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.