Forex Update: Forex Update: Sell-Off Continues Ahead of Holiday Break

Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1406 0.32%
GBP/USD 1.2705 0.64%
USD/JPY 110.32 -0.79%
AUD/USD 0.7049 0.25%
GOLD 1,273 1.11%
WTI Crude Oil 42.42 -6.61%
BTC/USD 4,060 2.96%

This year bears received an unusual Christmas present from the market, as the risk-off trend continued in earnest today across asset classes. Last week’s steep drop in equities deepened considerably today in during the holiday-shortened session, and the major global indices almost all closed on new bear market/correction lows.

For currencies, this meant a clear bias towards the Japanese Yen, the main safe-haven currency, and the Yen is now trading at its highest levels against most of its peers since August. Gold is also trading on new multi-month highs against almost all of the major currencies, topping the $1270 level for the first time since June.

Elsewhere, the Dollar should clear relative weakness as the escalating tensions between Donald Trump and Fed Chair Jerome Powell weighed on the reserve currency, despite the general risk-off trend in financial markets. While tomorrow, almost all of the main markets will be closed, the rest of the week could continue to bring fireworks, with one of the worst December’s likely ending on a volatile note for bulls.

Technical Analysis

USD/JPY, 4-Hour Chart Analysis

The USD/JPY pair got close to touching the 110 level during today’s sharp drop, and it’ snow also near its August low. The global bearish shift will likely continue to boost the Yen but as we expect the Dollar to catch a bid in January as well, the pair might consolidate near the August low, before likely challenging the 108 level in the coming months. Strong resistance zones are ahead near 111.50 and between 112 and 112.50, and traders should sell the rallies in the pair.

S&P 500 Futures, 4-Hour Chart Analysis

The charts of the major US stock indices are not pretty, and this month’s more than 10% sell-off pushed all of the benchmarks into bear market territory, following in the path of the China, Europe, and emerging markets. The US financial sector is especially weak, amid the plunging Treasury yields, and that weighs heavily on the financial-heavy S&P 500, which closed near $2350, its lowest level since mid-2017.

The index is now clearly below its February low, and although a retest of those levels is likely given the stretched short-term momentum readings, technicals clearly switched to a bear market, and market internals continue to confirm the broad sell-off.

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair drifted in relatively active trading despite the shortened sessions and the starting holiday period, and the Euro managed to get back above 1.14, although it remains stuck below the 1.1440 resistance, with the long-term trend clearly being negative.

We still advise short-term traders to stay out of the most-traded pair, as the choppy consolidation pattern remains intact, and even though the long-term trend is stable, wild short-term swings could be ahead in both directions.

Gold Futures, 4-Hour Chart Analysis

Gold continued to perform in line with the risk-off shift, hitting a new swing high above the $1270 level, once more confirming the key trend change in the precious metal. The the short-term uptrend is now clearly established, and we expect a move towards the $1300 level in the coming weeks although volatile pullbacks are possible given the fragile state of the global financial markets, with the long-term fundamentals being on the side of gold bulld as well.

ChartBook

Forex

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

EUR/JPY, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

USD/CNH, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

 

Featured image from Shutterstock

Author:
Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.