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Daily market analysis

US Consumer Confidence boosted the sentiment

December 22, 2022

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

CurrencyDataTime (GMT + 8)Forecast
GBPGDP (QoQ)15:00-0.2%
GBPGDP (YoY)15:002.4%
USDGDP (QoQ) (Q3)21:302.9%
USDInitial Jobless Claims21:30222K