Market Analytics and Technical Considerations
Key Points
- Support for the euro recovered as the US dollar declined.
- Many Fed speakers reiterated the message about increased rates.
- There may be a turning point for the US dollar.
After widespread market sentiment improved as a result of Chinese authorities’ repression of protesters, the Euro has recouped some of yesterday’s losses.
Just shy of the psychological 1.05 level, EUR/USD reached a five-month high on Monday before the rout began. So far on Tuesday, the Euro has made up some ground while the US Dollar has dropped everywhere.
Despite several speakers from the Federal Reserve reminding markets that tighter monetary policy is coming, the US dollar is weakening.
In the North American session, Fed board members Lael Brainard, John Williams, and James Bullard led the hawkish rhetoric before Thomas Barkin took over after the New York session ended.
The overall message remained constant. Despite the fact that rate increases have slowed down, they are still rising and may remain so for longer than the market currently anticipates.
The Dow, S&P 500, and Nasdaq all finished the cash session down approximately 1.5% as a result of Wall Street taking notice. When futures reopen later today, they point to a steady start.
After the authorities retaliated against protesters who are opposed to the lockdowns that are currently in place there, equity indices in both China and Hong Kong surged.
The loss of a few basis points across the curve on Monday has been made up by Treasury yields. Overnight, the US 2s 10s yield curve again fell below -0.80%.
In another area, Japan’s unemployment rate for October was slightly lower than anticipated, at 2.6%, as opposed to the 2.5% forecast. After hitting a two-month low of 137.50 yesterday, USD/JPY has risen above 138.50.
Additionally, ahead of the OPEC+ meeting on Wednesday, crude oil has found more stability. There had been some hypothesis that they could cut creation by more than the 2 million barrels each day previously declared.
At the time of printing, the Brent futures contract was close to US$ 85 bbl and the WTI futures contract was close to US$ 78.50 bbl.
As the repercussions from FTX continue, the cryptocurrency industry continues to face obstacles, with BlackFi declaring bankruptcy.
Looking ahead to today, German CPI will be released after Swiss GDP figures and Canadian GDP later on.
TECHNICAL ANALYSIS OF EUR/USD
After failing to hold onto a five-month high yesterday, the EUR/USD rate has since dropped back into its most latest trading range of 1.0223 to 1.0482.
Prior to the breakage at 1.0198, support may be found at the most low point of 1.0223.
Resistance on the upside might come from the dual tops of 1.0482 and 1.0497 or higher, at the peak from June of 1.0615, which is just below the breakage at 1.0638.
