IMF Warns Of China Econ Downgrade Over Covid Policy

IMF Concerns Over China Covid PolicyThe focus on China continues to build this week. Following ugly scenes of police clashing with protestors at the weekend, the scrutiny of the government’s zero-covid policy has intensified leading the IMF to warn that it might be forced to downgrade its Chinese economic outlook unless the policy is abandoned. IMF MD Georgieva made these comments yesterday in Berlin, warning that growing uncertainty linked to record defaults in the property sector and the broader disruption caused by lockdowns and business closures, meant that the crisis-lender might be forced to cut its outlook. This comes on the back of the lender cutting its China growth forecasts in October to 3.2% this year and 4.4% next year.PMI Data DropsThe impact of recent lockdowns was reflected very clearly in the latest PMI data released overnight. The Chinese manufacturing PMI was seen falling to 48 in November, below the 49 level the market was looking for. This marks the weakest reading since April, when China was reeling in the wake of two month’s worth of widespread lockdowns. Non-manufacturing was hit even harder, falling to 46.7 from 48 prior. With both readings well into contractionary territory, the outlook for overall GDP is tuning lower into the end of the year.China Announces CrackdownGiven that covid cases in China are soaring, it seems hard to think the Chinese government will u-turn on its covid policy. Indeed, the Chinese government has warned that it will crackdown even harder on anyone taking part in any further protests. This will include stricter monitoring from the Chinese internet watchdog targeting anyone deemed to be liking or creating content in opposition to the government’s covid policy. This comes on the back of further violent clashes between protestors and police yesterday in Guangzhou. Reuters has confirmed footage of protestors and police engaged in street battles.Two-Way RisksLooking ahead, the outlook appears quite clear. If China maintains its zero covid policy in coming months the economy will suffer sharply as a result. Furthermore, continued clashes between protestors and police risk spilling over into a national security situation, which will further harm the economic outlook for China, hurting global risk sentiment. However, if the government takes the unlikely step of scrapping its zero covid policy, we can expect risk sentiment to rise sharply in response.Technical ViewsShanghai CompositeThe rally off recent lows around the 2867.1980 level has seen the marker breaking above the 3043.1853 level and above the bear channel resistance. With momentum studies bullish, the focus is on a further push higher while price holds above 3043.1853. The next hurdle for bulls is the 3185.9209 level which, if broken turns focus to the 3347.6880 level next.

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BTC / ETH / XRP – Cryptos on the brink!

The world of cryptocurrencies is living a year that will remain engraved in the memories, with a series of dark signs that have undermined the confidence of investors (Luna, FTX) and the change in monetary policy of the US Federal Reserve, which to fight against inflation has operated an extremely aggressive rate hike, causing a tense flow in favour of the safe haven that is the Dollar, with the USDIndex currently around the 106.00 level.

The Fed’s stated objective is to bring inflation down to 2%, and to do this it has not hesitated to raise rates by 0.75 basis points, four times in a row. This action has caused inflation to fall from a peak of 9.1% in June to 7.7% by October 2022, but has not steepened the yield curve which remains deeply inverted, particularly the 2 and 10 year, a phenomenon which generally indicates a coming recession.

source: Refinitiv

The market expects a slowdown in the rate hike of +50 bps on December 14 2022, At the November 1-2 meeting a majority of members of the US Central Bank pronounced themselves in favour of a slowdown in the pace of interest rate increases, however this morning voices of Fed officials are raised in favor of a rate hike, including John Williams, president of the New York Federal Reserve, who said on Monday that he expects inflation to fall, while stressing that core inflation, especially in a booming labour market causing “rapid” wage growth, is the most difficult to combat. (see chart below).

source: Cmegroup

“Inflation is far too high, and persistently high inflation undermines the ability of our economy to reach its full potential,” Williams said. Williams, the New York Fed president,  expects the core PCE index to slow from 5.1% to 3%; 3.5% in 2023, driven by reduced supply chain disruptions and slower global growth, the latter of which is expected to push the unemployment rate to between 4.5% and 5% by the end of next year, Williams said. A slowdown by the US Central Bank, does little to reassure investors in cryptocurrencies and so-called risky assets, especially at a time when global growth is on the brink and China is struggling with an economy shaken by the return of COVID.

Technical Analysis BTC, Daily

The BTC price is currently at the $16405 level below its KIJUN (Lv) and Tenkan (Lj) clouds; the Lagging Span (Lb) is below the cloud and its peers clearly meaning that it is in a bearish momentum. This pullback could lead the price to its lowest level at $13914, and if it is broken, it could reach its support at the $9903 level. On the other hand, if the price rises again, it could reach $23915.

