Forex Update: Risk Assets Plunge Again Amid Turmoil in Washington

Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1381 -0.55%
GBP/USD 1.2642 -0.10%
USD/JPY 111.37 0.09%
AUD/USD 0.7050 -0.79%
GOLD 1,260 -0.22%
WTI Crude Oil 46.09 -0.32%
BTC/USD 3,905 -4.06%

One of the most volatile December’s on record continued to provide plenty of action today, on the last trading day before Christmas Week, and risk-on currencies and stocks were under pressure again. The Yen continued to shine thanks to the strong safe-haven flows, while the Dollar also recovered from yesterday’s dip amid the broad risk-off shift.

The Treasury market continued to discount the hawkish Fed-surprise and yields are now back near their recent multi-month lows, and the megatrends that have been dominant in currency markets are firmly intact, and it seems that we are in for a volatile January.

The ongoing monetary tightening and the slowing global growth are still defining the broader trends, and today, the increasing threat of a US government shutdown, the weaker than expected Durable Goods report, and the resignation of Defense Secretary Jim Mattis just added to the bearish pressures. While next  week, trading activity will likely be very low, it will be interesting to see if risk assets can recover from this week’s rout or we will see volatile trading in the illiquid environment.

Technical Analysis

EUR/JPY, 4-Hour Chart Analysis

The EUR/JPY pair completed the technical breakdown that we anticipated and now the common currency is testing the key support zone near 126.50 after moving out of the long-standing bearish consolidation pattern. The pair looks ready to move back towards its lows form June and August near 125, and the coming months will likely see new lows with the next major zone found near 122.50, and with resistance zones now ahead near 127.50 and 129.

AUD/USD, 4-Hour Chart Analysis

The Aussie also established the short-term downtrend as expected, and the AUD/SUD pair is now close to its recent multi-year lows, looking ready to test the 0.70 level. While the short-term picture is now oversold, and the holiday week could bring a bounce back towards 0.7150, the broader bearish trend is clearly intact, and new lows are very likely next year.

USD/CNH, 4-Hour Chart Analysis

While the USD/Yuan pair continues to be stable compared to the major pairs, the brief period of strength in the Chinese currency might already be over, and a move towards the highs might be ahead in the coming month.

That would further confirm the global bearish shift, since the weakness in China remains one of the most significant risks for the shaky global economic growth, and the steep devaluation of the currency seems inevitable from an investment standpoint. The pair is now near its pre-trade-truce levels, after moving out of a triangle consolidation pattern, and it could be headed to 6.94 soon with crucial support found at near 6.8925 and 6.865.

WTI Crude Oil, 4-Hour Chart Analysis

WTI crude oil showed signs of stability today in the risk-off environment after getting close to the $45 per barrel price level, and although the downtrends remain intact both short- and long-term, the crucial commodity might provide a tradable bounce in the holiday period. A recovery above the $46.60-$47 support/resistance zone could trigger the counter-trend move, with possible targets ahead near $50 and in the $53.50-$54.50 area.

ChartBook

Forex

EUR/USD, 4-Hour Chart Analysis

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

Commodities

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

 

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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.