The approach of the Christmas weekend and New Year holidays are accompanied by a fall in market liquidity making them more sensitive to any news. It looks like we risk a correction this year after a sevenweek rally since early November.
Global markets managed to shake off most of the initial fears and rebounded from much of the initial decline on the day. The SP500 fell 0.44 over Monday, although intraday futures were down 3.2 at one point. The situation is similar in the FX market, where EURUSD ended the day with a symbolic decline of 0.1, although intraday losses exceeded 1.
GBPUSD, the antihero of the day, reduced its losses to 0.5 by the end of Monday vs a 2.5 decline in the middle of the day. From a technical analysis perspective, it managed to gain support on the dip to the 50day moving average, which has acted as support over the past two months and has earned a reputation as a shortterm trend signal line.
The persistence above the 50 and 200day averages clearly shows the superiority of the buyers, but the situation could change rather quickly. A decline in the GBPUSD under 1.32001.3250 area would overrule the optimistic scenario.
The pessimistic correctional scenario is on the table for this week. On Tuesday morning we see further caution prevail in the markets; key indices are back in the red zone and the dollar is adding, pushing GBPUSD, at one point, below 1.3400.
Traders should have even more caution towards Crude Oil. Brent is now trading at the 50…