Technical Analysis ETH, Daily

The ETH price is currently at the $1204 level below its KIJUN cloud (Lv) and is above its Tenkan (Lj); the Lagging Span (Lb) is below the cloud and its peers meaning hesitation. The price could reach its first support at $1064 if broken it could reach the $908 level a second time. On the other hand, if the price goes up again, it could reach $1374.

Technical Analysis XRP, Daily

The XRP price is currently at the level of $0.3836 below its KIJUN cloud (Lv) and above its Tenkan (Lj); the Lagging Span (Lb) is above the cloud and below its peers clearly signifying hesitation. The price could reach its first support at $0.3567 and if it is broken it could reach the level of $0.3380 a second time. On the other hand, if the price goes up again, it could reach $0.3988.

Kader Djellouli

Market Analyst

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Market Update – November 30

• The USDIndex slightly below 1-week ahead amid reports of a softer stance on Covid emerging in China’s official rhetoric, which is keeping hopes alive that there won’t be a move back to tighter restrictions. All eyes are on an expected hawkish stance from Chair Powell’s speech today.
• Japan’s factory output fell for a second consecutive month in October, a
• Stocks –The Nikkei closed with a -0.2% loss, the ASX managed a 0.4% gain and Hang Seng and CSI300 are currently up 1.1% and 0.1% respectively. GER40 and UK100 futures are up 0.6% and 0.4% respectively. US futures are underperforming, but also managing slight gains. Wall Street closed mixed with the NASDAQ dropping -0.59% on weakness in tech and the rise in yields.
• Japan’s factory output fell for a 2nd consecutive month in October, China’s factory activity contracted at a faster pace in November, weighed down by softening global demand
• JPY – is holding in the 138-139 range.
• USOil – supported ahead of the OPEC+ meeting on December 4. Energy was lifted by easing in China jitters.
• AUD & NZD on a downward pressure from worse than expected Chinese manufacturing surveys.
• Gold – extendes gain to $1757.

Today – Attention is on Powell’s speech later today, who is likely to reinforce yesterday’s hawkish Fedspeak from Williams, Bullard, and Mester who all stressed rates are headed higher still and could remain so for some time. Elsewhere is EU HCPI, US ADP and Q3 GDP.

Biggest FX Mover @ (07:30 GMT) GBPAUD (-0.25%), declines to 1.7816 from 1.7930. MAs aligning lower and RSI at 34.8 and MACD histogram & signal line remain below 0. H1 ATR 0.00267, Daily ATR 0.01538.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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13 ways to save on your energy bill

As the weather gets colder and bills rise, we outline 13 ways you can save on your energy bills.

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S&P 500 E-mini Futures ( ES1! ), H4 Potential for Bullish Continuation29

Type: Bullish ContinuationKey Levels:Resistance:4173.25Pivot:3913.25Support:3751.75Preferred Case:On the H4 chart, we have a bullish bias. Furthermore, the price is above the Ichimoku cloud , indicating a bullish market. If the bullish trend continues, price may move towards the 4173.25 resistance level , which contains the 78.6% Fibonacci Fibonacci line.Alternative Scenario:Price could retest the pivot line at 3913.25, where the 50% Fibonacci line is. Fundamentals:There are no major news.

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Oats Futures ( ZOK2022 ), H4 Potential for Bearish Momentum

Type: Bearish MomentumKey Levels:Resistance:745.500Pivot:613.250Support:665.000 Preferred Case:On the H4 chart, we have a bearish bias. To add confluence to this, price is under the Ichimoku cloud which indicates a bearish market. If this bearish momentum continues, expect price to head back down the the support level at 665.000, where the 78.6% Fibonacci line is.Alternative Scenario:Price may go back up and head towards the resistance at 745.500 where the 38.2% Fibonacci line is located.Fundamentals:There are no major news.

