<p class=“MsoNormal“>As the Fed delivered a <a target=“_blank“ href=“https://www.forexlive.com/centralbank/federal-reserve-hikes-50-basis-points-as-expected-20221214/“ target=“_blank“ rel=“follow“>more
hawkish than expected stance</a>, the market sold off for some
days as the risk of an overtightening coupled with a deep recession caused risk
aversion across the board, affecting the Russell 2000. The Fed is resolute on bringing the inflation
rate back to their 2% target and they are willing to go for a “hard
landing” scenario to achieve that. </p><p class=“MsoNormal“>This can be seen by the subtle
hawkish messages like them not revising the terminal rate in the <a target=“_blank“ href=“https://www.forexlive.com/centralbank/fomc-dot-plot-and-central-tendencies-from-dec-2022-meeting-eoy-2023-48-20221214/“ target=“_blank“ rel=“follow“>Dot
Plot</a> after the <a target=“_blank“ href=“https://www.forexlive.com/news/us-november-cpi-71-yy-vs-73-expected-20221213/“ target=“_blank“ rel=“follow“>miss
in the CPI report</a> even if they could do so until the evening or them
complaining about the <a target=“_blank“ href=“https://www.forexlive.com/centralbank/federal-reserve-hikes-50-basis-points-as-expected-20221214/“ target=“_blank“ rel=“follow“>tight labour market</a> hinting that they want to see the unemployment
rate picking up. </p><p class=“MsoNormal“>All of these things point to the
two of the worst things for the stock market: overtightening and serious
recession.</p><p class=“MsoNormal“>RUSSELL 2000
Technical Analysis</p><p class=“MsoNormal“>In the
chart above we can see how the market initially spiked up as the <a target=“_blank“ href=“https://www.forexlive.com/news/us-november-cpi-71-yy-vs-73-expected-20221213/“ target=“_blank“ rel=“follow“>CPI
report missed</a> again expectations but soon after got faded as
the market went defensive into the FOMC meeting. Sure enough, the Fed came
out as more hawkish than expected causing a risk-off <a target=“_blank“ href=“https://www.forexlive.com/Education/understanding-market-sentiment-20220217/“ target=“_blank“ rel=“follow“>sentiment</a> in the following days. The
price broke down through a swing low support and kept on falling until the
selling momentum waned.</p><p class=“MsoNormal“>In the 1-hour chart above we can
see how the price <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-divergence-20220429/“ target=“_blank“ rel=“follow“>divergence</a> with the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-relative-strength-index-rsi-20220426/“ target=“_blank“ rel=“follow“>RSI</a> was hinting to a loss of
selling pressure. In such instances generally the price pullbacks to a
previous swing level or the top/bottom of the swing where the divergence
started. In the chart above the price retraced back to the top (orange line) of
the whole divergent move. </p><p class=“MsoNormal“>This is also a previous broken
swing low <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>support</a> area (blue) that now may turn
into a <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a>. The price now is struggling
right at the resistance as we can tell by the multiple rejections and
candlesticks wicks. If the price breaks down through the blue trendline the sellers
would be again in control.</p><p class=“MsoNormal“>On the daily chart above we can
see how the CPI spike couldn’t break the resistance area at 1910-1920.
After the FOMC the price broke down through the minor blue support zone. As the
selling pressure waned, the price pull backed and it’s currently retesting the
previous broken support that now may turn into resistance. </p><p class=“MsoNormal“>On a downward continuation the clear
target is the double bottom level at 1642. If we get another “Santa Claus
Rally” the price should break up the blue resistance area and reach again the
1900 price zone.</p>

This article was written by ForexLive at www.forexlive.com.

