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19 December 2022                             Weekly Analysis

 

GCMAsia Weekly Report: December 19 – 23

 

Market Review (Forex): December 12 – 16

US Dollar

The Dollar Index which traded against a basket of six major currencies received significant bearish momentum last week following the easing of inflationary risk in the US, which prompting investors to shift their capitals toward other assets. The Dollar Index has closed its market price at 104.40.

 

According to the US Bureau of Labor Statistics, the U.S. Consumer Price Index (CPI) YoY for November notched down from the previous reading of 7.7% to 7.1%, missing the consensus forecast of 7.3%. In addition, the core CPI, which excluding volatile food and energy prices rose 0.2% on the month, compared with the estimates of 0.3%. With that, the greenback has plunged over the selling pressure since the odds of aggressive rate hikes was diminished. Besides, the US retail sales fell more than expected in November, while the US Philadelphia Fed Manufacturing Index was also disappointed most of market participants. The pessimistic economy outlook has stoked a shift in sentiment toward other currencies which provided a better return. Nonetheless, the losses of Dollar Index was limited as the Federal Reserve started to shift their stance. Last week, the US central bank raised its interest rate by 50 basis point to 4.50% in early Thursday, after four consecutive 75 basis point hikes. In the Press Conference, the Federal Reserve Chairman Jerome Powell reiterated that the current inflation data was not enough to convince Fed to turn its stance, even economy slips toward a possible recession, which hinted that further rate hike might be implemented. Besides, the US central bank’s projection of the target federal funds rate rising to 5.1% in 2023, which is slightly higher than investors expected.

 

 

USD/JPY

The pair of USD/JPY extended its losses last week while closing its market price at 136.47. The pairing received bearish momentum following the depreciation of US Dollar. The lower-than-expected CPI figures had signaled that the inflation risk in the US was cooling down, as well as the market participants was anticipating a lower rate hikes in the next meeting. According to CME FedWatch Tool, the possibility of 25 basis point rate hikes has reached 75%, instead of 25% for half-of-a-percentage rate hikes. However, Fed Chairman reiterated that the current rate hike path might be continued after the interest rate increase in December, and the pairing has regained some lost ground.

 

 

EUR/USD

The pair of EUR/USD appreciated last week while closing its market price at 1.0578. The Euro received bullish momentum following the inflationary risk in the Eurozone still heightened. According to Eurostat, the Eurozone Consumer Price Index (CPI) YoY for November came in at the reading of 10.1%, exceeding the market forecast of 10.0%. In addition, the European Central Bank (ECB) has increased its interest rate by 50 basis point to 2.50%, as well as the ECB President Christine Lagarde claimed that more hikes might come through, which sparked the appeal of Euro. Though, the gains of Euro was limited over the hawkish statement from Fed.

 

 

GBP/USD

The pair of GBP/USD eased last week while ending last week session at the price of 1.2153. In the earlier week, Pound Sterling received significant bullish momentum after the upbeat economic data has been released. According to Office for National Statistics, the GDP in the UK has rose by 0.5%, and the UK Manufacturing Production has also increased over the last month. The optimistic economy outlook has dialed up the market optimism toward economic progression in the UK. Nonetheless, the Pound Sterling has retreated its previous gains, although Bank of England (BoE) decided to hike its interest rate to 3.50%. According to the BoE’s estimation, the UK will remain in recession throughout next year and the first half of 2024. The bank also forecasted at the November meeting that the UK economy would contract by 0.3% in the fourth quarter. With such background, the BoE would likely to scale back its rate hike pace in the next meeting.

 

Market Review (Commodities): December 12  – 16

GOLD

Gold price dropped significantly last week while closing its market price at $1790.49 per troy ounces. In the earlier week, the gold price received bullish momentum after the lower-than-expected CPI data has been announced. However, the gold price had faced a huge selling pressure after the Fed hinted that further tightening monetary policy might be needed to tackle inflation risk.

 

CrudeOIL

Crude oil price rallied while ending last week session at the price of $75.06 per barrel. Crude oil price received bullish momentum last week following the oil pipeline has occurred leaking issue. Last week, the Keystone pipeline, the largest oil pipeline to the US from Canada has been shut down after a spill of 14,000 barrels, which threatened the oil circulation in the market. On the other hand, Reuters reported that the US Energy Department will repurchase 3 million barrels of domestic crude oil for the Strategic Petroleum Reserve, whereas supporting the oil price. Though, the gains of oil price was limited following the major central banks, such as Fed, BoE and ECB had increased their interest rate, which sparking the fears upon global recession, as well as weighed down the demand of this black commodity. Furthermore, the increase of crude oil inventories had also erased the previous gains of oil price. According to EIA, the U.S. Crude Oil Inventories raised by 10.231M barrels, while the market were expecting a decrease of -3.595M barrels.

 

 

Weekly Outlook: December 19 – 23

For the week ahead, investors would continue to focus on crucial economic data such as the US GDP and US Core PCE Price Index this week in order to determine further direction. Besides that, the ongoing situation with Ukraine-Russia war will also be in the eyes of investors.

 

As for oil traders, they will be eyeing on US inventories level reported by API and EIA to gauge the strength of crude demand for world’s largest oil consumer.

 

Highlighted economy data and events for the week: December 19 – 23

Time Market Event Actual Forecast Previous
Monday – 19th December 2022
17:00   EUR German Ifo Business Climate Index (Dec) 87.4 86.3
Tuesday – 20th December 2022
8:30   AUD RBA Meeting Minutes
9:15   CNY PBoC Loan Prime Rate 3.65%
11:00   JPY BoJ Monetary Policy Statement
11:00   JPY BoJ Press Conference
21:30   USD Building Permits (Nov) 1.483M 1.512M
21:30   CAD Core Retail Sales (MoM) (Oct) 1.50% -0.70%
Wednesday – 21st December 2022
5:30   USD API Weekly Crude Oil Stock 7.819M
21:30   CAD Core CPI (MoM) (Nov) 0.40%
23:00   USD CB Consumer Confidence (Dec) 101 100.2
23:00   USD Existing Home Sales (Nov) 4.20M 4.43M
23:30   USD Crude Oil Inventories 10.231M
Thursday – 22nd December 2022
15:00   GBP GDP (QoQ) -0.20% 0.20%
15:00   GBP GDP (YoY) 2.40% 4.40%
21:30   USD GDP (QoQ) (Q3) 2.90% 2.90%
21:30   USD Initial Jobless Claims 225K 211K
Friday – 23rd December 2022
United Kingdom – Christmas – Early close at 12:30
New Zealand – Christmas – Early close at 12:45
Australia – Christmas – Early close at 14:30
21:30   USD Core Durable Goods Orders (MoM) (Nov) 0.10% 0.50%
21:30   USD Core PCE Price Index (MoM) (Nov) 0.20% 0.20%
21:30   CAD GDP (MoM) (Oct) 0.10% 0.10%
23:00   USD New Home Sales (Nov) 595K 632K

 

 

Risk Statement:

Forex, Gold, Crude Oil, Commodities, CFD and all other margin trading investment products involve high level of risk and may not be suitable for all investors. Your previous investment success in stock, futures or any other investment achieved does not mean that all your future investment will obtain the same results. You should carefully consider your investment objectives; risk associated and seek professional advice before deciding to trade or if you have any doubts.