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The IndeX Files 29-11-2022

Equities Rebound As China Unrest CalmsEquities markets look to be stabilising today following initial losses suffered yesterday as traders reacted with caution to events in China. A wave of civil unrest spread across China on the back of 10 people dying in a tower fire in Urumqi province. Locals accused the rescue operation of being hampered by the government’s zero-covid policy and protests broke out calling for an end to the restrictions. These protests grew in number and location over the weekend and led to clashes between police and protesters with many suggesting the protests eventually became about more than just the government’s covid policy.However, with Chinese authorities having seemingly put an end to the protests for now, the sell off in equities prices has paused and most indices are in the green today. Looking ahead, there is some speculation that the Chinese government might announce an end to its zero-covid policy, which would be firmly welcomes by markets. However, this appears at odds with the ongoing covid restrictions being announced in Shanghai today.Away from China, the focus remains on December FOMC expectations. The Fed is widely tipped to opt for smaller 50bps hike. Any incoming data or Fed commentary this week supporting that view will likely allow equities room to move higher. However, any data or comments suggesting room for a further, large hike, will weigh on equities. US GDP on Thursday and Jobs data on Friday will be the headline events to watch.Technical ViewsDAXThe breakout in the DAX has seen the market extending beyond the recent 13672.31 level and the 14170.79 also. The rally has paused for now, just shy of testing the 14703.98 level and with momentum studies waning, some pull back might be seen. However, while price holds above the 14170.79 level, the focus remains on further upside near-term.S&P 500The S&P continues to grind higher within the bullish channel which has framed the rally off the YTD lows. For now, price is holding above the 3910 level and while above here, the focus is on a break of the bearish trend line from YTD highs and a test of the 4153.50 level next.FTSEThe rally in the FTSE is ongoing this week with price breaking out to its highest level since August. Price is currently stalled into a test of the bear channel top, having rallied almost 13% off the October lows, with the 7575.8 level sitting just above market. To the downside, 7362.6 remains key support.NIKKEIThe rally off the September lows has seen the market breaking above the 27422.9 level. Price is currently testing the 28356.6 level resistance, following an earlier attempt at a breakout. Momentum studies are waning here, suggesting room for correction. However, while above 27422.9, focus is on a further topside break.

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Market Update – November 29 – Tightening Tilt, COVID control & Month End flows

• The USDIndex rallied to 106.70 in the previous session but formed a correction in Asia session to 106.00 ahead of a COVID-19 press briefing in China that is spurring hopes of a potential easing in the country’s strict pandemic restrictions.
• Fed Officials Signal Higher rates: Hawkish reminders from key Fed officials Williams, Bullard, and Brainard that rates will have to go higher helped weigh on the markets in Monday action. Wall Street was weaker overnight on the back of Williams’s and Bullard’s comments, and slipped further as Brainard tripled down on the rate outlook.
• US houses prices fall like 2008
• Stocks – Global stocks rise after yesterday’s dip. US100 and US500 dropped -1.58% and 1.54%, respectively, with the US30 off -1.45% amid broadbased weakness. Today however the rumours of an earlier easing of strict COVID-19 restrictions along wihth vaccination for over 80-year old, found buyers in stock market with Chinese stocks rebound. Hang Seng and CSI 300 bounced 4% and 3% respectively. ASX and Nikkei closed narrowly mixed. GER40 and UK100 futures are up 0.5% and 0.4% respectively.
• EUR – reversed from 5-month peak. Currently at 1.0360. ECB’s Lagarde said overnight that inflation had not peaked and it risked turning out even higher than currently expected, hinting at a series of interest rate hikes ahead.
• JPY along with Yuan, Aussie and Kiwi on bid.
• GBP – turns again below 1.20 at 1.1987.
• USOil – jumps to 80.00 as China refines its approach for dealing with protest and Covid control. All eyes are on OPEC+ meeting in the weekend. EU fails to agree on Russian oil price cap once again.
• Gold – fully recovered yesterday’s losses, currently at$1754.

Today – Swiss GDP, German HICP , Canadian Q3 GDP, US Consumer Confidence and BOE Governor Bailey speech.

Biggest FX Mover @ (07:30 GMT) NZDUSD(+1.10%), bounces to 0.6235. MAs aligning higher and RSI at 63 but MACD histogram & signal line remain below 0. H1 ATR 0.00147, Daily ATR 0.00962.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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Weekly Market Overview: 28 November 2022

The Dollar Index starts the new week on the back of the dovish November FOMC meeting minutes and the shifting risk complex in the market.

Dollar

The Dollar begins the new week retreating to a 9-day low on the back of an increased risk sentiment in the market. Factors driving this selling bias in the Dollar can be mainly attributed to the dovish assessment that was made of the November FOMC meeting minutes that were released last week, which cemented the increasing probability of a smaller 50 basis point rate hike in December as opposed to the 75 that previously had a higher probability. Heading into the week, investors will be eyeing the rising Covid-19 cases in China and the resulting protests from citizens, as well as the expected speeches from FOMC members James Bullard and John Williams.

