Today is actually the last full-fledged working day before the New Year holidays. Usually, the activity of bidders at the end of December drops noticeably in anticipation of the New Year holidays, but not this year, where the month of December was characterized by very high volatility in world markets and first of all in the stock market.
This behavior of the market as a whole is unusual, although the overall volatility is growing, still remains within reasonable limits. But this year, against the background of continuing uncertainty about the prospects for resolving the US-China trade conflict, clear signals of a slowdown in global economic growth and political instability in Europe and the United States, extremely high volatility is observed.
The foreign exchange market, in contrast to the stock markets, is characterized by low volatility, while the commodity markets and equity markets, on the contrary, are characterized by extremely high volatility, which is based on the nervousness of investors concerned about the prospects for further growth of the world economy.
After the collapse of the US stock market this month in the last two days, he has noted an attempt to grow on the hopes of many investors that this decline is a correction and that it has probably ended. But, if you look more closely at the market volumes, they are still not as impressive and noticeably lower than those that were observed during the sale of shares of companies. It seems that a much smaller part of the market players took advantage of the low activity of its most part because of the Christmas and New Year holidays and decided to trade in opposition to the general market expectations.
Despite the second day of active growth in global stock markets, it is still early to speak about a real turning point in trends. Yes, the market, as before, hopes in autumn that once again in January, Beijing and Washington will manage to agree on the rules of mutual trade, and many probably also hope that the American economy will maintain an acceptable growth rate. But, unfortunately, the factors that really weaken these hopes have not disappeared anywhere. And this: the promise of the Fed to further raise interest rates, the continued reduction of the balance by the US regulator, which every month more and more reduces the amount of dollar liquidity in the financial system, the presence of clear signals about the slowdown of the global economy as a whole and the three leaders in particular and we mean the United States, China, and the eurozone.
Evaluating all the existing factors, we still believe that the probability of continuing falling of the stock market to a greater extent still prevails, and at the same time, there will be a demand for defensive assets, the Japanese yen, the Swiss franc, and the US dollar.
Forecast of the day:
The USD / JPY currency pair is trading below 110.85. We still expect the pair to decline to 109.60.
The USD / CAD currency pair is above the level of 1.3600. If crude oil prices remain under pressure, the pair may continue to move to 1.3700.
The material has been provided by InstaForex Company - www.instaforex.com
