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China unrest as Covid lockdowns ramp up

28 November 2022

Oil prices have dropped to an 11-month low at the start of the week as protests escalate in China in response to the strict zero-COVID restrictions. More and more localized lockdowns have been imposed, and civil unrest has broken out. As COVID infections rise to daily record highs in China, the world’s largest oil importer, the demand outlook for crude oil has deteriorated. On the supply side, the December OPEC+ meeting is later this week and comes following a 2 million barrel per day production cut, which was announced in October.

Where might the oil price head to?

After hitting resistance at 92.34 in early November, the price of oil has rebounded lower. Oil has taken out the previous low of 7525 to fall to a new 11-month low. The RSI could support further downside while it remains out of oversold territory. Sellers could look to break below 73.15, the early December 2021 high, to bring 70.00 round number into target. A break below here opens the door to 66.15, the December ’21 low. Buyers could look for a more over 75.15 and 76.40, the September low, to mount a recovery towards the 80.00 round number.

BTC/USD falls in risk-off trade

BTC/USD is heading lower at the start of the week, slipping over 3% in risk-off trade after consolidating across the weekend. The risk-off mood comes as protests erupt across China due to the ramping up of unsustainable COVID restrictions. The hit-to-risk sentiment sees investors ditching riskier assets, which the safe haven USD rises. This latest move comes as the industry continues to watch the fallout from the FTX scandal. Bitcoin is attempting to stabilize around 15.5k to 17k. Where BTC/USD goes from here could depend on whether buyers manage to defend the 15.5k level, a break below here opens the door to 13.5k. Buyers will look for a rise over 16.8k to bring the 17.6k handle into the picture.

EUR/AUD heads higher after weak Australian retail sales

EUR/AUD is rising after Australian retail sales unexpectedly fall and amid the unrest in China, Australia’s largest trading partner. Retail sales fell for the first time this year, dropping by -0.2% as household incomes show signs of coming under pressure amid high inflation and rising interest rates. Expectations had been for a rise in sales by 0.5%. Resilient consumer spending had been one of the reasons that the RBA kept hiking rates aggressively. However, in the last RBA meeting, policymakers slowed the rate of hikes. The euro is rising against the weaker AUD, as attention turns to ECB’s Christine Lagarde, who is due to speak later. Investors will be listening for clues on the path of rate hikes amid growing speculation that the ECB could slow the pace of hikes in the December meeting.


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