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USD Gets Support From Hawkish Powell

The USD got some support yesterday yet during today’s Asian session traded at lower levels against some of its counterparts. In his testimony before the Senate yesterday, Fed Chairman Powell stated that the bank would discuss expediting the tapering of its QE program in the bank’s December meeting, providing support for the greenback as the hawkish tone seemed to take the markets by surprise. Also Chairman Powell tended to imply a strong economy, a slow growth in the US employment market and stated that high inflation is expected to continue until mid-next year, once again implying a rather transitory nature of the inflationary pressures in the US economy. Its characteristic that the Fed Chairman sounded confident that the impact of the Omicron variant of the pandemic could be lighter. Today we note the release from the US of the ADP national employment figure for November, yet the main release could prove to be the ISM manufacturing PMI figure for the same month.

The USD Index jumped on Powell’s testimony, reaching as high as the 96.65 (R2) resistance line, yet corrected lower and remained below the 96.15 (R1) resistance level. Temporarily we tend to maintain bias for a sideways motion between the 96.15 (R1) resistance line and the 95.60 (S1) support line, yet some bearish tendencies seem to exist. The RSI indicator below our 4-hour chart is between the readings of 30 and 50 also implying an advantage for the bears. Should there actually be a selling interest for the greenback we may see the index breaking the 95.60 (S1) support line and aim for the 94.95 (S2) support level. Should the index on the other hand actually find fresh buying orders along its path, we may see it breaking the 96.15 (R1) resistance line and aim for the 96.65 (R2) resistance level.

Oil’s drop seems to be extended

WTI prices extended their losses yesterday and closed their worst monthly drop since the pandemic started in March 2020. Fundamentals for oil traders cannot exclude OPEC’s meeting which is about to start along with its allies, which is to decide the oil production levels in the coming months. It should be noted that OPEC last week had noted that the release of strategic oil reserves by the US, China, Japan and India could create a surplus in the oil market and we note that the Omicron variant added more uncertainty on the demand side of oil. Should OPEC decide to curtail its production levels we may see oil prices jumping higher, while today oil traders may be keeping an eye out for the weekly US EIA crude oil inventories figure.

WTI prices dropped yesterday testing the 65.00 (S2) support level yet corrected higher and floated above the 67.35 (S1) support line in today’s Asian session. We maintain a bearish outlook for the commodity currently and for it to change we would require a clear breaking of the downward trendline guiding the commodity’s prices since the 26th of the November. Please note that the RSI indicator below our 4-hour chart is near the reading of 30 and despite the slight upward slope, seems to confirm the bearish sentiment of the market. Should the bears continue to guide WTI’s price, we may see it breaking the 67.35 (S1) support line and aim for 65.00 (S2) support level. On the other hand, should the bulls take over, we may see WTI’s price breaking the prementioned downward trendline and the 70.00 (R1) resistance line in search of higher grounds.

Other highlights today and during tomorrow’s Asian session

Besides the financial releases allready mentioned we would also like to note in the European session UK’s Nationwide House prices for November, Germany’s retail sales for October, Switzerland’s CPI rates for November and Germany’s as well as UK’s final manufacturing PMI figures for November. In the American session, we get from Canada the building permits growth rate for October and the manufacturing PMI figure for November. During tomorrow’s Asian session we note the release of Australia’s trade data for October

USD Index H4 Chart

Support: 95.60 (S1), 94.95 (S2), 94.30 (S3)

Resistance: 96.15 (R1), 96.65 (R2), 97.30 (R3)

WTI H4 Chart

Support:67.35 (S1), 65.00 (S2), 61.70 (S3)

Resistance: 70.00 (R1), 73.45 (R2), 76.60 (R3)

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