Global Markets Mixed as Investors Await Central Bank Decisions

Stocks in Asia posted a mixed performance on Tuesday as investors braced for key central bank meetings this week. The Federal Reserve is widely expected to cut interest rates by 25 basis points, while the Bank of Japan (BoJ) is likely to maintain its ultra-loose monetary policy stance. Against this backdrop, the dollar held firm, and oil prices hovered near $70 per barrel.

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In regional markets, Australia’s shares rose on positive commodity price movements, while Japan’s Nikkei dipped slightly on profit-taking and cautious sentiment. Taiwan’s stock index managed a 0.3% gain, reflecting optimism around the tech sector. Meanwhile, the broader MSCI Asia-Pacific index (excluding Japan) fell 0.3%, weighed down by weakness in Chinese markets, though it remains on track for a 10% annual gain.

Sentiment in China remains fragile amid renewed concerns over slowing consumption and a struggling housing sector. New data highlighting ongoing softness in the property market pressured both mainland Chinese stocks and the Hang Seng index. Investors remain wary of the Chinese government’s limited progress in reviving domestic demand.

In Europe, most indices have opened in the red, while Germany’s DAX appears more buffered and is ranging between 20,474 and 20,193 after the strong 21% rally year-to-date. Market participants are awaiting for the Fed’s meeting on Wednesday evening which could act as a potential catalyst.

Eurozone Early Indicators Signal Contraction

In the Eurozone, the latest economic indicators presented a mixed picture. The Purchasing Managers’ Index (PMI) for the services sector rose from 49.5 to 51.4, moving above the critical 50-point threshold that separates expansion from contraction. This marked a modest improvement in sentiment among service providers. However, the manufacturing sector remained in contraction with a reading of 45.2, falling short of analyst estimates.

It is noteworthy to say that most Eurozone nations showed their strongest growth in six months, which were weighed down by the 2 largest economies Germany and France.

Gold Prices Below Record Highs

Gold rose approximately 28% in U.S. dollar terms and around 35% in euros since start of the year. However, the price has pulled back by 5% and 3%, respectively, since hitting all-time highs in late October. The retreat was driven by a decline in holdings of gold-backed exchange-traded funds (ETFs), which fell for the first time since April. Notably, European investors led the outflows with a reduction in ETF holdings to 3,215 tons.

Despite this shift, central banks remain consistent gold buyers. In November, China’s central bank resumed its gold acquisitions, adding five tons to its reserves after a six-month pause. Strong gold demand from Asia is also expected to persist into 2025, providing upside support.

Bitcoin Hits New Record

Bitcoin surged to a new record high above $106,000 ahead of this week’s pivotal Fed decision, reflecting investor enthusiasm for digital assets with support from crypto friendly Donald Trump.

Key Economic Events Ahead

13:30     USD                  Core Retail Sales (MoM) (Nov)                        

13:30     USD                  Retail Sales (MoM) (Nov)

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13:30     CAD                  Core CPI (MoM) (Nov)

13:30     CAD                  Core CPI (YoY) (Nov)                             

13:30     CAD                  CPI (YoY) (Nov)                          

13:30     CAD                  CPI (MoM) (Nov)         

14:15     USD                  Industrial Production (YoY) (Nov)                                 

14:15     USD                  Industrial Production (MoM) (Nov)  

DAX-Check 

DAX leaders

Airbus Group +1.48%

Siemens AG +0.77%

MTU Aero Engines +0.736%

Infineon +0.69%

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DAX Laggards

Deutsche Post -2.48%

Brenntag AG -1.04%

Bayer -1.04%

RWE AG -1.00%

Germany 40 (DAX) 4H Chart

Price Action and Trend

• Uptrend with Weakness: The DAX is still in a broader uptrend; however, recent price action shows signs of a short-term pullback after reaching highs around 20,474.
• The price has dipped below the 20 EMA (20,359) and is testing immediate support near 20,193.5.
• If the DAX closes below this support, it could signal further downside toward the 50 EMA (20,275) or even the 100 EMA (20,048) as the next support zone.

Moving Averages

• 20 EMA: Currently at 20,359, the index is slightly below this short-term EMA, suggesting weakening momentum.
• 50 EMA: Acting as the next key dynamic support at 20,275.
• 100 EMA and 200 EMA: The medium and long-term support levels at 20,048 and 19,758 remain far below, indicating that the overall bullish trend is intact unless a sharper decline occurs.

Key Support and Resistance

• Resistance:
  • 20,474: Recent swing high; a break above this level would resume the uptrend.
• Support:
  • 20,193.5: Immediate support level being tested.
  • 20,048 (100 EMA): A significant support area if the decline continues.

Technical Indicators

1. Relative Strength Index (RSI):
   • Current Level: 45.89: RSI has declined from overbought levels and now hovers near neutral. This suggests weakening momentum but not yet oversold.
2. Stochastic RSI:
   • Current Levels: ~2.87 and 7.47: Stochastic RSI is in the oversold zone, indicating that a potential short-term bounce could occur from current levels.

Outlook and Scenarios

1. Bullish Scenario:

   • If the DAX holds the 20,193.5 support and rebounds, the first target is a retest of 20,474 resistance.
   • A sustained breakout above 20,474 would confirm the continuation of the uptrend, targeting higher psychological levels such as 20,600.

2. Bearish Scenario:

   • A confirmed break below 20,193.5 could trigger a further decline toward the 50 EMA (20,275) and possibly the 100 EMA (20,048).
   • If selling pressure intensifies, the 200 EMA (19,758) will be a critical long-term support to watch.

Conclusion

Global markets remain cautious ahead of this week’s central bank meetings. Asian stocks reflected mixed signals, while Europe continues to wrestle with economic stagnation. Meanwhile, gold and Bitcoin are drawing attention as key alternative assets amid uncertain economic fundamentals.

The DAX remains in a broader uptrend, but short-term weakness is evident as the index trades near critical support levels. Traders should watch for a bounce near 20,193.5 or a breakdown toward the 50 EMA. Indicators like the oversold Stochastic RSI suggest a possible near-term rebound, but confirmation is needed through price action and a move back above the 20 EMA.