Technical Analysis (D1)

In terms of market structure, price has come to a significant juncture by invalidating the uptrend drawn from Feb 2022. Since then, price has been moving to the downside and sellers are about to reach a key level of interest located around the 104.12 area where the previous higher-low was formed. If bulls can defend this area, the narrative could still remain bullish, however the opposite applies if the area is invalidated by sellers.

Euro

The Euro kicks off the week on the front foot as it reaches a two-week high above the 1.045 area. Factors driving this buying interest in the European common currency can be linked to Dollar dynamics as some weakness driven by lower US yields puts pressure on the Dollar. Heading into the week, investors will be eyeing the narrative from the ECB concerning their hiking cycle, as well as the increasing recession risks driven by energy concerns and record high inflation.

Technical Analysis (D1)

In terms of market structure, price has invalidated the longer-term downtrend formed from mid-May 2022 and has done so in an impulsive break of structure. Since then, the bulls have been driving price, creating higher-highs and higher-lows. The next line in the sand to be challenged will be the 1.061 area.

Pound

Sterling begins the week maintaining the bullish bias and trajectory it’s been on recently. Factors contributing to the buying interest in the British currency can be firmly linked to the weakness in the demand for the Dollar as well as increasing expectations from investors around the BoE continuing to raise interest rates to fight off stubbornly high inflation.

Technical Analysis (D1)

In terms of market structure, price has invalidated the longer-term trendline. Since then, the bulls have been in control of the narrative and threatening to test the next line in the sand located around the 1.227 area where there could potentially be sellers waiting to drive price back down.

Gold

Gold heads into the new week with the bulls firmly in control of the narrative as price heads towards a two-week high. Factors contributing to this exuberance can be linked to less aggressive rate hikes being priced into the pipeline from the FED going into their December meeting, which is lending the yellow metal firm buying interest. Additionally, the rising Covid-19 fears in China are adding to the impetus seen on Gold as investors flee from risk assets towards the safe-haven status that Gold provides in times of economic uncertainty.

Technical Analysis (D1)

In terms of market structure, Gold has just broken out of the outer trendline on the downtrend, and since then, bulls have been in control of price. Currently the next line in the sand for sellers to defend is the $1,809 area. If breached, this could give bulls the impetus to drive the narrative further and if it holds, new sellers might be interested in testing the bulls.

Click here to access our Economic Calendar

Ofentse Waisi 

Financial Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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EURUSD Targeting 1.0620... MS Month End Model Update

Technical & Trade ViewEURUSDTrade ViewBias: Bullish Above Bearish below 1.0390TechnicalsPrimary support is 1.0390Primary upside objective is 1.0620Next pattern confirmation, acceptance above 1.0485Failure below 1.03 opens a test of 1.022020 Day VWAP bullish, 5 Day VWAP bullishToday’s New York Cut Option Expiries: 1.0240-50 (2.4BN), 1.0250 (2.0BN), 1.0300 (737M), 1.0350 (377M), 1.0390-00 (1.06BN), 1.0405-15 (777M),  1.0425 (1.0BN), 1.0450-55 (708M) Institutional InsightsAnalysts at Morgan Stanley note ‘Equity market performance appears to influence trading volumes and returns: We published a foundation report to show that local equity returns in G10 are linked to appreciating local currencies versus USD in the last week of the month, possibly due to asset manager flows (see Introducing Our FX Month-End Signal Framework). For November 2022 the model expects the US dollar to underperform: Our signal suggests that USD should weaken versus all currencies in the G10 this month-end. The FX month-end strategy considering the last week of the month has not performed as well over the past few months as it did earlier in the year. Last month, the dollar gained against most G10 currencies at month-end, though positive equity returns led to our signal suggesting dollar weakness.

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Copper Futures (HG1!), H4 Potential for Bearish Drop

Type: Bearish DropKey Levels:Resistance:3.6920Pivot:3.5545Support:3.3840Preferred Case:On the H4 chart, we have a bearish bias. To add confluence to this, price is under the Ichimoku cloud which indicates a bearish market. If this bearish momentum continues, expect price to possibly break the Pivot at 3.5545, where the 61.8% Fibonacci line is, before heading towards the support level at 3.3840, where the previous swing low is.Alternative Scenario:Price may go back up towards the resistance line at 3.6920, where the 38.2% Fibonacci line is.Fundamentals:There are no major news.

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Cocoa Futures ( CC1! ), H4 Potential for Bullish Rise

Type: Bullish RiseKey Levels:Resistance:2506Pivot:2422Support:2280Preferred Case:On the H4 chart, we have a bullish bias. To add confluence to this, price is crossing back above the Ichimoku cloud which indicates a bullish market. If this bullish momentum continues, expect price to head back up towards the 1st resistance at 2506 where the 23.6% Fibonacci line and 100% Fibonacci projection line are located.Alternative Scenario:Price head back down towards the Pivot line at 2422, where the 50% Fibonacci line and 61.8% Fibonacci projection line are located.Fundamentals:There are no major news.

