Daily Outlook

Stocks and commodities are rising, but currencies are on alert

The world markets remain positive, recording new attempts to climb higher. The US S&P 500 closed Thursday’s trading session updating historical highs the sixth session in a row. At the same time, liquidity is gradually declining as the holidays approach. However, this does not mean that there will be no volatility in the markets. It may turn out to be quite the opposite. Reduced trading volumes create vulnerability in the markets to sudden significant events, creating the risk that trading will be mostly automatic by triggering stop orders.

Moreover, market participants call today “Quadruple Witching day”. During the single day there are expiration of futures on stock indices, individual shares, and options on indices and shares. All this leads to a high number of transactions, especially in the last trading hours of the stock exchanges, and can turn into a sharp jump in price volatility.

Along with the growth of stock indices, the growth of oil prices also attracts attention. Avoided sharp movements, it shows a strengthening for the last seven trading sessions, moving closer towards the heights since July. Technical analysis is also on the bulls’ side, as prices crossed the Rubicon one week ago, climbed above the 200-day average, after which we observe a methodical demand for this commodity.

In contrast to the constant demand for the stocks and commodities, the foreign exchange market behaves noticeably more cautiously as major currency pairs bounce back from recent extremes.

The impressive victory of the conservatives in the elections sent GBPUSD to 1.3514. Still, Boris Johnson’s statements revived fears of hard and chaotic Brexit, which returned the pound to 1.3000 within a week, lowering its price by 2.4%, forcing it to finish the year far from the highs.

EURUSD has not yet managed to confirm the upward trend, bouncing from the levels of 1.12, which is close to the 200-day average and upper boundary of the descending trade channel.

It is also worth noting how the Chinese Yuan bounced from the same line and declined below 7.0 per dollar, despite the positive comments regarding the trade negotiations. The USDJPY is another famous pair that is influenced by the risk demand, retreating from the local highs without daring to copy the stock markets strengthening at the end of the year.

Such caution of currency market players forces to assess with caution the stability of the current rally on stock markets and in commodities.

The FxPro Analyst Team

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