Market News & Insights
19 December 2016

Patchy Trading in Christmas Markets

We are entering Christmas week and with that many in markets will be winding down, liquidity will be thinner and next week we will have year-end flows to account for as well. This can bring volatility across markets as large flows and thin market liquidity can result in exaggerated moves across currencies. To start the week EURUSD remains just above 14 years lows posted last week, the pair have recovered back above 1.0400 for now but calls for parity are once again going to drive focus towards the magic 1.00 figure. European markets maintained a bid tone into the end of last week, with major bourses closing higher on Friday, while in the US equity markets traded slightly lower, albeit not very aggressively. Overnight in Asian markets we saw stocks hold steady above four week lows while the USD was also lower to open the week following some profit taking after last week’s 2.8% high/low range.

Data is on the quiet side this week but we’ll be maintaining focus on some key levels across pairs, especially around releases. Today the best of the European data has already passed with the German IFO business sentiment survey releases and posting firmer figures for the current assessment and business climate. It has given the Euro some minor support but the single currency remains weak looking. Last week’s lows towards 1.0366 should hold the pair for now, pending any shock news. For me, EURUSD major support does not come in until 1.0170 area, where near 31 year uptrend support comes into play. 1.0515 provides resistance to any moves higher and we’d need to see that broken if EURUSD was to have any chance at a recovery this week. EURGBP remains range bound, the 200 day EMA still holding EURGBP below its level at .8400, any rally above quickly gets sold while support towards .8340/30holds the downside for now. A break of these ranges is needed to change the picture, otherwise we remain in directionless consolidation.

There are some US releases of note this week, and after last week’s hawkish fed and bullish USD move, we’ll really need to see US data backing up the big rhetoric. Services and composite PMI data headlines this evenings prints, and Janet Yellen is due to speak at the University of Baltimore later in the evening. Both could provide the US with some volatility, although Yellen is unlikely to provide us with anything new from last week. Thursday has a whole host of releases to bring additional USD risk, again, with so much positivity priced into the greenback weaker data will likely have a bigger impact that positive figures. GBPUSD continues to find support around the 1.2380 area, this zone (1.2310-1.2390) has been a support resistance area for GBPUSD since the October flash crash, while we hole above our for GBP remains to the upside, intraday however resistance around 1.2510 should see some sellers emerge.