As more central banks continue to catch up with the FED's policy, we could be seeing a shift in the balance of power in the currency market says XTB's Walid Koudmani

As more central banks continue to catch up with the FED's policy, we could be seeing a shift in the balance of power in the currency market says XTB's Walid Koudmani

The level of $80 could play an important role in determining whether the upward move continues or if WTI will encounter resistance and pullback once again

 

While the situation on the oil market has been quite uncertain as of late, particularly after the start of the Russia-Ukraine conflict, prospects of slowing demand resulting from economic downturn have been weighing increasingly on the price of this key commodity. Furthermore, the ongoing zero-covid China policy has significantly impacted demand prospects in the world's second biggest economy as lockdowns and industrial shutdowns have reduced the need for transportation and impacted shipping routes. Despite this, there is still one last OPEC+ decision left for 2022 and while it is unlikely the group will decide to adjust production, any notable shift in production quotas could have an effect on prices and bring an increase in volatility as we head towards the end of the year. The level of $80 could play an important role in determining whether the upward move continues or if WTI will encounter resistance and pullback once again. 



This week's prints stand for the last data pack ahead of December Fed decision, supposing they came as a surprise would Fed go for a 75bp rate?

 

This week's highly anticipated data pack may play an important role in the final FED decision of 2022 as the central bank continues its fight against inflation while attempting to not cause a demand shock. Consumers remain under extreme pressure as prices rise across the board while rising commodity prices add to the problem and as the central bank's hawkish policy continues to constrain demand. The US central bank has shown a willingness to adjust its policy according to the data and this time could be similar as many begin to speculate as to when it will begin to reverse its policy while others wonder if the target rate will be adjusted further. In either case, the FED might be running out of ammo when it comes to tackling inflation and may choose a more cautious approach in order to ensure that it is mitigated in a sustainable manner.


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This NFP report may also have an important role when it comes to the strength of the US Dollar as the greenback continues to be under pressure after a period where it dominated all other currencies

 

In addition to playing a key part in the inflation discussion, this NFP report may also have an important role when it comes to the strength of the US Dollar as the greenback continues to be under pressure after a period where it dominated all other currencies. The USD Index has been dropping for several weeks and while it may be unlikely that we see a significant rebound, the FED's decision may lead to a change in sentiment as we head into 2023. Furthermore, the USDIDX is testing the 200 SMA on the daily chart after trading in the reaction area around 106 points which may act as a support if it manages to hold. As more central banks continue to catch up with the FED's policy, we could be seeing a shift in the balance of power in the currency market away from the US dollar which has reigned over others in recent times.

 

As more central banks continue to catch up with the FED's policy, we could be seeing a shift in the balance of power in the currency market says XTB's Walid Koudmani

Walid Koudmani

Market Analyst working in UK-Italian-Arabic markets covering a broad range of assets including stocks, commodities, FX and crypto. English, Italian and Arabic Speaker with a B.A in Business Management. Quoted in many prestigious publications including the Guardian, Barrons and Lefigaro and winner of bloomberg top forecast rank Q-2/Q-3 2020.