Santa Clause rally seems to have pushed US markets back to record high. Before we get into Today’s analysis, I wanted to take this time and let you know about the year-end calendar of most brokers, and what days you may not be able to jump up to your computer and trade (how ever hard you would like to avoid the family gatherings .)
| DATE | TRADING HOURS |
| December 24, 2014 | TH: Close at 2 pm EST |
| December 25, 2014 | TH: Closed |
| December 26, 2014 | TH: Open at 1 am EST |
| December 31, 2014 | TH: Closed at 2 pm EST |
| January 1, 2015 | TH: Closed |
| January 2, 2015 | TH: Open at 1 am EST |
Equity markets continued their positive run towards the end of the year yesterday, with almost every global exchange posting moderate gains.
US equity traders had good reason to Buy American, as S&P upgraded their US GDP outlook for 2015. The move from 3% to 3.1% may seem small, but S&P are factoring in global constraints into their forecasts and also say that a mid-year rate rise is still on the cards for the Federal Reserve. This led to the S&P 500 and Dow Jones pushing back into record high territory, with the sharp falls we saw at the end of November now a distant memory.
S&P weren’t just in the giving mood because it’s Christmas. They were quick to downgrade the outlook of three of the world’s largest oil firms. BP, Total and Royal Dutch Shell had their outlook changed from stable to negative. With a couple of very obvious reasons given for why these companies can expect poorer performance over the coming year.
In Europe, the Wall Street Journal has a fantastic article on why QE won’t work in Europe. quoting Angela Merkel in the article “Europe has 8% of the world’s population, 25% of its economy and 50% of its welfare spending” and continues to suggest that unless there is a severe rebalancing of lifestyles from the steadily employed and comfortably retired (on the state) to the young trying to enter the workforce, then Europe is destined to fail. It also covers a range of other benefits that are available in Europe that almost beggar belief.
In Eastern Ukraine, peace talks are set to continue on Christmas Eve and Boxing Day, with all parties apparently now willing to engage in constructive talks and in agreement that the ceasefire is broadly holding (it’s amazing what the collapse of a currency will do to spur you into action).
Russia’s economy is still taking up the majority of financial newspaper column inches though, with many expecting a vast wave of corporate defaults next year unless companies regain access to dollar bond markets to refinance their maturing debts. Other articles highlight the plight of former soviet states that have been dragged into the debacle, with Belarus forced to double their interest rate to 50% over the weekend as well as impose a 30% tax on buying US Dollars.
Overnight, markets have been less optimistic than the US over what 2015 may hold. Shanghai saw a sell off as the Chinese Central Bank once again chose not to inject any liquidity into the financial system, for the 8th consecutive time.
Glenn Stevens at the Reserve Bank of Australia looks like he might be getting the Christmas present he’s been asking for all year. The Aussie Dollar has weakened below a key level against the US Dollar for the first time since 2010. The 0.81 level breaking could see another six cents off the value of the Aussie’s purchasing power in fairly quick succession now – a welcome relief to a Central bank plagued by an overvalued currency.
Today we see round two of the Greek presidential elections, which will probably fail to get a result. If that’s the case we see some risk aversion in Europe as being the likely outcome. As well as this, we get the final reading of UK GDP for the third quarter and the same from the US this afternoon. We’re not too sure if there are many people left at their desks to trade the news, but any upward revisions for either country will probably see a bit of interest in their stock markets.
With the limited audience for our words of wisdom at this time of year, we’ll make this the last report of the year. However, we are open for business tomorrow, the 29th, 30th, 31st December and January 2nd, on our normal office numbers and via email at pretty much any time of day.
Have a wonderful rest of the holiday season!
Intraday Forex Technical Levels
EUR/USD 4-hour: Broke below the previous bottom.
Invest Diva positioning: Short positions below 1.2218 with targets at 1.2134 and 1.2056 in extension.
Technical reasons why: The pair broke below the previous bottom at 1.2218 below the Ichimoku’s cloud. The RSI is at overbought zone. Market sentiment of one of the largest international brokers shows that 62% of traders are long the pair and the combination of the technicals and current sentiment gives a further bearish bias.
Alternative Scenario: Above 1.2218 look for further upside toward 1.2366 and 1.2457.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.2134 | 1.2218 | 1.2457 |
| 1.2056 | 1.2366 |
GBP/USD 4-hour: Reached our bearish target.
Invest Diva positioning: Short positions below 1.5474 with targets at 1.5375 and 1.5273 in extension.
Technical reasons why: The pair broke below the support level at 1.5562 below the Ichimoku’s cloud. The RSI is moving below the oversold zone. Market sentiment of one of the largest international brokers shows that 61% of traders are long the pair and the combination of the technicals and current sentiment gives a further bearish bias.
Alternative Scenario: Above 1.5474 look for further upside toward 1.5562 and 1.5709.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.5375 | 1.5474 | 1.5709 |
| 1.5273 | 1.5562 |
USD/CHF 4-hour: Broke above the previous top.
Invest Diva positioning: Long positions above 0.9841 with targets at 0.9896 and 0.9963 in extension.
Technical reasons why: The pair broke above the previous top at 0.9841 above the Ichimoku’s cloud and continues to moving up. The RSI reached the overbought zone.
Alternative Scenario: Below 0.9841 look for further downside towards 0.9770 and 0.9719.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.9719 | 0.9841 | 0.9963 |
| 0.9779 | 0.9896 |
USD/CAD 4-hour: Testing the previous top.
Invest Diva positioning: Long positions above 1.1665 with targets at 1.1791 at 1.1795 in extension.
Technical reasons why: The pair is testing the previous top and the key resistance level at 1.1665 above the Ichimoku’s cloud. The Chiko span is trying to break above the price level and the Tenkan line broke above the Kijyun line, both of which would give a signal for further up-moves. The RSI is above the neutrality area.
Alternative Scenario: Below 1.1665 look for further downside towards 1.1600 and 1.1537.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 1.1600 | 1.1665 | 1.1795 |
| 1.1537 | 1.1791 |
AUD/USD 4-hour: Downtrend prevails.
Invest Diva positioning: Short positions below 0.8102 with targets at 0.7977 and 0.7879 in extension.
Technical reasons why: The pair continues to be on an overall downtrend below the Ichimoku’s cloud. The RSI keeps moving below the neutrality area.
Alternative Scenario: Above 0.8102 look for further upside towards 0.8183 and 0.8248.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 0.7977 | 0.8102 | 0.8248 |
| 0.7879 | 0.8183 |
USD/JPY 4-hour: Continues to move up.
Invest Diva positioning: Long positions above 119.72 with targets at 121.83 and 123.88 in extension.
Technical reasons why: The pair is heading to our bullish target and the previous top at 121.83 after breaking above the Ichimoku’s cloud. The RSI has reached the overbought zone.
Alternative Scenario: Below 119.72 look for further downside toward 117.98 and 115.59.
Where I’m setting my stops and limits:
| Support Levels | Turning Point | Resistance Levels |
|---|---|---|
| 117.98 | 119.72 | 123.88 |
| 115.59 | 121.83 |
