Economic Data Releases
The RBNZ hiked rates as expected by 75 bp taking its official cash rate from 3.5% up to 4.25% (the highest level since early 2009). The central bank board pointed out that the core inflation rate was very high, and the unemployment number was beyond its sustainable level.
The Eurozone manufacturing PMI flash data (Nov) released earlier of 47.3 has come in higher than expected at 46. Similarly, the UK manufacturing PMI flash data (Nov) of 46.2 has come in higher than expected at 45.8.
Markets expect the US durable goods orders numbers (Oct) at 5:30 pm UAE time followed by the US manufacturing PMI flash data (Oct) at 6:45 pm, then the US Michigan consumer confidence index figure at 7:00 pm. Finally, investors will check the FOMC minutes of the last Fed meeting at 11:00 pm.
Indices and Bonds Yields
The US major indices steadied as markets ignored the imposed social restrictions in China due to the rise of COVID-19 cases and focused more on the FOMC minutes. Investors hope to find signals that the central bank’s tight monetary policy was contingent only on hot inflation reads.
The US two years yields at 4.50% remained higher than the 10 years treasury yields at 3.75%. A negative spread in favor of the shorter bonds yield reflects a yield curve inversion and highlights that the US economy is heading into a recession.
Major FX Currencies
The US dollar price fell due to a stronger risk appetite on news of possible deregulation of the tech sector in China.
Technically, the dollar moves in the area between 105.42 - 108.11. A daily close above the high end of this area could encourage traders to push the price toward 109.42, while a daily close below 105.42 opens the door for traders to press toward 103.83.
The EUR/USD steadied above 1.0200 as the euro benefited from higher-than-expected manufacturing PMI data with a stronger risk appetite.
Technically, the EUR/USD may revisit 1.0111 while below the head and shoulder neckline at 1.0340 (developed on the four-hour chart). On the other hand, a daily close above 1.0415 may encourage traders to rally the price towards 1.0503 and 1.0559 respectively.
The gold price stabilized on a weaker US dollar. It should be noted that the gold traders will be waiting the FOMC minutes release today to act accordingly.
Technically, the gold price may fall toward 1720 while below the neckline of the head and shoulders pattern at 1755 (developed on the four-hour chart). On the other hand, a daily close above 1747 may send the price even higher towards 1765.
The oil traders await the possible approval of the European plan to impose a price cap on Russian oil prices (possibly between 65-70 USD) while Russia responded that it would not sell oil to any country that participates in this in this plan. It should be noted that the crude rate fell below pre-Russian-Ukrainian war price levels due to a possible global recession combined with concerns of a softening demand outlook from China.
Technically, it should be noted that WTI oil price closed on multiple occasions above 79.82 and could be on the way toward 85.15. That said, a daily close below 79.82 could embolden bears to press toward 74.97
Chart of the Day: S&P 500 Daily Price Chart
Chart Source: ThinkTrader
On October 21st
the SP500 price corrected higher then started an upward trend creating higher highs with higher lows. Nonetheless, the ADX read below 20 highlights a weak bullish momentum.
Currently, the index moves in the area between 3939 – 4139. The price rebounded on multiple occasions from the lower end of the mentioned area eyeing a test of the high end of it. On the other hand, any daily close below the low end of this area opens the door for a further decline towards 3722. However, the support level located at 3830 should be considered.
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