Hello traders, welcome to Monday. Monday brings quite significant movements across many assets, even though from the fundamental side there are no big hitters. We only received a comment from ECB’s Schnabel, who suggested that the ECB is comfortable with the idea that the next move may be a rate hike. Apart from that, today’s calendar is empty, so the market is driven almost entirely by technicals and sentiment.
One of the biggest stories this morning is the drop in oil, which is quite serious. Friday ended with a strong upswing, but Monday’s decline is cancelling this rebound almost entirely. This creates a very real possibility that Friday’s movement was a false bullish breakout from the sideways trend—something that would have very negative implications for the mid-term outlook on oil. Precious metals are also under pressure. Gold had a successful Friday at first, but the second half of the session brought a sharp decline and resulted in a daily shooting star, a bearish pattern that usually promotes further weakness. Silver follows the same path, so sentiment on metals is fragile.
Indices, on the other hand, remain strong. Sentiment is positive globally, and Monday brings continuation of the bullish bias. Nothing seems to disturb the optimism in index markets at the moment. As for currencies, Monday starts relatively calm. Australian dollar is flat, Japanese yen is weaker, Swiss franc is flat, New Zealand dollar slightly stronger, and the American dollar remains stable. Despite the lack of volatility, technical setups on USDCHF and USDJPY look particularly promising, with price action favoring long positions on both pairs.