Asian investors got positive news. China's top coronavirus official, Vice Premier Sun Chunlan, said the country's efforts to combat Covid were entering a new phase thanks to a decline in the number of cases with the Omicron strain and the widespread vaccination.
Yesterday, Jerome Powell reversed to a more dovish rhetoric. It was a good sign. For that reason, we can no longer expect the US dollar to continue to strengthen against risky assets. In the futures market, the Fed's peak rate expectations were revised lower, which may also weaken the demand for the US dollar and allow the stock market to surge.
Powell's statements confirmed expectations that the Federal Reserve would only raise interest rates by 50 basis points this month, as opposed to a series of four hikes of 75 basis points. Swap market prices are indicating that the Fed's interest rate is likely to peak at 5% in May and remain so for a short period of time. Prior to Powell's comments, the market was expecting a peak above that level in June.
Now investors are guessing on whether the US economy will be able to avoid recession and how economic growth will develop in the coming quarters. The key US indicators showed mixed results in the third quarter. New jobs fell in October - an encouraging sign for the Fed as it seeks to curb demand - while Friday's labor market report also forecasts a serious drop in new jobs which is harmful for the economy.
Oil prices were moving sideways after a three-day rally, as investors assessed China's latest signals that it may soften its zero-Covid policy. OPEC+ is also expected to set a production ceiling for 2023.
As for the S&P 500 index, the trading instrument soared and consolidated above $4,064. Defending this range will be a priority for today. As long as it is trading above $4,064, we may expect an increase in demand for risky assets. That is likely to strengthening the trading instrument and push it towards $4,091 and $4,116, especially after Powell's statement. If the price pierces the level of $4,150, the price may continue the upward correction and reach to the resistance level of $4,184. If we see a decline in the price, bulls should protect at $4,064. If the S&P 500 index plunges below this level, the pressure on the price is likely to return. Meanwhile, if this level is broken through, the trading instrument may be sent to $4,038 and to the area of $4,003.