VOT Research Desk

Market Analytics and Technical Considerations

The market outlook is bullish for the USDJPY above 141, bullish for the EURUSD over 1.0000, and bearish for gold under 1,750.

Compression has emerged for the S&P 500 and the Dollar, which will heighten expectations already raised by the impending liquidity drain of the Thanksgiving break.

Although the gap in Fed rate expectations may put pressure on the dollar to break, it’s also crucial to keep an eye on broader rate predicting and potential recession risks.

Not fourteen days prior, we were amidst outstanding unpredictability that just so ended up leaning toward ‘risk on’ and a ‘Dollar negative’ viewpoint. That move was sparked by the lower-than-anticipated consumer inflation report from the United States, which would in turn capitalize on the consistent market-moving theme of interest rate speculation. There wasn’t much run after the first charge, despite speculation about a lower “terminal” benchmark rate this update would trigger.

Given the still-high rate of price pressures and the opposing winds of issues like an inbound recession, this shouldn’t come as a surprise. A risk-measure like the S&P 500 may be unable to break out of its well-established technical range, which is constrained by numerous moving averages, Fibonacci retracements, and historically significant levels, despite the macro backdrop’s tepid balance.

If we look to the past as a guide for what lies ahead, the month of November is known as a time when volatility and volume typically decrease, while the S&P 500 itself has averaged its second-best performance of the year. Nonetheless, there is further action to be tracked down inside the actual month. More specifically, we are entering the 47th week of the year, which has averaged the third largest week’s loss of the year.

That seems to go against the expectations of a holiday-shortened market on Thursday, when Thanksgiving falls. It’s important to remember that the US holiday hasn’t always been on the same week every year, but it usually falls between the 47th and 48th week.

Whether Thanksgiving is on the 47th or 48th seven day stretch of the year, the ramifications for instability appear to be about something very similar .When looking at the VIX’s averages over time, we can see that activity has decreased since the series’ inception in 1990.On the other hand, there are always chances for exceptions. In fact, volatility increased during the 48th and 49th weeks of the year in 2021.It all depends on the fundamental focus of the market as well as the events that occur on and off the wire. On that front, a serious unresolved situation serves as the backdrop for a gloomy recession. Concerning the upcoming event risk, a few known releases have the potential to agitate the markets.

Organized Event Risk and Themes From the scheduled economic docket for the following week, there is unquestionably a throttling in the significant releases through the end of the following week. However, there are a number of high-profile listings that I will be monitoring for their potential for volatility. The November PMIs, which are due on Wednesday, will provide the most comprehensive and current picture of economic activity worldwide. These economic measures have been heading in the wrong direction for a few months, with many experiencing technical contraction.

The risk of reality sinking in will only grow if that trend continues in the future. In the meantime, important aspects of the world’s largest economy will be represented by Chicago Fed indicators like the US National Activity Index, orders for durable goods, and new home sales

Although earnings may also be low this week, updates from Best Buy, Dollar Tree, and even Baidu will speak to important norms meme carry over, inflation, and China. On the other hand, the threat of a recession remains the most ambiguous and, as a result, the most potent fundamental themes moving forward for us There are a number of other things that have the potential to cause volatility. The outlook for monetary policy is still a significant driver for the US Dollar and capital markets.

The Fed’s rhetoric this past week conveyed a clear message: that even though inflation had fallen recently, there would still need to be more tightening, and that the final rate would be higher than they had anticipated. Using Fed Fund futures, the market’s expectations for the implied rate through June 2023 only slightly shifted, but it has since returned to above 5.00 percent. This shows that these implied rates and the Dollar’s performance diverge significantly in the short term. Will they continue to diverge or converge? And if one changes to the other; which will give in.