Business during Holidays

Equities Decline on Wall Street Cues amid Holiday Thin Market

Donald J.Trump

Summary: Global market is seeing a relatively subdued price action owing to holiday season. While trading activities has resumed today following Christmas, all major European markets and Canadian market are closed for the day which has had great impact on already weak volatility in market. Investors continue to exercise caution in their trading activities amid ongoing festivities are market is still suffering from impact of geo-political issues and ongoing political turmoil in USA. With Government partially shutdown owing to Trump Tantrums on ongoing feud within internal government over allocation of funds for border wall and T.Yield curve inversion have affected Wall Street performance significantly and cues from US market has inspired dovish performance in Asian equities. This combined with ongoing bearish phase in Crude oil market is interpreted as signs of global economic slowdown which has boosted demand for gold and other safe haven assets despite limited liquidity in market.

EUR/USD: The common currency trades range bound in upper half of 1.13 handle as broad based weakness surrounding USD underpin’s EURO bulls despite European markets political and economical struggles. Partial shutdown of US Government, T.Yield curve inversion following recent hawkish fed rate hikes and worries of economic slowdown in US are some of major factors that serve as positive influence for EUR bulls. Ahead of New Year eve, EURO is expected to retain upper hand against US Greenback amid thin liquid market.

USD/JPY: The USD/JPY has followed a drop in Equities and a prolonged government shutdown which resulted in broad based USD sell-off. Safe heaven demand is expected to support Japanese yen amid year end holiday season as ongoing geo-political issues and forecast for bearish price action in major assets during January 2019 has boosted fundamental support for safe haven assets significantly and this should keep JPY bulls active till end of this week.

AUD/USD:  The pair is trading range bound during European market hours as broad based USD’s weakness helped the pair make recovery move post Asian market hours. The pair saw bearish action in Asian market hours as Chinese equities suffered from Wall Street cues and Australian market and currency have significant impact based on price action of China to whom Australia outsources majority of its products and services. Holiday thin market will limit price action during this week which will influence range bound price action till trading session closes for the week.

On the Lookout: The market has suffered significant bearish pressure through later half of 2018 influenced by wide variety of factors ranging from Italina budget woes, Sino-U.S trade spat, Brexit, NAFTA and Iran-U.S sanctions etc., Global markets are expected to close dovish for 2018 with holiday season effectively limiting investor participation. January sees a bout of activity which will have significant impact on market such as Sino-U.S. delegated meeting for trade deal negotiations, OPEC production and supply cut and Brexit parliamentary approval. Overall forecast for January 2019 is bearish market and investors are expected to stay cautious during year end trading session as they wait for first week of Jan for clues on outcome of various events to place bigger bets.

Trading Perspective:  Broad based sentiment favors safe haven and major risk assets as USD will remain subdued untill January 3, 2019 when new congress is expected to come into power and change price dynamics in market which so far reflected global investors’ reactions to multiple Trump Tantrums.

GBP/USD: The Brexit uncertainty remains the biggest challenge for UK politics and the biggest drag on Sterling heading into 2019. The pair is expected to weaken at the beginning of 2019 and rebound sharply after the Brexit uncertainty fades away. Sterling could fall past 1.2000 level that historically frames the bottom and serves as a territory of rebound for GBP/USD in case of hard Brexit. Meanwhile in immediate market USD price dynamics control the pair’s price action and subdued USD should provide positive influence to GBP on its range bound price action as trading session comes to close for 2018.

USD/CAD: The US Dollar started a solid upward move and traded above the 1.3520 resistance level against the Canadian Dollar. The USD/CAD pair also climbed above the 1.3600 resistance but upside move was limited owing to bullish rebound in crude oil price action in spot market today which has helped Loonie regain some momentum but Canadian market is closed for the day which limits liquidity for the pair significantly during American market hours leaving the pair at mercy of USD price dynamics but subdued USD in broad market is expected to influence range bound price action.

Wall Street Indices: US indices closed with significant losses on Monday impacted by local political woes and partial shutdown of US government. However when trading session resumes for the day major wall street indices are expected to show some positive influence over news of Christmas retail sales. But any sharp upside move is unlikely owing to above mentioned multiple bearish factors that are currently at play in USA.