the Federal Reserve released the raise of rates by half a percentage point. However, while the Fed has downshifted the pace of tightening, the message given to the financial markets is that they’re not done yet.

While the Fed has signalled its plans to keep lifting rates next year to combat high inflation Fed chair Jerome Powell was speaking and his comments seemed to have given mixed messages to the market. In US Treasury yields, the flips with the 10-year falling back from a high of 3.5610% to print 3.477% currently and on the way towards the day’s low of 3.46%.

Though the raise is 50bps this time, its economic projections see higher rates for a more extended period. the data comes in hotter than expected, but the investors projected at least an additional 75 basis points of increases in borrowing costs by the end of 2023, as well as a rise in unemployment and a near-stalling of economic growth.

The Dow Jones Industrial Average has dropped 0.42% to close at 33966.35. The S&P 500 dropped 0.61% to close at 3995.32. The tech-heavy Nasdaq Composite dropped 0.76% to close at 11170.89. Despite the Fed statement, U.S. Treasury yields were slightly lower after initially jumping in the wake of the announcement, and the strategy of aggressive interest rate increases by major central banks around the world this year has increased worries the global economy could be pushed into a recession and weighed heavily on riskier assets such as equities this year. Further, the US Treasury bond yields go up and down. U.S. 10-year treasury yield sits at around 3.503%. The policy-sensitive 2-year treasury yield sits at 4.247%.

Main Pairs Movement

The US Dollar is tailing off from the highs that were made on what was perceived to be a hawkish rate hike of 50 basis points by the United States Federal Reserve. The US Dollar is back on its backside following a mixed reaction to the Fed event. While the Fed has signalled its plans to keep lifting rates next year to combat high inflation, and this is a sign of two-way price action in asset classes, including the US Dollar and bonds.

The Gold price had fallen back to $1806, and still can’t break the resistance at $1810, though there were volatile moves over the interest rate decision and policy guidance by the Federal Reserve. The precious metal displayed wild gyrations in the $1.796-1,814 range and has now turned extremely quiet 4 hours after the speech.

The EURUSD is aiming at breaking 1.0700, as per the investors’ estimated, EUR/USD soars as US CPI comes in below expectations, 1.0700 is a key level where a measured move of -0.272% of the potential correction’s range to support meets the prior mid-summer resistance looking left, the next level is 1.0790.

Technical Analysis

EURUSD (4-Hour Chart)

EURUSD traded 0.47% higher throughout yesterday’s trading. The 50 basis points interest rate hike by the Fed FOMC sent the Greenback higher, initially, but tides quickly turned after Fed Chair Jerome Powell began his speech. The Dollar index, which tracks the U.S. Greenback against a basket of major foreign currencies, saw a whiplash of more than 1% during Chair Powell’s speech, and the index eventually headed south after his speech concluded. Market participants will now turn their attention to the ECB’s monetary policy statements and interest rate decisions that are scheduled to be released during the late European trading session. ECB president Christine Lagarde is also scheduled to speak during today’s trading day.

On the technical side, EURUSD continues to trade just below our previously estimated resistance level of 1.0785. The retreating Dollar has put the Euro on a steady upward trend over the past week. A hawkish ECB during today’s interest rate decision could spark another leg up for the Euro. RSI for the pair sits at 67.53, as of writing. On the four-hour chart, EURUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1.0785

Support: 1.046,1.031

GBPUSD (4-Hour Chart)

Cable has successfully extended its winning streak into the sixth straight trading day after a turbulent American trading session on the 14th. The Dollar’s volatile price movements on the 14th eventually ended with the Dollar heading lower as market participants interpreted the latest interest rate hike as a dovish signal from the Fed. During Fed Chair Jerome Powell’s speech, he reiterated the central bank’s determination to bring price levels back to normal standards and cautioned market participants about the duration of tightening, which could be longer than many estimated but is highly dependent on future economic data releases. The Bank of England is scheduled to release its interest rate decision during today’s late European trading session with MPC meeting minutes released simultaneously. Markets are widely pricing in a 50 basis point interest rate hike by the BoE at today’s interest rate announcement.

On the technical side, GBPUSD edged close to our previously estimated resistance level of 1.26 but is still trading below that price region. Today’s BoE interest rate decision could spell great volatility for the British Pound as the nation faces hard a hard economic outlook for 2023. RSI for the pair sits at 69.39, as of writing. On the four-hour chart, GBPUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1.2666, 1.3000

Support:1.2290, 1.2100, 1.1900

XAUUSD (4-Hour Chart)

Gold traded slightly lower throughout Wednesday’s trading. The yellow metal recovered most of its intraday losses due to the volatile price movements of the Greenback. The initial interest rate release sent the Dollar soaring and the Dollar-denominated Gold falling; however, as Fed Chair Jerome Powell began his speech, the Dollar began retreating and sent Gold upwards. Geopolitical tensions around the globe and recessionary fears continue to anchor Gold prices at around the $1800 per ounce price region. U.S. 2-year treasury yields dropped 0.015 to 4.214%, while the U.S. 10-year treasury yield dropped 0.024 to 3.479%. The benchmark U.S. 10-year treasury yield falling below the psychological barrier level of 3.5% could explain the Dollar’s late session fall. On the economic docket, the ECB and the BoE will both announce their respective interest rate decisions during today’s late European trading session.

On the technical side, Gold currently hovers around the $1800 per ounce price region. Our previously estimated resistance level of $1810 per ounce is now within arms reach from current levels. Short-term support levels for Gold remain at $1795 per ounce and $1775 per ounce. RSI for Gold sits at 49.07, as of writing. On the four-hour chart, XAUUSD currently trades above its 50, 100, and 200-day SMA.

Resistance: 1810, 1830

Support: 1800, 1795, 1775

Economic Data