From a technical perspective, the benchmark Dow Jones Industrial Average (DJIA) could be at risk of a short-term pullback as prices carve out a bearish Rising Wedge pattern.

Bearish RSI divergence and a notable drop-off in volume hints that the recent topside push may be running out steam.

Failing to close on a daily basis above wedge resistance and the December 29 high (30502) could ignite a correction back towards the 21-day exponential moving average (29982) and wedge support.

Wall Street 20201230 12.57

Alternatively, pushing past the 30500 mark would likely signal the resumption of the primary uptrend and bring psychological resistance at 31000 into the crosshairs.
A bearish crossover on the MACD indicator, in tandem with the RSI dipping sharply back below 60, suggests the path of least resistance may be lower.

Crude oil prices regained some strength on Tuesday as the US Dollar retreated, but overall momentum remains weak from a technical perspective. Traders are eyeing a potentially larger stimulus check amount after the House of Representatives voted to raise pandemic relief payments to $2,000 from $ 600. The proposal is now pending Senate approval.
Still, concerns remain over tighter Covid-related travel restrictions around the world, which may serve to limit upside potential for oil. In the near future, uncertainties surrounding the uneven distribution of vaccines, new coronavirus strains and reduced travel activity may post additional uncertainty over the energy demand outlook. The OPEC+ coalition have agreed in early December to increase production by 0.5 million barrels per day starting in January 2021, gradually easing a total production cut of 7.7 million bpd that was carried out earlier this year to shore up oil prices.

USOil D1 12 29 2020 1412

Earlier this month, US DOE crude oil inventories have climbed to 503.2 million barrels, reaching a 4-month high This was mainly due to a large, 15-million-barrel build in stockpiles in the first week of December. Inventories have seen fallen by 3.13 and 0.56 million barrels in the following two weeks respectively, but the amounts were not substantial enough to boost market confidence.
Traders are anticipating a 1.70-million-barrel decline in US crude inventories for the week ending December 25th, with the actual data coming in on December 30th. Last week, markets saw a 0.56-million-barrel decline in stockpiles, which only marked a small reversion of the 15.20 million barrel increase seen in early December.

 

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The FTSE 100 is looking vulnerable again today as movement resumes in the port of Dover after two days of gridlock as an attempt to prevent the spread of a new strain of coronavirus through Europe, putting downside pressure on European equities.

British stocks have been at the center of a risk-off move starting late last week as Brexit concerns resume. Fisheries continue to be the main discussion point in the last leg of talks, as the EU yesterday rejected a proposal from the UK government for a reduction of 35% of the catch in UK waters. The EU is only willing to accept as low as 25%, and this disagreement could see talks go past the December 31st deadline and into the new year, dragging on uncertainty for longer.
Looking ahead at the next two days, a reduction in liquidity may see markets moving rapidly, but the general perception is that there is a lack of direction. Equity markets are currently pending on the resolve of many open fronts like Brexit, the coronavirus pandemic, and the US stimulus bill, and any of these can offer heightened volatility in the days to come, so investors must be aware. 

UK100 D1 12 23 2020 1312

On the daily chart, we can see the FTSE 100 is stuck below the 61.8% Fibonacci level, falling under the 20-day moving average. Momentum indicators have reset the overbought conditions seen last week, so we could see continued buying support up until 6,600, although this area is likely to remain as a strong resistance unless there is a risk event.

To the downside, 6,255 remains as key support as Monday’s retracement was unable to fall below this level, which had previously acted as a barrier for further losses. A break below this level would leave the FTSE 100 exposed until the next support area between 6,160 and 6,110, before risking losing the 6,000 mark.   

 

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The US Dollar has traded higher, even as US fiscal stimulus is formalized and a government shutdown is avoided. Outgoing US President Donald Trump has signed the bipartisan Congressional agreement, despite reservations expressed last week and failure to sign by an earlier deadline that will upend unemployment benefits to out of work Americans, if only temporarily.

For most corners of the financial world, these developments culminate a ‘buy the rumor, sell the news’ type of situation. Or in the US Dollar’s case, ‘sell the rumor, buy the news.’ Higher deficits continued operations on the federal level should both, in theory, spur greater risk appetite, with traders jettisoning lower yielding safe haven currencies like the US Dollar. 

US Dollar Basket 20201228 18.42

Even though a US government shutdown has now been avoided, traders aren’t exactly lining up to take on more risk. After all, we’re in that quieter, more illiquid part of the calendar between Christmas and New Year’s, with many traders relegated to the sidelines. The news that are developing are more or less in line with consensus expectations .

In a sense, then, nothing has changed. The timing of the calendar – in the midst of the holidays, following a year of prolonged weakness still suggests that traders simply covering their short positions, not setting up fresh US Dollar longs.  

 

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EURUSD H8 12 17 2020 2022

Recently surging to its highest level since April 2018, EUR/USD added another victim to its growing list of breached technical levels in the last few months. It has made considerable progress toward ending the multiyear decline it found itself in as a result. European Central Bank officials have already taken note but, judging by their commentary, have little interest in curtailing continued Euro strength in the near future. Still, this may become a concern in the future.
In the meantime, the steady fundamental landscape and recent technical break suggest EUR/USD may continue higher still. Since the pair trades at levels not seen in more than two years, immediate technical barriers are rather sparse. Nevertheless, prior highs from early 2018  the nearest of which does not arrive until 1.2405  may provide some influence if EUR/USD pushes higher.
Despite the recent break higher, shorter-term pullbacks are not out of the question and could serve as healthy consolidation. In the event of a reversal, early support may reside around the 1.2174, 1.2150 and 1.2100 levels. A potential “line in the sand” that, if broken, could warn of further losses rests at the December swing-low of 1.2059.  

 

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