U.S indices took on a positive price action yesterday supported by a rebound in the U.S Treasury yield and reports from MasterCard Inc that stated sales during the U.S holiday shopping season rose the most in six years in 2018, which also boosted positive investor sentiment while alleviating concerns of a slowdown in the U.S economy. Asian indices took up momentum from overnight recovery rally in U.S markets and traded positive since trading session opened for the day. However European markets show mixed performance as visible from indices price action owing to Europe’s own political and economic woes. Holiday celebrations have limited market volatility significantly, but bulls and bears fight for control even amidst low trading activity as investors maintain a cautious tone albeit increased risk appetite. While most safe-haven assets trade neutral or bearish on increased risk appetite, Gold continued to trade positive on demand over partial shutdown in the U.S government.
Wall Street Indices: All three major U.S indices closed positive on Wednesday with nearly 5% increase in value on news of good holiday season sales information. This was also supported by positive movement in the bond market and news of progress in Sino-U.S. talks. This boosted the Greenback in the broad market and dollar index which measures the greenback’s strength against six major currencies hit a high of 97.11 up by 0.48% on the day before yesterday. But major political issues including partial government shutdown in the U.S remain unresolved which has caused US futures trading in the international market to turn dovish in early Thursday’s trading session.
USD/JPY: USD/JPY is cycling at the 111.00 handle after catching a lift on Wednesday as market flows saw the greenback catch a bid, and markets are keeping the pair afloat as risk appetite flows remain on-balance in thin post-holiday trading. Both fundamental and technical analysis paint a bearish picture in short-term as geopolitical woes are expected to keep safe-haven demand is expected to underpin Japanese yen when technical indicators in the four-hour chart have corrected extreme oversold readings but lost upward strength below their midlines, as the price remains far below its moving averages, suggesting the pair could resume its decline anytime.
AUD/USD: The AUD/USD pair is seen extending its Asian decline in the early European dealing, as the sellers remain in control amid a sell-off in the risk assets following disappointing Chinese macro news. China’s industrial profits for December fell for the first time in three years, arriving at -1.8% y/y versus previous reading at 3.6%. On the release, the Aussie changed course and fell about 20-pips from a high of 0.7077 as Australian economy is greatly linked to China owing to trading activity between both countries. The selling intensified in Asian market hours and is now threatening the two-month lows of 0.7030 reached last week.
On the Lookout: Immediate market is expected to see thin trading volume owing to year-end holiday celebrations. Despite increased risk appetite today, investors continue to exercise caution as majority of geopolitical issues remain unresolved and are expected to be addressed post-New Year celebration and forecasts hint at a negative outcome in some of the key events. The primary focus of investors during the next 24 hours are CB consumer confidence data and new home sales data from US market hours and German CPI data which are expected to keep market liquid to some extent.
Trading Perspective: No major moves are expected in year-end trading session but retail traders will continue to keep market volatile on holiday headlines and macro data releases.
EUR/USD: With little momentum driving broader markets after Christmas the Euro is trading elevated slightly at around 1.1390 from Wednesday’s low of 1.1343. There is no European data scheduled for Thursday with US government shutdown fear dominating the pair is expected to continue trading in EURO’s favor but first tier macro data scheduled to release during US market hours may provide short-term profit opportunities for traders.
GBP/USD: The bounce in GBP/USD lost legs near the 1.2670 level and is now consolidating in a tight range ahead of 1.26 handle as the bears fight for control amid a fresh uptick in the US dollar across its main competitors while looming Brexit concerns keep the prices in check. Looking ahead, amid thin volumes and a lack of fresh fundamental news from both the UK and the US, the pair will remain at the mercy of the broader market sentiment and USD dynamics, while tonight’s US macro data will provide some short-term opportunities for retail traders.
USD/CAD: The USD/CAD pair finally breaks the upside consolidative channel on Thursday and reaches the highest levels since May 2017 at 1.3633, as the Loonie continues to face headwinds from the oil-price sell-off. The immediate focus is on the US API crude stocks data due later today for fresh direction on oil prices, which will eventually have a significant impact on the CAD pair as trading remains light heading into the New Year celebrations.