Further Fed hikes coming, and the Recession might be near

The Federal Reserve is expected to keep raising interest rates at a fast pace to combat inflation, a move that is expected to boost the dollar and weigh on oil markets. Rate hikes are also expected to cool global economic growth, which is a negative signal for crude markets.

On the other hand, an escalating conflict between Russia and Ukraine could disrupt crude supplies from Moscow. A harsher-than-expected European winter could also push up oil demand, particularly for heating purposes. Broader market sentiment also improved after the UK government withdrew a controversial tax cut plan, abating fears of a debt crisis in the country.

U.S. Dollar Index (USDX)

The U.S. dollar rose slightly on Tuesday, recovering from a 1% drop during the last trading day as sentiment improved after the U.K. government made a dramatic reversal on a controversial tax policy. The dollar index rose 0.2% on Tuesday from around ten days low, while dollar index futures rose 0.1%, hovering around the 112 level.

But despite weakening slightly in recent sessions, the greenback is expected to gain in the coming months, especially as the Federal Reserve keeps hiking interest rates to combat rampant inflation.

The dollar index moves downwards after failing to penetrate the resistance at 112.05 but found light support at 111.80. However, the daily chart remains positive on the daily chart as long as the index is trading above 109.60.

Pivot Point: 111.80

Sterling Pound (GBPUSD)

The Bank of England is likely to delay the sale of billions of pounds of government bonds in a bid to encourage greater stability in gilt markets following Britain’s failed “mini” budget, the Financial Times said on Tuesday. The decision by the central bank’s top officials comes after they judged the gilts market to be “very distressed” in recent weeks. The bank had already delayed the start of a scheme to sell down 838 billion pounds of government bond holdings built up after the global financial crisis and during the COVID-19 pandemic.

The pound remains inside the negatively trending channel despite the fluctuations around 1.1250. The hourly chart shows support at 1.1200 while the gap between 1.1180 and 1.1210 indicates weak momentum. On the other hand, the daily chart shows a continuation of the downtrend towards 1.0440

Pivot Point: 1.1360

Spot Gold (XAUUSD)

Gold prices moved little on Tuesday, hovering around key support levels as the dollar retreated from recent highs. Spot gold held on to mild gains from Monday, trading around $1,650.96 an ounce, while gold futures steadied at $1,656.20 an ounce.

Bullion prices benefited from a weakening dollar, as a slew of strong earnings on Wall Street boosted risk appetite and encouraged traders to move away from the greenback. But risk-heavy assets like stocks and foreign exchange were the bigger benefiters from this trend.

Gold prices are heading downwards on the hourly chart reaching the support at $1,665 per ounce. However, the current support is not strong enough to hold against the current selling pressure which might break the supports at 1,665 and 1,659 to head towards 1,650.

Meanwhile, the daily chart remains within the downtrend channel heading towards 1,620 on the foreseen time frame.

Pivot Point: 1,655

West Texas Crude (USOUSD)

Oil prices were muted on Tuesday as markets weighed signs of tightening crude supply against increasing fears that a global economic slowdown will erode crude demand this year. London-traded Brent oil futures were little changed around $91.93 a barrel on Tuesday, while U.S. West Texas Intermediate crude futures rose 0.3% to $84.75 a barrel.

The WTI chart shows a downward trend on the daily chart while trading right above the support at 86.60. However, the technical indicators show a chance of fluctuations between 85.60 and 87.40 before deciding the actual trend. The hourly chart on the other hand is moving below the 20 and 50 periods moving average, indicating a high possibility of a negative trend continuation.

Pivot Point: 85.30