Omicron Uncertainty Continues To Drive The Markets

Dec 29 21, 09:24 GMT

Tuesday’s price action was rather muted during the European session yet volatility increased to some extent entering the US session. The USD gained some strength and managed to work its way to dominate across the board. The greenback made notable gains against the CAD and the EUR while it neared break even against the JPY making it the only currency to stand its ground against the USD. The JPY may have been supported by a strong Preliminary Industrial Production reading that jumped from previous 1.8% to 7.2% in November.

Among other currencies the EUR was rather weak and lost ground against all majors except the AUD and the NZD which may have performed their weakest session during this week so far. The GBP was extremely strong against the NZD. However, even though it reached a new monthly high against the USD it corrected lower in the US session and did not manage to top the greenback for a second consecutive daily session. On a weekly basis GBP displayed significant strength against the JPY. WTI’s price action remained rather muted as the market seems to be concerned about future plans the OPEC plus group will implement to keep the market in balance.

Some analysts don’t see OPEC changing its strategy thus a sentiment for a stabilization at higher prices seems to persist for the time being. WTI continues to trade above $75.50 per barrel for the time being. Gold initially strengthened during the normal course of the daily session yet later turned lower and lost the ground gained including some gains from the past days. Silver reached a new December high on Tuesday yet relented ground thereafter in the early US session. US stock markets sent mixed signals as the Nasdaq and the S&P500 fell in red territory while the Dow Jones remained positive.

Technically some stabilization for the indexes makes sense as the upward movement persisted for the previous four daily sessions. The Turkish lira weakened for the second consecutive day against the USD, GBP and the EUR. Very notably reports state that the Turkish Banking Supervision and Regulation Agency is suing individuals that supposedly tried to manipulate the Liras exchange rate through comments on social media platforms. Among the people sued are two previous chairmen of the central bank of Turkey. Impressively, the CZK on a continuous strengthening managed to reach a 22 month high against the EUR. The Czech currency is supported by the confidence the Czech economy is displaying as the CNB continues to impose rate hikes.

This happening seems to favour the CZK against the EUR, as the later remains affected by the uncertainty surrounding the Eurozone block. On Tuesday media headlines from around the world confirmed COVID-19 cases had been on the rise in several countries reaching record highs. The impact on the market has been mild yet traders should be cautious as circumstances can change in an instance. On a more positive note The US Centre for Disease Control and Prevention (CDC) reduced isolation time for asymptomatic cases of COVID-19 to five days from the previous guidance of 10 days. This is said to be an action taken to limit somewhat the impact on the economy. We suggest that new actions that will combine public protection and economic support will continue to be announced in the days to come, as this may be the only path forward at the moment.

GBP/JPY continues to be in an upward momentum at the moment and has tested the (R1) 154.50 recently. This level may require extensive power to be breached yet a move above it could confirm the bulls are dominating the scene. In this case we could also see the (R2) 155.35 line coming into play while even higher the (R3) 156.20 may also be a target as it was last seen in early November. In the opposite direction a possible selloff can become evident if the price action make its way to test the (S1) 153.65 line. If this level is breached downwards then the (S2) 152.75 line could be next while at the end the (S3) 151.90 is the final support for this analysis.

According to the RSI indicator below our chart, a move above the 70 level may be implying the upward momentum persists. In our view an upward bias with some sideways tendencies in the short term could be more appropriate.

XAG/USD is also among the instruments that continues to run upwards in the current week. Yesterday Silver managed to break above the (R1) 23.10 line reaching a new monthly high yet the price action returned lower a few hours later. If the trend continues then the (R2) 23.60 level is approached then this can signal the buying tendencies have increased. At the top the (R3) 24.05 line is also imminent. A possible drop to the downside can force silver towards the (S1) 22.60 level. A movement even lower could bring the price action closer to the (S2) 22.15 level. Finally the (S3) 21.50 level can also be engaged in a more extended selling strategy. The RSI indicator below our chart remains below 70 implying the bulls may need more space to move in order to take over.

GBP/JPY H4 Chart