Top Story

December Brings the Volatility!

Welcome to December!   As my colleague Ken Odeluga wrote in our Market Brief, the day had started off pretty well with both the official Chinese PMI (released Saturday) and China’s unofficial measure of manufacturing, the Caixin PMI, both beat expectations.  With that,  stock indices, the Australian Dollar, and the New Zealand Dollar were all trading higher on the day.  Then early in the US session, Trump tweeted that tariffs would be restored on steel and aluminum shipped from Brazil and Argentina to the US.  Stocks and the US Dollar both began to sell off.  However, the selling did not start in earnest until the US ISM Manufacturing PMI for November was released at 48.1 vs 49.2 expected and 48.3 last.  A reading above 50 indicates economic expansion and a reading under 50 indicates economic contraction.  November is now the fourth straight month of a reading under 50, and therefore, economic contraction.

The US Dollar Index has had a difficult time trading about the 50% retracement level from the highs on October 1st to the lows on November 1st.  The DXY has been trading near the 98.40 level for a week and could not get a significant move above it.  With today’s price action, price moved aggressively lower and is now trading back at support between the 97.85/98.00 area.  If price breaks lower through this level, 97.65 may be the next level of support. 

Source: Tradingview, FOREX.com

In addition, the S&P 500 Index is down 30 handles as the markets got smashed by the tweets and ISM data.  After putting in new all-time highs last week, the index has pulled back and is currently trading near horizonal and trendline support at 3110/3113. 

Source: Tradingview, FOREX.com

If price breaks below 3110,  there is a longer upward sloping trendline dating back to September 2018 which comes across near 3075.  Also, if the S&P 500 closes below 3137, a bearish engulfing candle will form and the daily chart.

Source: Tradingview, FOREX.com

Along with the risk off theme of the US session, it’s no surprise that USD/JPY is trading lower.  The pair broke through the neckline of the inverse head and shoulders last week, only to see it collapse today and trade back under it.  USD/JPY is currently 70 pips off its highs of the day.  As with the S&P 500,  if the pair closes below 109.40 today, there will be a bearish outside candle, an indication prices may trade lower in the days to come.

 Source: Tradingview, FOREX.com

Watch for more tweets from President Trump throughout the day and the week.  He does not seem like a President who tolerates a falling stock market.  Perhaps a China-US trade deal is almost done, again?  And don’t forget NFP on Friday!

December has just begun!!


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

OPEN AN ACCOUNT