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FX.co ★ 28.11.2022: Investors digesting new COVID risks and US retail sales (S&P500, USD, CAD, Bitcoin).

28.11.2022: Investors digesting new COVID risks and US retail sales (S&P500, USD, CAD, Bitcoin).

Hi, dear traders! InstaForex analysts are ready to share their forecasts with you. This trading week is jam-packed with macroeconomic reports and events. Investors are alert to the US nonfarm payrolls, GDP data, and comments from Fed’s policymakers in order to fine-tune their strategies.

For a start, let’s analyze the results of the last trading week. The benchmark stock indices closed mixed on Friday. The Dow Jones logged the strongest performance. The index jumped 152 points to close 0.45% up. The Nasdaq slipped 0.58% on Friday. The S&P 500 shed 1 point or 0.03% to close at 4,026.

The stock market opened in the red on Monday. The S&P is expected to trade in the intraday corridor between 3,910 and 4,040.

Wall Street closed sluggishly the last short trading week. The trading volume measured 4.54 billion shares, much lower than the average volume of 11.25 billion shares for the last 20 trading days. Interestingly, the three key indices closed the week with gains with the Dow Jones taking the lead. It logged the biggest gain of 1.78%.

The Nasdaq lacked luster being under pressure from Apple whose facility in China delivers worrisome news. The flagship factory Foxconn in China is expected to decrease its supplies in November because thousands of employees quitted jobs in light of the last wave of discontent.  

Clashes in China persisted over the weekend and on Monday. Since mid-week, Beijing reported new daily records of COVID cases. On Monday, the authorities updated a new peak for 5 days in a row. The lion’s share of cases is symptom-free.

No doubt, the protests against COVID restrictions in China and social unrest are the culprit of global risk aversion. Market participants are trying to puzzle out what to expect from the second-largest global economy. Any lockdown release will instantly boost the appetite for risk. On the contrary, tightening restrictions will spark off fears of low demand, a downturn in manufacturing, and logistic problems.

Apart from global jitters, Wall Street will evaluate consumer activity in the US. The pre-Christmas season is an accurate barometer of consumer sentiment. The information on Black Friday was mixed. On the one hand, retailers did not report a flood of consumers. On the other hand, retail sales were extremely robust.

The US National Retail Federation forecasts that Christmas sales, including e-commerce, could expand 6-8% in November and December. It is 13.5% lower than the surge last year, following a growth of 9.3% in 2020.

Such data might cheer up investors and, in turn, propel a Santa Claus rally in the stock market. On the flip side, strong retail sales could encourage the US Fed to make its rhetoric more aggressive.

In any case, the equity market is at the crossroads, being sensitive to Fed’s speakers. To sum up, the New York session today could be gloomy. Apart from pandemic fears, Fed policymakers might put extra pressure on Wall Street. James Bullard and John Williams are due to speak tonight.The US dollar gained ground on Friday but it is trading lower today like most assets. Its index lost another 0.4% in the pre-market and sank to 105.6. The intraday corridor for the index is seen between 104.9 and 106.2.

Despite a minor growth on Friday, the US dollar is pinned at multi-month lows, being weighed down by the prospects of moderation in the Fed’s cycle of rate hikes.

The Fed’s minutes released on Wednesday showed that most members of the rate-setting committee found it appropriate to ease the pace of further rate hikes.

Besides, an increase in US initial unemployment claims and a lower-than-expected CPI convinced investors that the US dollar might snap its rally.

From now on, analysts suppose that the US Fed will raise the funds rate by 50 basis points in December. This likelihood is measured at 71.1%. The federal funds rate will reach its peak in June 2023.

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*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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