Weekly Technical Forecast:Volatility is Picking Up Across the FX and Equity Markets, Prepare for Breaks
The start to a new trading year is typically a quiet affair for the markets. That isn’t the case heading into the first full-liquidity week of 2019. The high volatility for currencies, equities and other asset classes through the end of 2018 has clearly held firm into the opening days of the new year. Volatility raises the probabilities of technical breaks and trends; so be prepared.
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The flash crash in JPY-crosses ahead of the Asian session open on Thursday ultimately resulted in some of the most significant reversals ever seen in the history of FX markets. Do they matter?
GBPUSD hit a 20-month low around 1.2435 mid-week and with the 20- and 50-day moving averages bearing down on price action, another re-test of this low is likely.
While we have seen some remarkable volatility for US equities and even specific currencies – like the Yen flash crash – these past few weeks, the Dollar continues to carve a restrained path. That is likely to end soon.
Risk aversion continued to show through the 2019 open, but a ray of light appeared for equity bulls on Friday morning as Chair Powell took on a more dovish tone.
The New Zealand Dollar looks likely to continue a slow decline versus the US and Canadian Dollars as nearby resistance threatens to overpower bulls.
Crude oil fell nearly 45% from the October high through December 24. The short side seems to be played out for now as focus turns to a tactical bounce.
The Euro has been congested for weeks, but that is set to change soon; breakout seen as likely down in-line with trend but will wait for trend to develop first.