Markets Muted as Holiday Mood Kicks in

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Financial markets have commenced the final trading week of 2018 in a muted fashion as investors remain on the sidelines ahead of the Christmas holiday break tomorrow.

Asian equity markets concluded mostly mixed thanks to a holiday in Japan while European stocks are trading lower amid ongoing concerns over global economic growth. With political instability in Washington stimulating risk aversion and leaving investors on edge, US stocks are likely to trade lower this afternoon.

Dollar sinks on government shutdown fears

The Dollar softened against a basket of major currencies today as fears intensified about the impact of a partial US government shutdown to the US economy.

Reports of US Donald Trump discussing the possibility of firing Jerome Powell compounded to the Dollars woes with prices trading around 96.70 as of writing. With fears over slowing growth in the United States threatening the Dollar’s safe-haven allure, further downside remains on the cards in the short to medium term. In regards to the technical picture, the Dollar Index is seen challenging 96.50 in the near term. A breakdown below this level will open a path towards 96.10.

Pound rally capped below 1.2700 

It has been an extremely rough and rocky trading year for the British Pound thanks to Brexit related uncertainty and political drama in Westminster.

With the Pound’s fortune tied to the Parliament vote on Brexit in the new year, the near-term outlook is likely to be influenced by the Dollar’s performance. While the Pound has the potential to remain buoyed on Dollar weakness, upside gains remain capped below the 1.2700 resistance level. Sustained weakness below this point is seen opening a clear path back towards 1.2480 in the medium term.

Oil prices whacked by oversupply fears

Oil prices entered the trading week under renewed selling pressure as risk aversion compounded with oversupply fears and concerns over weaker Oil demand.

With markets struggling to find signs of the Oil market rebalancing following OPEC and Russia’s deal to cut production by 1.2 million barrels per day and global growth fears fuelling concerns over falling demand, Oil prices remain fundamentally bearish. In regards to the technical picture, WTI Crude is heavily bearish on the daily and weekly charts. The downside momentum is likely to send prices towards $44 in the short term.

Commodity spotlight – Gold 

Gold is on course to concluding 2018 on an incredibly positive note thanks to Dollar weakness and risk aversion across financial markets. With depressed stock markets, expectations of fewer US rate hikes in 2019, global growth fears, Brexit related uncertainty and heightened political risk in Europe fuelling uncertainty, Gold has the potential to shine with intensity next year. With prices trading above the $1,260 level, the next key level of interest can be found at $1,272.

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