<p>Headlines:</p><ul><li><a target=“_blank“ href=“https://www.forexlive.com/news/10-year-jgb-yields-fall-back-after-first-run-up-against-050-20221222/“>10-year JGB yields fall back after first run up against 0.50%</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/how-significant-was-the-impact-of-the-boj-surprise-this-week-20221222/“>How significant was the impact of the BOJ surprise this week?</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/centralbank/ecbs-de-guindos-50-bps-rate-hikes-may-be-the-new-standard-20221222/“>ECB’s de Guindos: 50 bps rate hikes may be the new standard</a></li><li><a target=“_blank“ href=“https://www.forexlive.com/news/uk-q3-final-gdp-03-vs-02-qq-prelim-20221222/“>UK Q3 final GDP -0.3% vs -0.2% q/q prelim</a></li></ul><p>Markets:</p><ul><li>AUD leads, CAD lags on the day</li><li>European equities little changed; S&P 500 futures down 0.1%</li><li>US 10-year yields down 2.3 bps to 3.641%</li><li>Gold flat at $1,814.63</li><li>WTI crude up 1.8% to $79.68</li><li>Bitcoin up 0.2% to $16,829</li></ul><p style=““ class=“text-align-justify“>Markets are slowly winding down to the holiday period, with meaningful headlines few and far between. Bonds moved higher on the day, owing to a drop in 10-year JGB yields after having run up against the 0.50% mark set out by the BOJ yesterday.</p><p style=““ class=“text-align-justify“>Equities are looking more tepid now after a decent start, with US futures nudging a touch lower while European indices have also pared early gains to keep more flattish at the moment.</p><p style=““ class=“text-align-justify“>In the FX space, the dollar is just a smidge lower with losses more evident against the yen and aussie. USD/JPY is seen trading 0.3% lower to 132.10 as the plunge from Tuesday begins to consolidate. Meanwhile, AUD/USD is up 0.4%. to 0.6735 as the pair keeps a bounce off its 100-day moving average from around 0.6658 earlier in the week.</p><p style=““ class=“text-align-justify“>EUR/USD is up 0.2% to 1.0625 as buyers look to build on a shallow upside break while other major currencies are mostly little changed against the dollar.</p>

This article was written by Justin Low at www.forexlive.com.

<p class=“MsoNormal“>Following the <a target=“_blank“ href=“https://www.forexlive.com/centralbank/federal-reserve-hikes-50-basis-points-as-expected-20221214/“ target=“_blank“ rel=“follow“>more
hawkish than expected FOMC meeting</a>, the market and the Dow Jones went into risk-off
mode breaking down and selling off for a few days. The market is now fearing
the risk of overtightening from the Fed as economic conditions deteriorate and
the Fed seems to be resolute to keep financial conditions tight for longer. The
absolute worst for the stock market is a too tight monetary policy and a deep
recession. </p><p class=“MsoNormal“>In fact, the Fed has been
complaining about the <a target=“_blank“ href=“https://www.forexlive.com/news/us-november-non-farm-payrolls-263k-vs-200k-expected-20221202/“ target=“_blank“ rel=“follow“>“extremely
tight” labour market</a> for several times, they can’t have the confidence
in loosening their stance until they see the unemployment rate picking up. So,
in the end that leads to a “hard landing” scenario especially since the actual
layoffs were always bigger than the Fed forecasts. </p><p class=“MsoNormal“>DOW JONES Technical Analysis</p><p class=“MsoNormal“>In the chart above we can see how
the market cheered initially as the <a target=“_blank“ href=“https://www.forexlive.com/news/us-november-cpi-71-yy-vs-73-expected-20221213/“ target=“_blank“ rel=“follow“>CPI
report missed</a> again expectations but soon after went into
defensive mode as the FOMC event approached. The market was right, and the Fed
was more hawkish than expected causing a risk-off <a target=“_blank“ href=“https://www.forexlive.com/Education/understanding-market-sentiment-20220217/“ target=“_blank“ rel=“follow“>sentiment</a> in the following days. The price
broke down and kept falling until the selling pressure waned.</p><p class=“MsoNormal“>In the 1-hour chart above we can
see how the price <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-divergence-20220429/“ target=“_blank“ rel=“follow“>divergence</a> with the <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-understanding-relative-strength-index-rsi-20220426/“ target=“_blank“ rel=“follow“>RSI</a> was signalling a loss of
momentum to the downside. In such instances generally the price pullbacks to a
previous swing level or the top/bottom of the swing where the divergence
started. In the chart above the price retraced back to the top (orange line) of
the whole divergent move. </p><p class=“MsoNormal“>This is also a previous broken <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>support</a> area (blue) that now may turn <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-support-and-resistance-20220405/“ target=“_blank“ rel=“follow“>resistance</a>. In fact, the price is diverging
with the RSI again showing some struggle right at the resistance. A break to downside
through the blue trendline and the orange line would give sellers more control
again.</p><p class=“MsoNormal“>On the daily chart above we can
see how the CPI spike couldn’t break the resistance area at 35200-35400. After
the FOMC the price broke down through the blue <a target=“_blank“ href=“https://www.forexlive.com/Education/technical-analysis-trendlines-20220406/“ target=“_blank“ rel=“follow“>trendline</a> and the previous swing low
support zone. </p><p class=“MsoNormal“>As the selling pressure waned,
the price pull backed and it’s currently retesting the previous broken support
that now may turn resistance. On a downward continuation the clear targets are
the swing low at 31761 and further down the October low at 28650.</p>

This article was written by ForexLive at www.forexlive.com.