Dow Jones, US Dollar, Gold, Euro, British Pound, Fed, ECB, BoE

Market volatility came back to life this past week as the VIX ‘fear gauge’ soared almost 20 percent, the most since August. On Wall Street, the Dow Jones, S&P 500 and Nasdaq 100 dropped 2.08%, 2.71% and 2.72%, respectively. Things weren’t looking too great in Europe either, with DAX 40 dropping 1.5%. Australia’s ASX 200 fell 2.14%.

Much of the volatility occurred towards the end of last week when larger-than-expected US wholesale inflation data for November crossed the wires. It also didn’t hurt the University of Michigan consumer sentiment surprised higher as well. Treasury yields gained across the maturity spectrum, reflecting rising hawkish Federal Reserve monetary policy expectations.

On the chart below, the US Dollar outperformed most of its major counterparts, especially the Japanese Yen. Gold prices were little changed. Crude oil suffered a drop of about 10.9% amid rising concerns of a recession, the most since March. Using statistical analysis, the probability that oil falls 10.9% or more in a given week is roughly 8% based on price action since 2020.

Heading into next week, all eyes turn to the Federal Reserve. Policymakers have been stressing that a slower pace of tightening is likely ahead. Markets are pricing in a 50-basis point rate hike to 4.5%. But, officials have also been increasingly opening the door to tightening for longer. Markets are still looking forward to a pivot, which could result in disappointment.

We will also get the latest CPI report the day before the Fed. US headline inflation for November is seen slowing down to 7.3% y/y from 7.7% prior. An unexpectedly strong outcome could easily send market plunging, boosting the US Dollar and hurting gold. Other notable events include the ECB and BoE rate decisions for the Euro and British Pound, respectively. What else is in store for markets in the week ahead?

How Markets Performed – Week of 12/5

Fundamental Forecasts:

S&P 500, Nasdaq 100 Outlook – Thumb Twiddling Ahead of The Fed

US equity markets are biding their time ahead of next week’s significant data releases and events.

GBP Weekly Outlook: Resilient Pound Prepares for Data Heavy Week

GBP/USD trades on the precipice of a key technical pattern that could be prompted by next week’s Fed and Bank of England (BoE) rate decisions.

Australian Dollar Outlook: US Dollar Remains in the Driver Seat for AUD/USD

The Australian Dollar recovered from a sell-off against the US Dollar throughout the week, but it had little to do with the RBA hike. If the Fed delivers on their tightening, Will AUD/USD rally?

Dollar Forecast Loaded with Volatility Potential but Can It Find a Trend?

The week ahead is jam-packed with high profile US event risk – anchored by the top listing of a FOMC rate decision. The Dollar is significantly off its multi-decade highs after two months of choppy retreat, but is there enough oomph in what’s ahead to produce an outright bear trend…or perhaps spur recovery?

Euro Weekly Forecast: Cold Weather Spurs Gas Prices Ahead of ECB Meeting

Colder weather tests Europe’s resolve as gas storage gets drawn lower, lifting EU gas prices. ECB and other major central bank’s decide on final rate hikes of 2022

Gold (XAU/USD) Forecast: Recent Gains May Come Under Pressure as US Data Takes Center Stage

Gold has struggled to find acceptance above the 200-day MA and $1800 key level. Next week’s data releases are likely to define the medium-term direction for the precious metal.

Technical Forecasts:

Weekly Technical US Dollar Forecast: DXY Downtrend Still in Focus, Eyes on Falling Wedge

The US Dollar was mostly little changed this past week, but it did give up gains from early on. As the pair struggles around the 200-day moving average, a falling wedge is brewing on the 4-hour chart.

XAU/USD Price Forecast: Gold Prices Dimmed by Silver’s Shine

Gold prices ended the week flat as bulls struggled to gain momentum above 1800. With silver extending recent gains, psychological resistance remains intact.

S&P 500, Nasdaq, Dow Jones Forecast for the Week Ahead

Next week is a massive outlay of high impact risk events, with CPI on Tuesday and the Fed on Wednesday. Can bulls break the falling wedge that’s taken all of 2022 to build in the S&P?

USDJPY, EURJPY and NZDJPY Support Different Technical Scenarios

We are coming into the final bursts of potential volatility for the year with USDJPY in the midst of a possible long-term trend change. What is possible for this pair in the week ahead and do all Yen crosses present the same picture?

— Article Body Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com

— Individual Articles Composed by DailyFX Team Members

To contact Daniel, follow him on Twitter:@ddubrovskyFX