With liquidity likely to be very thin this week we could be in for some exaggerated moves, and as before, the key for direction would appear to be in the stockmarkets, which still look awful, closing the week down by another 1.5%-2% on Friday – Nasdaq -3.2% – and seemingly headed a fair bit lower in coming days. The US government shutdown over the weekend is unlikely to helpsentiment on Monday, and if it continues, it would seem to suggest the possibility of the stock markets heading a fair bit lower.
The general risk off attitude looks set to benefit the Jpy, Chf and possibly the US$, while the big losers look likely to be the Aud$ and the Kiwi, both against the US$ and on the crosses. WTI is also trading very heavily, although it is now sitting on the strong support that we previously mentioned at 45.50 (61.8% of 26.03/76.87). A break of this leads to 42.03 (21 June 2017 low)
For the Aud$, below 0.7020 would target 0.6970 and 0.6920 ahead of the January 2016 low at 2016, albeit that this is some way off. Similarly, Kiwi targets would be 0.6670 (100 DMA) and 0.6630 (61.8% of 0.6426/0.6969).
Although these views may well play out, and the trend table will be produced during open market sessions, there will be no trade recommendations until Wed 2 January.