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Matteo Marchetti Market Strategist
Analysis, Market Analysis | December 6, 2022

US OPENING BELL 6-12-2022

EUROPEAN EQUITIES ARE BELOW PARITY AHEAD OF THE US OPENING;  THE RBA HIKED INTEREST RATES BY 25 BPS AS EXPECTED, WHILE THE BETTER-THAN-EXPECTED US ISM NON-MANUFACTURING PMI PAUSED THE EQUITY RALLY.

Major European equities remain set to fall this Tuesday, with all indices on the old continent trading below par before Wall Street opens. Currently, the Dax is down 0.15%, the Cac40 0.19% and the Eurostoxx 0.11%.

Market sentiment, in any case, remains positive, despite the setback suffered yesterday, mainly due to the ISM non-manufacturing PMI data in the States, which came in higher than expected (56.5 vs 53.3). This triggered a downward movement in the equity segment and the dollar, and the reaction was similar to that seen last Friday after the NFP data. Even though they now expect an increasingly less aggressive Fed and have largely priced in this monetary policy change on the horizon, they would prefer to continue to see data in line with expectations or worse, to reinforce their confidence in this policy change. Meanwhile, the Covid situation in China is improving, not so much because of the number of infections, which remains sustained, but because of new relaxations in the country’s stringent anti-virus policies. Negative tests will soon no longer be required to enter some public places, and the rules on quarantine will also become more relaxed. In the meantime, the USD/Yuan exchange rate has returned below $7 for the first time since last September, a sign that international investors are once again looking at the country with interest.

Elsewhere, there was a strong movement in the oil market, which swung sharply yesterday (+3%, -3% on the same day) due to the dubious and complex impact the G7-imposed price cap may have on commodity prices.

As for the macroeconomic calendar, today, investors will focus on Canada’s Ivey PMI and the EIA’s short-term energy outlook for the US.


EURUSD, M15

The EURUSD trades around the most significant intraday resistance area, the D-1 VAL. In contrast, the most critical intraday support is the W-1 VAH (as confirmed this morning). From a technical point of view, if prices fail to overcome and consolidate above the resistance, the most likely scenario is a drop toward the support. On the flip side, a breakout of the resistance could lead prices to another attempt to stretch toward the 1.0587 mark (the highest value of the medium-term resistance (blue rectangle).

Main intraday support areas where to look for long trades in case of a bullish candlestick pattern or short trades in case of a bearish candlestick pattern: 1.0483, 1.0429, 1.0404.

Main intraday resistances areas where to look for short trades in case of a bearish candlestick pattern or long trades in case of a bullish candlestick pattern: 1.0518-1.0525, 1.0587.

S&P500, M30

The S&P500 is trading in a close range after yesterday’s drop. From a technical standpoint, the most significant intraday support area is between the D-1 POC and the W-3 VAH. In contrast, the most crucial resistance area is the W-2 POC. As long as prices remain above the support, the most likely scenario is a pullback to target the resistance. On the other hand, should the index drop below the support after the cash opening, further declines towards the W-1 POC (uncovered) are expected.

Main intraday support areas where to look for long trades in case of a bullish candlestick pattern or short trades in case of a bearish candlestick pattern: 3991-4002, 3968, 3956.

Main intraday resistances areas where to look for short trades in case of a bearish candlestick pattern or long trades in case of a bullish candlestick pattern: 4027, 4043.

Key:

POC= Point of Control
VAH= Value Area High
VAL= Value Area Low
LVN= Low Volume Node
HVN= High Volume Node
W-1= last week
W-2= two weeks ago
W-3= three weeks ago
D-1= yesterday
D-2= two days ago
D-3= three days ago

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