Daily market analysis

Market flat as traders await Jerome Powell’s Speech

November 30, 2022

US stocks edged lower on Tuesday, regaining upside traction and paring most of their daily losses with traders unwilling to make big bets ahead of Jerome Powell’s speech Wednesday. Jerome Powell is expected to cement expectations the Fed will slow its pace of hikes next month and remind investors that its fight against inflation will run into 2023.

The need for more measured rate rises will also take account of increased two-way economic risks as policy becomes restrictive. Meanwhile, the US central bank is expected to hike rates by an additional 50 basis points when it meets on Dec. 13-14, though the odds of a 75-basis-point increase have risen over the past several weeks and now stand at a 37% probability.

Moreover, market mood improved slightly as Chinese authorities announced multiple measures to ease the strict lockdown in the key areas after witnessing a retreat in the daily Covid infections from a record high. On the Eurozone front, the sentiment remains supportive of the Euro in that the European Central Bank remains committed to raising interest rates to dampen high inflation.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower on Tuesday as the S&P 500 rebounded back slightly with gains in energy and financial firms tempered a slide in big tech. The S&P 500 was down 0.2% on a daily basis and the Dow Jones Industrial Average was little changed with a 0.1% loss for the day. Six out of eleven sectors in the S&P 500 stayed in negative territory as the Information Technology sector and the Utility sector are the worst performings among all groups, losing 0.98% and 0.73%, respectively. The Nasdaq 100 meanwhile dropped the most with a 0.7% loss on Tuesday and the MSCI World index was unchanged for the day.

Main Pairs Movement

The US dollar advanced higher on Tuesday, preserving its upside momentum and extending its daily gains towards the 106.80 area amid a cautious market mood. The 10-year US Treasury yields have accelerated to 3.75% as Fed policymakers see no halt in rate hike culture in the near term, which helped the US Dollar Index (DXY) to print a three-day uptrend despite softer statistics from the United States. This week, the US Nonfarm Payrolls (NFP) is the key event that investors will focus on.

GBP/USD retreated slightly on Tuesday with a 0.06% loss as the cable dropped to a daily low near the 1.1940 mark in the late US trading session amid a cautious market mood. On the UK front, the speech from Bank of England (BOE) Governor Andrew Bailey on Tuesday failed to provide support for the British Pound. Meanwhile, EUR/USD suffered from daily losses and pared the biggest monthly gains since September 2010 amid a stronger US dollar across the board. The pair was down almost 0.10% for the day.

Gold advanced higher with a 0.49% gain for the day after struggling around the $1,750 level ahead of Fed Powell’s speech during the US trading session, as expectations for a less aggressive policy tightening by the Federal Reserve underpinned the precious metal. Meanwhile, WTI Oil advanced sharply with a 1.24% gain for the day.

Technical Analysis

EURUSD (4-Hour Chart)

The EURUSD was having difficult time gathering upside strength and hovering around the 1.0335 level as of writing, with Wall Street’s main indices declining further after the opening bell, the US Dollar was trying to attract positive traction and weighing on the pair. Earlier, the euro was initially boosted by the hopes of a potential easing in China’s strict pandemic restrictions following an unprecedented episode of unrest in the country. However, the pair failed to preserve its daily gain during the US trading session. The Conference Board’s (CB) index shaved off 2 points to come in at 100.2, a hair above the 100 consensuses. In the meantime, flash euro zone inflation figures for November are due on Wednesday, with economists polled by Reuters expecting inflation to come in at 10.4% year-on-year. The key event, however, for Wednesday will be in the comments from Fed Chair Jerome Powell. These will be scrutinised for new signals on further tightening. The Fed is widely expected to hike rates by an additional 50 basis points when it meets on Dec. 13-14.

From a technical perspective, the four-hour scale RSI indicator edged lower to 43 figures as of writing, suggesting that the pair was amid negative traction. As for the Bollinger Bands, the pair was priced in the lower area and supported by the lower band. As a result, in case the pair was falling below the lower band, the bears have the chance to test the weekly low 1.0228 level.

Resistance: 1.0497, 1.0604

Support: 1.0228, 1.0163, 0.9961

GBPUSD (4-Hour Chart)

The GBPUSD has turned south and fell below the 1.2000 level in the second half of the day on Tuesday, as the negative shift witnessed in risk sentiment seems to be helping the US Dollar find demand and forcing the pair to stay on the back foot. The US equities wavered as Wall Street opened, as the St.Louis Fed President James Bullard said that the Fed has “a ways to go to get a too restrictive policy,” adding that the first 250 bps was to get rates neutral. He emphasized that rates need to be at around 5% to 7% through 2023 and 2024. In fact, money market futures have priced in a 50 bps hike in December, with odds of a 75 jumbo increase at 15%. Apart from this, the Covid-19 outbreak has not escalated as initially thought, as global equities remained mixed but tilted to the upside on early Tuesday. According to the Wall Street Journal, the National Health Commission urged local governments to avoid unnecessary and lengthy lockdowns.  On the data side,  the Conference Board (CB) Consumer confidence, decreased to 100.2 a 4-month low. Lynn Franco, senior director of economic indicators at the Conference of Board, said that the combination of inflation and interest rate hikes will continue to pose challenges to confidence and economic growth into early 2023.

From the technical perspective, the four-hour scale RSI indicator edged lower to 39 figures as of writing, suggesting that the pair was surrounded by strong bearish momentum. As for the Bollinger Bands, the pair was pricing along with the lower band and trying to find some support from it, meaning that the British Pound is likely to move downward in the near future.

Resistance: 1.2123, 1.2253

Support: 1.1765, 1.1647, 1.1366

XAUUSD (4-Hour Chart)

The XAUUSD rallied on Tuesday, recovering after Monday’s slide. The gold price has almost reversed the previous day’s losses, having captured the $1750 mark amid a renewed sell-off in the US Dollar across its main rivals. Earlier on Tuesday, the three-day coronavirus lockdown-induced protests across China eased. Chinese equity markets rebounded firmly on expectations that the government will further relax its zero-Covid policy after the weekend protests. China’s authorities announced new property market measures while Global Times tweets suggested that the government could do away with its stringent zero-Covid policy sooner. These developments from China improved the market risk sentiment and triggered a sharp retreat in the safe-haven greenback, which, in turn, boosted the dollar-denominated gold. Nevertheless,  the further recovery in Gold prices could be capped by the buoyant tone seen around the US Treasury bond yields, which recovered sharply on Monday after the hawkish commentary from the US Federal Reserve officials.

From the technical perspective, the four-hour scale RSI indicator recovered to neutral level 48 figured as of writing, suggesting that the gold has not made a decisive move. As for the Bollinger Bands, the pair was fluctuating around the 20-period moving average, signalling that the yellow metal would get into a consolidation phase ahead of any surprising event.

Resistance: 1785, 1800

Support: 1740, 1704, 1671

Economic Data