The last week of troubled 2022 has begun. Due to Christmas holidays, American and European investors who form the majority of liquidity in the markets, will return on Tuesday. This does not necessarily mean elevated volatility in the market but neither does it mean a relaxed week considering the COVID-Tsunami in China and widely expected turmoil in the U.S. stock market and appreciation of the U.S. Dollar.
Chinese authorities are trying to mitigate the panic by forbidding daily publications of COVID cases numbers. But fear from last week when shocking figures showing that37 million people were infected in a single day were released is still very much felt.
Macroeconomic data publications this week could hardly obscure Chinese madness. Some positive tunes, however, were added last Friday by the PCE Price index that dropped to 5.5% year-on-year in November from 6.1% a month before, and core PCE Price Index that slowed a drop to 4.7% year-on year during the last month compared to 5.0% in October. The Federal Reserve (Fed) is closely monitoring these indicators but even these figures are far from the Fed’s target at 2.0% of annual inflation.
Technically, the S&P 500 broad market index continues to look down with rising chances of a free fall towards 3400-3500 points, and a possibility of then spiraling to extreme targets below 3000 points.
Oil prices are rallying ahead of Russia’s announcement of counter measures after the EU introduced a price cap on Russian seaborne oil. Brent crude prices are slowly taking off from the resistance at $78-80 per barrel. But it would be better to wait for the official response from Russia, as recession fears and some exclusions in the price cap mechanism may offset crude to rally. Brent crude prices over $78-80 per barrel are rather seen as a temporary departure that would end a new selloff wave to the nearest support at $68-70 per barrel. The lowest targets are currently seen at $60-70 per barrel.
Gold prices are charting an upside formation with targets at $2000-2100 per troy ounce by the middle of 2023. A short-term primary scenario suggests prices may roll back towards $1700-1720 per ounce by the middle of January. Only then may the gold rally be resumed.
The money market continues to experience elevated volatility that prevents the use of short-term signals. So, it is better to place orders that are attached to longer perspectives. Short trades of AUDUSD were opened at 0.68000-0.68500, and for EURUSD at 1.05000-1.05500. Downside targets for these trades are at 5000 points below opening prices. The same applies to stop-loss orders that are 5000 points above order prices.