U.S. Midterm Elections Ahead

What You Need to Know

Asian markets are on the upsurge, especially the Hong Kong market, which climbed more than 11% in November. The Sterling will suffer as the BoE has turned its focus from inflation to saving its negative economic outlook, which will drive the market to sell off more pounds. Meanwhile, the U.S. midterm elections are around the corner, and the markets are feeling more confident about the Republican party, believing that the equities market will perform better under a GOP majority in congress. Oil prices, on the other hand, slid after their surge last Friday. This is due to the Chinese authorities reaffirming their strict COVID policy, quelling hopes for a rebound in oil demand.  

bond

Look Out For

Current rate hike bets on 14th December Fed interest rate decision: 

50 bps (61.5%) VS 75 bps (38.5%)

Market Overview

Economic Calendar

Market Movements

USDX

The Dollar Index, which trades against a basket of six major currencies, retreated from its higher level following the United States releasing its mixed economic data last Friday. According to the Bureau of Labor Statistics, US Nonfarm Payrolls came in at 261K, which exceeded the market expectation of 200K. Nevertheless, the unemployment rate increased significantly to 3.7% from September’s reading of 3.5%, missing the market forecast of 3.6%. The mixed economic data sparked further uncertainty on the US Dollar, which prompted investors to start taking profits.

On the technical front, the Dollar Index is trading lower while currently testing the support level at 109.95. MACD has illustrated increasing bearish momentum, while RSI is at 40, suggesting the downside is more favoured as the RSI stays below the midline.

Resistance level: 111.75, 113.45

Support level: 109.95, 107.55

XAU/USD

The downbeat unemployment data from the United States has increased the odds for the Federal Reserve to moderate the hiking pace, which underpins the dollar-denominated gold. Besides, the rising geopolitical tensions due to the US midterm election have stoked a shift in sentiment toward the safe-haven asset, which increased further bullish momentum on gold.

The gold market is trading higher while currently testing the resistance level at 1681.85. Nonetheless, MACD has illustrated diminishing bullish momentum, while RSI is at 63, indicating that the commodity is going into an overbought area.

Resistance level: 1681, 1721

Support level: 1619, 1584

EUR/USD

The euro rallied higher last Friday due to the weakening dollar and US mixed economic data. However, the euro remains trading below 1.0000 at 0.9932 at the time of writing. Markets are awaiting the US CPI date, which is due on Thursday. Besides that, eurozone finance ministers will discuss better coordinating support for economies against soaring energy prices to reduce its risk for the 2023 budgets. 

MACD has crossed above the zero line and is moving upward, indicating an upbeat bullish momentum. The RSI has also spiked to 60 as of writing, which suggests the pair is trading in bullish momentum.

Resistance level: 1.0000, 1.0103

Support level: 0.9871, 0.9676

BTC/USD

BTC broke through the resistance at 21000 over the weekend. While there has been no obvious catalyst for the coin to surge, it quickly retraced after hitting 21550, heading back to the 21000 level. The trading volume seems to be quiet, and the markets might be pondering over the midterm U.S. election before taking any action. 

The RSI quickly dropped to 50 after btc surged over its resistance level at 21000 depicts that the buying power is not strong and MACD has converged on the above signalling a weak momentum as well. 

Resistance level: 21730

Support level: 20400, 18500

DJ30

The Dow Jones rebounded from its lower level following the retracement of US Treasury yields. The 2-year and 10-year Treasury yields eased slightly last Friday following a fresh 15-year high as the downbeat unemployment data has continued to weigh on rate hike expectations. As for now, investors will continue to scrutinise the latest developments concerning the US Inflation data and US midterm election for further trading signals. 

The overall trend for the DJ30 remains bearish following prior retracement from the resistance level at 33065. MACD has illustrated increasing bearish momentum, while RSI is at 62, suggesting the index’s outlook is bearish in the near-term as the RSI retreated sharply from overbought levels. 

Resistance level: 33065, 34320

Support level: 31045, 29805

GBP/USD

As a correction, the pound has seen some volatility in the opening session today. Moreover, the BoE has shifted its focus from inflation to the UK’s worsening economic outlook, giving investors reasons to sell off the pair. Now the markets are waiting for Prime Minister Rishi Sunak and Chancellor Jeremy Hunt to announce the government’s medium-term fiscal policy in the next two weeks, which will become a trigger point for the pound.

MACD shows a cross below the zero line, indicating a bearish momentum as of writing. RSI is trading at 47, which indicates the pair is still hovering within bearish momentum.  

Resistance： 1.1464，1.7792

Support： 1.0931, 1.0396

USD/JPY

A mixed U.S. economic result and the market speculating that the Fed will slow down its rate hike program has put pressure on the dollar. Japan authorities intervention over its currency has also seen some results as the Yen is slightly stronger against the dollar. U.S. inflation data and the midterm elections result will be the critical factor to watch in the week ahead. 

RSI and MACD have shown no signal over which direction the pair is heading. The MACD has been hovering near the zero line, and the same goes for the RSI which currently ranges between 50 to 43 in November. 

Resistance level: 148.76, 149.965

Support level:  145.83, 142.305

CL OIL

Crude oil prices slumped more than 2% during early Asian trading following the news that Chinese officials vowed to stick to the Covid-zero policy as cases continue to rise in China, dashing the demand outlook on this black commodity. According to the National Health Commission, China recorded 4,420 new locally transmitted Covid-19 infections on Saturday, reaching its highest number of new Covid-19 cases in six months.

The crude oil price is forming the double-top signal while retracing from the resistance level at 92.60. MACD has illustrated diminishing bullish momentum, while RSI is at 58 after it retreated sharply from the overbought territory, suggesting the commodity extended its losses toward our first support level at 89.65.

Resistance level: 92.60, 97.10

Support level: 89.65, 86.80