The daily chart in on the established range with the incorporation of a mid-line as a reference point. The uncertainty around Brexit saw price action see-saw, moving above and below the mid-line with regular frequency.

Although a deal has been agreed, both nations are still in the early stages of operating under the new agreed terms and therefore, the true impact of the separation is still to play out and will be revealed in price action. In the absence of a clear discernable trend, price action may well continue to oscillate around the mid-line in the early days of 2021.

A break above the descending channel and above the midline brings into focus the 0.9160 level of resistance, while a bounce off of the upper trendline with increased selling momentum highlights the recent low of 0.8930. 

EUR GBP 20210105 17.45

 

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The Australian Dollar has enjoyed recent gains against many of its major counterparts as risk appetite drives demand for the grow-sensitive Aussie. AUD/NZD has been an exception since August, however, and the pair was locked in a downtrend until December. The final month of the year offered some respite for the Australian Dollar which saw AUD/NZD climb quickly from 1.0417 to the 200-day moving average just north of 1.0715. 

AUD NZD 20210104 16.40In conjunction with resistance offered by the 200-day moving average, AUD/NZD reveals waning momentum with a series of daily candles with long upper wicks. Further still, the recent formation of a death cross in mid-November could suggest the pair is vulnerable to a continuation lower. Levels of invalidation if bearish exposure is to be explored can be set above the nearby 200DMA the November high.

 

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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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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.

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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