Steven Mnuchin, US Treasury Secretary

Markets cautious ahead of holidays and political instability in the US

Steven Mnuchin, US Treasury Secretary
Steven Mnuchin, US Treasury Secretary

Asian stocks start of a holiday-shortened week mostly lower with thin volumes on Monday as a Wall Street slump and a partial U.S. government shutdown stemmed holiday cheer. In Japan Nikkei 225 stock index slipped 1.11% to 20166.19, the Shanghai Composite index rose 0.1%, Hong Kong’s Hang Seng lost 0.4 percent to 25,651.38. Australian stocks started with a pulse of selling that saw the ASX 200 at a 57 point deficit in opening trade. Thereafter, the Index steadied as the selling ebbed and the market reeled in some of its initial losses to close 26 points or 0.5% higher at 5493.8. The S&P 500 on Friday index slipped 2.1% to 2,416.62 and the Dow Jones Industrial Average was down 1.8% at 22,445.37. The Nasdaq composite tumbled 3% to 6,332.99. US indices lost over 7% last week marking the worst week in seven years.

European exchanges are also trading in the red CAC is down 1.11% while FTSE100 in London gives up 0.90%. In company news Euronext the pan-European exchange operator said it was buying the Oslo stock exchange.

On the Lookout: Treasury Secretary Steven Mnuchin held calls with top USA bankers over the weekend following the recent selloff in equities, and made plans to convene a group of officials sometimes referred to as the “Plunge Protection Team.” The political drama in Washington will be another area of focus for traders, with the government facing a partial shutdown that is likely to last until at least Dec. 27, according to Senate Majority Leader Mitch McConnell. The yield on the US 10-year bond climbed 2 basis points. Other global yields were mostly lower or flat. This should provide the Greenback with some support today.

Trading Perspective: EURUSD is trading in narrow trading range and thin trading from 1.1370 to daily highs of 1.1411. Holding neutral stance for the pair during holidays with upside target the 1.14 round number level and next the 1.1445 area the 38.2% Fibonacci level, with strong supply expected in the 100 day Moving average and previous  week top at 1.14786. Moving south, the 50% Fibonacci of the rally from 1.1269 to 1.1485 at 1.137 could provide first support for the common currency.

USDJPY looks weak in early European trading session after previous week sharp selloff. The pair has entered a bearish face as prices are hovering below the hourly and daily moving averages. 111.40 is the immediate resistance for the pair and then the 50% Fibonacci level of the rally from 109.76 to 114.54. On the flipside the pair will meet supply at 112.

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GBPUSD try to digest the late rally from yearly lows to 1.27, currently is trading in the mid 1.26’s as investors are cautious awaiting developments from the Brexit frontier and political instability in the US. 1.2630 the 200 hour moving average will act as support during the holidays and 1.27 previous week top will meet some supply.