Forex analysis | Amega

Top Market Opportunities 20.12.2021 – 24.12.2021

20 December 2021 Amega

SPX Suffers Losses as Investors Realise Hawkinesh Post-FOMC

Investors look at the post-FOMC environment as hawkish despite the initial reaction having triggered a risk rally, the weekly close showed last Friday.

With the reset setting the equities up for extended bearishness, market participants will shift their focus on economic figures that add to the Fed’s case. Although the calendar is lighter than usual this week due to Christmas, the case for short-term optimism can persist should Fed’s preferred inflation gauge hint at continued pressure come Thursday.

Aside from direct indicators, analysts will keep an eye on Wednesday’s home and consumer confidence data. Hot numbers will likely be seen as a confirmation signal that interest rates are coming, and they might appear sooner rather than later.

Such figures could boost the dollar and add further pressure on bleeding equities. The SPX would find immediate support at the previous swing low of 4492, whereas a break below the said level would initiate a deeper descent towards 4158.

If traders receive negative figures that would suggest that the Fed is not taking swift action, the SPX might find support at 4543 low. This is where markets opened the week before last, which is also August’s high.

Forex analysis | Amega

Cable Likely to Continue To Hang on How Omicron Develops

UK’s policymakers decided to surprise the markets once again before going home for Christmas as they were the first bank to hike rates during the pandemic. While some analysts would say the MPC decided to increase rates despite surging omicron cases and renewed lockdowns, Pill cited the aforementioned as reasons of “temporary” spikes in inflation or fears thereof.

On Thursday, the pound soared more than 100 pips as the decision restored London traders some of the confidence lost in November’s surprise meeting. However, the rally was short-lived as all gains were quickly reversed on Friday, and the pound trades below Thursday now. Many blame a stronger dollar, but the reality is that cable wasn’t prepared to initiate a reversal as the decision to hike 0.15 points proved to be more of a strategic signal to set 2022’s path rather than an attempt to curb inflation. What can a mere 15 basis points hike do to curb inflation?

The UK is not expecting major economic releases this week apart from the revised GDP figures. Instead, the pound will most likely hang on to how the Omicron situation develops in the UK and whether new restrictions exist.

The triple support at 1.3175 makes a decent level of reaction if Omicron gets out of hand, but it would also open up 1.3085 if Boris decided to lock the whole country down before Christmas. On the top side, it will be hard to assume a reversal up to 1.3373 and beyond in this market unless the greenback suddenly comes under severe pressure on an unlikely Santa Rally.

Forex analysis | Amega

Oil Prices Down Despite EIA Reports Record Demand

Oil ended the week lower after failing to recapture 73.15 on rising uncertainty around Omicron. Several factors have added to the downside over the past few months, highlighting oversupply and China’s clampdown. And now, it all seems to start coming into place as WTI is setting itself up for further declines.

On the flip side, EIA reported record demand on the US implied petroleum products for the week ending December 10. Despite prices surging amidst EIA’s inventory draw, pandemic concerns seem to be accelerating the weakness as IEA reaffirmed to investors that the Omicron variant is impacting the markets negatively.

With risk sentiment decreasing, the oil will likely lose its grip below the 67.30 Fibonacci support, reaching 66.12. Should Fed’s case find increasing interest, oil prices might down spiral lower to 61.72 and perhaps even closer to 60 per barrel. Any upside will likely be a relief, and it is unlikely to get past 71.90.

Forex analysis | Amega

Risk Aversion Leads Gold to 3-Week High as Investors Think Again

Gold prices surprised markets post-FOMC last week as risk aversion took hold amidst resurging covid and policy concerns. The safe-haven soared to a 3-week high of 1815 but remained pressured to the downside as long as it trades within the descending all-time high channel.

The inflation hedge trade returns on the table and prices could accelerate towards 1850. Short-term risks include the greenback rising and/or a risk rally which may find investors rotating gains into stocks. Support lies at 1781 in case the round 1800 gives in.

Forex analysis | Amega
Amega

Trade with an award-winning broker! Lowest spreads on the market for Forex, Precious Metals, Energies. No re-quotes, no rejection of orders & instant withdrawals.

Open account