I’m back! My apologies for the extended absence, but I was dealing with a family medical emergency that required me to return to the UK for almost all of December. Unfortunately, that meant my commentary had to be sidelined for a while but am now ready and raring to go again. So with that, I wish everyone a very belated Happy New Year and I hope everyone enjoyed the holiday period with their families.
A month away has seen some significant changes in the world. The UK had a general election that saw a landslide victory for the Conservative party. An orderly Brexit now seems a foregone conclusion. The US and China have agreed on a phase 1 trade deal that helped equity markets close at record highs for 2019. China had a surprise cut in its Reserve Requirement Ratio by 50 basis points effective January 6th, which spurred a global equity rally to begin 2020. And of course, we have had the initial proceedings for the Trump impeachment hearings. But then came the news that the US had assassinated Iranian commander Qasem Soleimani. The financial market’s reaction was swift and predictable, with Oil rallying, equity markets getting hit and XAU making impressive gains. At this point, there is little clarity as to how this will play out. Other major powers have called for restraint, while Iran appears hell-bent on revenge. All of this makes the markets nervous with the weekend rhetoric causing some sharp moves at the beginning of this week’s trading activity. XAU gapped higher from Friday’s close around $1,548 to trade as high as $1,588 just after the opening of trading. Equity futures would drop, the DJ pointing to a move lower by some 200 points. Traditional ‘risk-off’ pairs such as EURJPY also gapped, trading to 120.28 from Friday’s close around 120.60. The only surprise was the subsequent rally in EURJPY back initially as high as 121.13, which rather bucked the trend of the rest of the market.
As the US day begins, equities open lower but not by as much as futures had suggested, with both the S&P and Nasdaq down by just 0.25%. Gold trades steady at $1,573, USDJPY is 108.10 and EURUSD 1.1185. The ‘mighty’ Pound sits at 1.3150. What followed was a slow and painful reversal of the opening moves in Asia. XAU backs off to $1561 while equities rally with the DJ, S&P and Nasdaq all turning positive. USDJPY rallies to 108.50 and EURJPY to 121.40. Why? Well, sometimes no news is good news. Maybe short-term positioning was a little overdone. But common sense suggests caution as the Iran-US situation is potentially highly volatile with lasting consequences. Expect it to dominate over the coming days.
My daily technical analysis will return as soon as I have my charts sorted out. Amazing what happens when you’re away for a month!
Keeping up-to-date with news & foreign currency exchange rates will give you a good foundation for trading and allow you to better identify good investments in the long run. Trade with a simple, yet effective broker, fund your account today.