Analysis Market overview

Top Market Opportunities 29.11.2021 – 03.12.2021

Investors Eye Wage Growth for Hints at Inflation

Admittedly, investors’ quest for safety transpired in the markets last week as the Omicron variant shook every last bit of confidence away ahead of Christmas.

The new covid originating from South Africa forced several countries to ban travel to seal themselves from contacting the most transmissible variant ever seen as more cases are being detected by the hour.

This can be bad news going forward as central banks might have to postpone tapering or hiking given the difficulty in fighting Omicron with less effective vaccines.

The Fed will provide the first hints on Tuesday as newly reappointed Chair Powell will speak in front of the Senate Banking Committee.

If the narrative around inflation and bond tapering changes or Powell hints at some postponement following this new variant, the dollar will likely be impacted negatively. However, if the Fed Chair indicates that the situation is under control, markets might fluctuate ahead of the monthly jobs report on Friday.

In either case, volatility is expected to be high near the end of the month, and markets patiently await the wages figures.

USDCHF will be interesting to watch as it heads towards last November’s 0.91 swing low after a failed attempt to break past a multiyear descending trendline.

Coincidently, the 62% Fibonacci lies near the round 0.92 support, which currently acts as a barrier between the current prices and how bearish the pair can turn.

With the 38% offering resistance, a rejection can be detrimental going into the last few days of November. However, the haven bulls will have to get through the 50% Fibonacci at 0.9230 first.

Forex analysis | Amega

BoE Might Have to Rethink Rates Now

Although the calendar is somewhat light for London this week, on Wednesday, Dec 1st, the UK will taper the credit welfare payment uplift introduced at the beginning of covid officially from 63 to 55 pence temporarily.

Since the UK officially enters winter on Wednesday, impacting some half a million people who depend on universal credit, the UK market might be affected by sentiment.

In addition, Fed Powell’s talk might create a chain event regardless of how hawkish BoE Pill’s speech was last week.

As the week goes by, markets will focus on consumer credit and mortgage lending data, house price figures, and the PMI prints on Friday.

GBPJPY has been on a nosedive since the October top at 158.25 and remains under pressure amidst the last flight to haven yen.

Despite the recent rejection of the descending trendline at 150.75, the pair is set to decline towards the 150.40 Fibonacci support.

A break of the said support might see bears attempt to 32% strengthen as the MACD and RSI indicators show more downside due to bearish divergences appearing on both. Initial support could be found at the 148 round level, whereas 152.75 makes a weekly top.

Forex analysis | Amega

Aussie Hags on GDP Figures

With risk aversion dominating, high beta currencies remain under pressure and are likely to do so during the week as momentum around Omicron is unlikely to change.

A glimpse of light might be offered on Aussie should GDP figures come near the 0.7 percent expectation economist await. However, Australia has several other data pieces to be impacted by throughout the week, from Retail Sales to PMIs and Home Loans.

The Aussie has been on a downward spiral recently, especially after RBNZ decided to hike, as it remains one of few banks to talk down rate expectations.

EURAUD has done exceptionally well the last month as a weaker Aussie allowed the pair to bounce off 1.5350 and rise to 1.59. Despite currently finding support at the round 1.58 level, prices are bound to appreciate toward 1.62 and perhaps higher once the 50% resistance gets a confirmed break.

If 1.5756 support breaks, we could find support lower at 1.57. However, a retest of the 1.5746 might save the day.

Forex analysis | Amega

Oil Traders Await OPEC+

As cases of covid rise and new travel bans are imposed, oil demand might keep falling for the foreseeable future. If we consider how flooded the markets might be with several countries’ recent oil reserves releases and OPEC+ supply increases, crude prices might deteriorate further.

OPEC+ members are ready to respond to countries that released their SPRs on Thursday as they meet to discuss output increase and whether to begin a 400,000 per day increase. Although oil traders are concerned about the group’s decision, word has it that they will likely pause production until January as crude suffers from oversupply and weak demand.

Last Friday, crude dropped more than 10 percent to $67.30, which happens to be the 23% Fibonacci retracement of the post-covid bounce. The ascending channel’s penetration, although temporally, for now, might add more to the downside up until Thursday’s meeting at least, and perhaps even down the line should OPEC+ take a reciprocal approach to the SPR release.

In case the support breaks, the next critical level lays miles below at $55.70. However, the $63.50 makes firm support in between levels and will likely offer some short-term bounce.

On a different note, the upside might be limited to $73.50 for the week. Although, chances of even a sighting of upside remain questionable.

Forex analysis | Amega

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