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No Christmas Calm

Published December 27, 2018

by Nicholas Cork

The market was witness to a very odd performance on Christmas Eve by the US President’s twitter feed, where he claimed “I am all alone (poor me) in the White House,” before teeing off at the Federal Reserve Chair Powell and the Fed itself, saying “they don’t understand necessary Trade Wars or Strong Dollars.” The market reacted as expected, punishing the DOW with another 500 point drop to take it back to AUG 2017 levels, and OIL was sold off to lows not seen also since AUG 2017. In currency’s, the YEN rallied to a 4 month high on safe-haven flows, and the CAD sat at 18 month lows due to its exposure to oil. The AUD and NZD both were under pressure but the AUD managed to hold above its year lows, and has subsequently seen 0.7030 tested and held over the last three days.

Fast forward to last night where Trumps’ advisor says that Fed Chair Powell is ‘100 per cent safe,’ and the market reacted by sending the DOW 1000 points or 5% higher, and Oil futures have risen an incredible 10% to overall give US markets their best one-day performance in 9 years. Currency markets also did their thing by reversing all the safe haven flows that went into YEN and Swiss Franc a few days earlier, and the AUD has ground higher from it’s lows but needs to close in NY above 0.7075 to show signs of health.

Neither move was healthy for market stability or integrity, and the Volatility Index has reacted accordingly by overall trading higher, so market participants will be a little nervous in these thin markets until more liquidity returns next week.  No doubt the US administration will be talking up todays performance so look out for headlines. Technical support for AUD currently remains at 0.7030, and 0.7150 should resist for now.