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EURO FX Futures ( 6E1! ), H4 Potential for Bullish Continuation

Type: Bullish ContinuationKey Levels:Resistance: 1.05090Pivot:1.01315Support:1.03600Preferred Case:The current bias for 6E1! on the H4 chart is bullish . To add to this bias, the price is currently above the Ichimoku cloud , indicating a bullish market. If the bullish momentum continues, expect price to possibly head towards the 1st resistance line at 1.05090 where the previous swing high is located. Alternative Scenario:Price may head back down breaking the support at 1.03600 where the 161.8% Fibonacci line is before heading towards the pivot at 1.01315, where the previous swing high is located. Fundamentals:There are no major news

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Activision Blizzard：Pressured Following Possible Regulator Intervention

Activision Blizzard (named after the merger between Activision and Vivendi Games in 2008) is known as the largest US gaming company by market capitalization (currently over $57B). The company engages in delivering content through premium and free-to-play offerings, generating revenue from full-game and in-game sales, subscriptions, and by licensing software to third-party or related-party companies that distribute Blizzard products.

Fig.1: Top Gaming Companies by Market Capitalization. Source： Statista

While the trading volume of the US stock market remained thin last week in accordance with the Thanksgiving holidays, the share price of Activision Blizzard plunged over 4% as there was a report that the US Federal Trade Commission (FTC) is likely to file an antitrust lawsuit, thereby halting Microsoft’s acquisition of Activision Blizzard that is worth $69B. The stock ended up as one of the worst intraday performers in the US100 index.

According to Zacks Research, the video game industry has been doing exceptionally well during the Covid pandemic, with overall sales revenue rising 26% and hitting a record high at $191B. However, sales growth began deteriorating since 2022 as more entertainment options became available following economic reopening. In addition, soaring inflation continued to hurt spending on discretionary items. Nevertheless, market participants expect the video game industry to steadily bounce back later in Q4 2022 as sales start picking up. There will be multiple title releases in the coming year, which could serve as a short-term positive catalyst for sales growth.

Fig.2: Activision Blizzard’s Net Revenue and Net Income. Source： Statista

Last year, Activision Blizzard’s net revenue reached $8.8B, up over 8% from a year ago. Nearly 74% of the revenue was generated from in-game, subscription and others, while the rest was generated from product sales. On the other hand, net income hit $2.7B, which was also the highest record ever achieved.

Fig.3: Activision Blizzard’s Net Revenue, by region. Source： Statista

At least 3% of Activision Blizzard’s net revenue derived from China, the world’s biggest market for online games. Recently, the company announced suspension of its services in China beyond January 2023 following failure in extending licensing agreement with local firm NetEase. Coupled with age and playing time restrictions imposed by the Chinese government, the gaming company’s revenues may be adversely affected.

Fig.4: Reported Sales of Activision Blizzard versus Analyst Forecast. Source： CNN Business

Activision Blizzard shall report its earnings for Q4 2022 on 9^th February next year. Consensus estimate for sales stood at $3.1B, up over 70% from the previous quarter and 24% from the same period last year.

Fig.5: Reported EPS of Activision Blizzard versus Analyst Forecast. Source: CNN Business

EPS is expected to hit $1.51, more than double the previous quarter. In Q4 2021, the figure was $1.25. All in all, reported sales and EPS for the year are expected to hit $8.1B and $3.02 respectively, below those printed in 2020 and 2021.

Technical Analysis:

Fig.6: Activision Blizzard Historical Price. Source：Google Finance

The #ActivisionBliz (ATVI.s) share price has been riding on a strong bullish trend after gaining support from the pivotal retrace in September 2018. It hit an all-time high in February 2021, at $104.48, before undergoing a massive sell-off throughout 2021 to hit a new low since 22^nd March 2020 at $56.35. The asset once again rebounded higher from Dec 2021-Jan 2022, but since then has remained capped below $86.

Technically, #ActivisionBliz last closed below $74 (FR 38.2%). The FR 50.0% ($80) and the 100-week SMA serves as the next resistance. On the contrary, as long as the asset price remains pressured below $74, support levels to watch include $68 (FR 23.6%), $56.35 (2021 low) and psychological level $50.

Click here to access our Economic Calendar

Larince Zhang 

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

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