THE LONDON OPEN 13-10-2022

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THE LONDON OPEN 13-10-2022

EUROPEAN STOCKS OPENED LOWER AFTER A NEGATIVE ASIAN SESSION; THE FOMC REAFFIRMED THE FED’S HAWKISH STANCE AS INVESTORS LOOK TO THE US CPI.

European stocks opened lower this morning after a negative Asian session, where the ChinaA50 index lost 1.19%, the ASX200 0.07% and the Nikkei 0.60%. Market sentiment remains weak following the minutes of the FOMC monetary policy meeting released last night, which showed that the Fed’s executive arm is still firmly focused on maintaining the restrictive monetary policy. This is because inflation is still high, and as several members of the committee expressed, the cost of taking insufficient action to curb inflation is undoubtedly more elevated than the cost of taking too much action; they also reiterated how history shows that, at least in the U.S. context, it is very dangerous to discontinue a restrictive monetary policy prematurely. The FED is, therefore, willing to sacrifice much of the demand, negatively affecting employment (which will increase) and economic output (which will decrease) as long as price stability is restored. It also does not help the new growth of Covid contagions worldwide, particularly in China, where new lockdowns are feared and where the government’s “Zero-Covid” policy has decimated economic growth in recent times.

Elsewhere, in the currency markets, the JPY continues to trade at highs since 1998, while on the commodities front, WTI oil continues its retracement from period highs after OPEC and EIA cut their demand outlook, citing risks of possible new lockdowns in China, rising (to be confirmed tonight) crude inventories, and continued slowdown in economic growth.

As for the economic calendar, investors will focus today on crucial U.S. inflation data, initial jobless claims and crude oil inventories.

EURUSD, M15

The EURUSD remain under pressure below the most significant intraday resistance area, between the current weekly VAH and the current weekly POC. Prices are then below the current weekly POC, a negative bias for today. From a technical point of view, as long as the pair remains below the resistance, the most likely scenario is a continuation of the trend toward the W-2 POC. On the flip side, if prices can overcome the current weekly VAH, a stretch to the 0.9743 mark and to the W-1 POC in case of a breakout is 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: 0.9633.

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: 0.9707-0.9724, 0.9743, 0.9800.

WTI, M15

The WTI continues its retracement from recent heights and is now trading above three essential supports: the W-1 POC, the W-3 VAH and the W-1 VAL. On the opposite side, the most crucial intraday resistance areas are the weekly LVN around the 86.51 mark and the current weekly POC. From a technical point of view, as long as prices remain above the W-1 POC, the most likely scenario is a pullback to the weekly LVN and to the current weekly POC in case of a breakout of the latter. On the other hand, if prices can break the w-1 POC, another drop towards 84$ per barrel is 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:85.34, 84.87, 84.00.

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: 86.51, 88.29.

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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