Equities mixed on profit booking activity and holiday thin trade, but trade deal optimism on Trump’s comments prevents sharp declines.
Summary: Global equities are off to a mixed start for the week today as traders are finally gearing up for the holiday season. Traders have taken to profit booking activities but there is no major shift in directional bias in market or eagerness from traders to place any major new bets, keeping the price well within a familiar range near highs. The short term activity is driven by speculative traders who are looking to take advantage of holiday season price volatility.
In the European market – trading volume was thin today but UK markets cheered the outcome of UK parliament which saw swift approval of PM Johnson’s Brexit proposal with a considerable majority and even support from several Labor members which market interprets as a sign of smooth Brexit in the near future. Trump’s comments on the trade deal being signed by the USA and China very shortly also provided market bulls with short term fundamental support to keep risk assets from seeing sharp declines.
In forex markets, major global currencies took a blow on profit booking activity and holiday season caution/fund flow reduction. Further, firm USD amid holiday thin trading volume also affected liquidity keeping major pairs circling inside a short price range limit.
Precious Metals: Rare metals saw a positive opening for the week as investors who choose to remain active in the market but safeguard investment from holiday season volatility shifted fund flow into safe-haven assets. However, firm USD in the international market prevented fund flow from traders outside of the USA and holders of other major currencies from actively participating in preventing huge gains.
Crude Oil: Crude oil price is trading flat over lack of fresh headlines to provide a directional bias. Optimism surrounding progress in a trade deal and hopes of swift resolution keeps the price from declining below recent highs while OPEC extended supply cuts provide Crude oil demand to supply ratio keeping fundamentals in favor of crude oil bulls during year-end trading activity.
AUD/USD: The pair is trading positive in the global market today with price scaling a fresh six-day high as optimism surrounding the Sino-U.S. trade deal spiked on comments from President Donald Trump hinting at the deal being signed very shortly. However, firm USD continues to put some level of pressure on AUD bulls preventing the pair from creating an upward breakout despite 4 consecutive sessions of positive price movement.
On The Lookout: Given the fact that major central banks have released their monthly interest rate statement and forward guidance, there isn’t any new major event aside from two major geopolitical events Brexit and China-U.S. trade deal to drive the market. However, given the recent headlines despite positive progress, there aren’t any signs of major changes taking place during the upcoming holiday season. This leaves price action of financial assets at mercy of holiday season headlines and macro calendar updates.
Profit booking activity is expected to drive the market today post which traders are expected to gear up for early closing of markets on Christmas eve and further holiday season short term bets.
On release front today, the US calendar will see Core Durable Goods Orders and New Home Sales data while the Canadian calendar is set to see the release of GDP for October month.
Trading Perspective: Forex market is unlikely to see any major change in directional bias or gain a breakout trigger given the dominance of firm USD in the global market. US futures trading in the international market ahead of Wall Street opening saw record performance as President Trump’s comments fuel trade optimism.
Boeing’s decision to fire its CEO on escalating scandal over 737 MAX issue also seems a highly welcomed move both of which suggests Wall Street is set to see a positive opening. However, cues and trading activity from the international market suggest that profit booking activity seems highly likely in which case Wall Street will lose most of the early gains during the intra-day sessions or by the end of today’s US market hours.
EUR/USD: The pair is trading with positive bias in the European session and has maintained its positive momentum across Asian hours as well. But firm USD backed by the US. T-Yields keeps gains in check regardless of support from Trump comment influenced risk appetite on trade deal optimism in the global market. Traders now await US data for short term profit opportunities.
GBP/USD: The pair continues to trade with clear dovish bias in the global market despite investors cheering recent outcome in UK parliament as GBP bulls have lost fundamental support gained from recent UK election outcomes given noise surrounding Brexit progress and renewed fears of no-deal Brexit. Firm USD also adds pressure to GBP bulls. Traders now await US data for short term profit opportunities.
USD/CAD: The pair is trading choppy today with price seeing a slight consolidative tone near the mid-1.31 handle. Amid lack of fresh updates and relatively firm USD, a lack of directional bias kept USD from gaining serious ground to the upside while weaker oil price weighed down Loonie preventing the pair from gaining any ground on the other side either. Traders now await US data and Canadian GDP for short term profit opportunities.
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