It is Christmas Eve and markets are understandably a bit quiet this morning. Several markets are shut today, with precious metals and indices such as the DAX not giving prices. So, with such a strong run higher in risk appetite over the past few sessions there is a sense of consolidation taking hold. Given the thin markets, low volumes and low liquidity this is to be expected. The economic calendar is empty and we are not expecting too much direction today.
We wish everyone a Merry Christmas and a prosperous 2022 for your trading!
- Main drivers: Markets are consolidating; watching for potential lockdowns in Europe; no Fed speakers scheduled; Economic calendar: no data
- Consolidation before Christmas: Major markets are quiet his morning. Major forex pairs are broadly flat although there is the slightest hint of profit-taking on higher risk currencies. Indices are doing very little (the DAX is shut) and will also close early today.
- European social restrictions potential: There is increasing potential for some European countries to increase social restrictions to combat the spread of Covid. This is the key risk in the coming days and for markets between Christmas and the New Year [Would be risk negative]
- Central bank speakers: there are no Fed speakers scheduled until the New Year
- Economic Data:
- There is no key data due today
Broad outlook: Consolidation with a hint of profit-taking on higher risk assets which have been so strong in recent sessions.
Forex: Higher risk majors (AUD and CAD) are slipping back slightly, with the safe-haven CHF slightly outperforming.
- EUR/USD remains stuck in its trading range under resistance at 1.1360/1.1380. The lack of traction for a breakout suggests still playing the range. Key supports at 1.1185/1.1220. Back under the initial support at 1.1290 would open the bottom half of the range again.
- GBP/USD has broken strongly higher in recent days and as the consolidation sets in the bulls will be looking to use 1.3350/1.3370 as a basis of support now. If this can hold then there is a prospect that Cable could be moving towards 1.3500/1.3570.
- AUD/USD with a breakout above 0.7220 the recovery is progressing well. Given the number of pullbacks in this recovery, we look to buy into weakness. The support around 0.7170/0.7190 is increasingly key. Next resistance at 0.7290.
Commodities: precious metals are developing recovery rallies, oil is looking at a test of key resistance.
- Gold a second close above $1800 is encouraging for recovery. The next step is a break above $1815 and then bulls can start to believe in traction higher towards $1845/$1870. Support at $1785 is turning into a key higher low.
- Silver recovery is developing well now. Holding above $22.60/$22.67 support is now important as the market moves to test $23.00/$23.30. We look to buy into supported weakness.
- Brent Crude oil with a marginal slip back this morning, the bulls will be looking to build support around $75.00/$76.00 for a platform to test $77.20 which is key resistance. A move below $73.85 would be disappointing now.
Indices: have rallied towards key resistance.
- S&P 500 futures have moved through the resistance levels within the range to move within striking distance of the 4742 all-time high again. The market is just backing away slightly initially, but holding above 4684 would sustain the pressure on the highs.
- DAX has rallied to test the 15,800/15,870 resistance area. This is a key moment for the bulls as if they can clear this mid-range pivot, then the big highs around 16,300 come back into play. Holding above 15,600 initial support will help.
- FTSE 100 is testing the key resistance at 7401. This is the post-pandemic high and a move above would open a continuation of the big trend channel higher. Support at 7342/7352 will be increasingly important for this move.