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The market mood improves after less hawkish Fed minutes

25 November 2022

Oil fell sharply on Wednesday, recording its largest daily drop in two months as the G7 consider capping oil prices at $65-$75 per barrel. Discussions on the price cap will continue today. Weak US data, in addition to rising COVID cases in China, have added to the deteriorating demand outlook for oil. Business activity in the US contracted by more than expected in November amid mounting headwinds from high inflation and rising interest rates. US gasoline stockpiles also rose by more than expected, highlighting slowing demand.

Trading today could be quiet owing to the US Thanksgiving Holiday. Losses have stabilized as the USD falls following the minutes from the latest Fed meeting, which are being interpreted as less hawkish. 

Where might the oil price head to?

Oil has fallen from the November high of 93.10, dropping below a multi-week rising trendline and the 20 and 50 sma. The RSI is below 50, and the 20 sma is crossing below the 50 sma in a bearish signal. Sellers will look to break below 75.27, the weekly low to extend the bearish trend towards 74.14, the 2022 low bringing 70.00 as the psychological level into focus. On the flip side, buyers could look to rise above 82.30, the weekly high, to expose the 20 and 50 sma at 85.20. A rise above here could negate the near-term downtrend.

BTC/USD rises in risk-on trade

BTC/USD is rising for a third straight session as it recovers from 15.5k, the 2-year low hit earlier this week. The cryptocurrency has been boosted by the risk-on mood on the market on signs that the Fed could start easing back on its hawkish. The minutes from the November FOMC show that policymakers agreed that it could soon be appropriate to start downshifting the pace of rate hikes. US equities closed higher. The moves in BTC/USD suggest that the cryptocurrency is stabilizing after the FTX fallout.

While the FTX fallout has raised many questions regarding the future of the industry, some consider that it will make the industry stronger in a survival of the fittest moment. It is also likely to fuel increased regulation.

EUR/USD at weekly high ahead of ECB minutes

EUR/USD is rising above 1.04 to a weekly high, boosted by the upbeat market mood and better-than-expected PMI data. Eurozone business activity unexpectedly improved in November, rising to 47.8, up from 47.3. The level 50 separates expansion from contraction. While this marks the fifth straight month of contraction, the modest increase suggests that the impending recession could be shallower than expected. Meanwhile, US PMIs fell by more than expected, which along with the less hawkish FOMC minutes, are dragging on the USD. Today the minutes of the ECB meeting will be released and could provide further insight as to whether the central bank will slow hikes in December.


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