The following are the noteworthy events that traders paid attention to as the week came to an end. Technical analysis on GBPUSD, Gold, the Dow, and WTI Crude is included as well.
Brainard: Fed May Slow Its Hike, Soon
Fed Brainard signaled that the Fed could slow down the pace of its rate hike starting as soon as the next meeting in December, but emphasized that there is additional work to be done. For investors, the message means a weaker outlook for the greenback as the rate hike slows while giving the equity markets and risk assets a boost.
Source: Alchemy Markets
US PPI printed a lower-than-expected figure at 8% versus 8.2% YoY, further solidifying the cool-down in inflation while providing more ground to what Brainard stated earlier
US Retails Sales
Source: Alchemy Markets
Retail Sales picked up in October, exceeding the consensus by 0.4% at 1.3% MoM after being unchanged in September. This means more work for the Fed to slow down consumer spending and keep inflation in check, though inflation has started to show signs of slowing down. Holiday seasons are approaching as well which may have contributed to the rise in numbers and more growth in retail sales for the rest of the year.
The inflation rate in the UK soared to a 41-year high at 11.1%, beating analysts’ expectations of 10.7%, and an entire percent higher than the previous reading. Most of the increment can be attributed to surging energy and food prices. Inflation might have exceeded 13% should the government not implement a cap on energy bills at 2500 pounds. At the same time, Jeremy Hunt, the finance minister has announced a number of tax rises and spending reductions to combat rising prices while sacrificing the growth in living standards that the UK has made over the past 8 years.
The Sterling is holding up decently against the dollar while attempting to break the 1.1850 resistance area to the upside. Its most recent upswing was primarily due to a pullback on the dollar’s strength and we will see how long this will last as the market is digesting the autumn budget by Hunt.
If GBPUSD can gather sufficient bullish power we may see an advance to the 1.2285 area and if not, the price could be supported temporarily by the 50 daily SMA. Looking at the bigger picture, the pair has broken above its long-term bearish trendline which can be seen as positive news for buyers.
The bullish momentum on gold appears to be taking a break as the commodity retraces back to close to its weekly open, and gold prices have been modestly flat today. Struggling to break through 1765, it looks like the dollar is still putting up a fight.
However, our preference remains to the upside, with a target near the 1806 resistance area given the strong bounce up from the 1615 support and a subsequent breakout from both the 50 and 100 Daily SMA. The FOMC meeting minutes next week will be the bigger catalyst that we are eyeing for.
Following a breakout from the bearish trendline, the index is pretty much directionless in the past week of trading. The 34250 resistance seems so near yet so far. Nonetheless, slowing inflation and more dovish statements by the Fed will boost the stock market, hopefully.
We are still eyeing the 34250 resistance as the immediate target, anticipating a follow-through of the previous bullish momentum.
It has been a distressing week for the crude, to say the least as it is making its way to its worst week in more than 3 months. Some major factors contributing to the decline include the reopening of the Druzhba pipeline and China’s covid measures are still straining their oil demand.
Currently testing the $81.80 support, there is a high chance that it would break and end the week lower, probably in the range between $80 and $77. Additional confluences for the bearish outlook include the double top pattern where the price attempted to break higher near $93.30 and also the price closing below both the 50 and 100 SMA on the daily chart.
Financial Market Analyst
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