FEARS OF GOVERNMENT SHUTDOWN DOMINATE MARKETS AS EARNINGS SEASON BEGINS

Today, the global financial markets saw mixed returns. In Europe, the DAX and the CAC gained by 0.25% while the FTSE 100 and the Bovespa fell by 0.17% and 0.22% respectively. This came as a report by European Commission showed that the Euro area confidence rose to the highest level since 2000.

In Asia, the Hang Seng, Shanghai, and Kospi were up 0.28%, 0.52%, and 0.63% respectively while in Australia, the S&P/ASX 600 was up 0.13% to settle at the highest level in 10 years.

In the United States, the main indices futures pointed south with the Dow and NASDAQ shedding 20 and 10 points respectively. The decline is associated with the fears of a government shut down after Trump and the Democrats differed on how to deal with the DACA issue. It is also associated with the upcoming earnings season, which kicks off officially on Thursday when Bank of America will release its quarterly earnings.

Also, the country continued experiencing freezing weather with many airlines cancelling flights. New York’s John F. Kennedy International Airport was forced to close amidst flooding.

On currencies, the Euro fell against the dollar as Germany’s Merkel initiated talks to form a government with the opposition party. This is the last ditch effort for Merkel to form an inclusive government for the largest economy in the Euro Area. Failure to which, the country will be headed back to an election. As of writing, the Euro was down 0.42%.

In the UK, the pound fell 0.17% against the dollar as reports indicated that Theresa May was close to reshuffling her cabinet. A report by the Telegraph noted that her new cabinet could include a Minister of No Deal as a signal that the country was prepared for an acrimonious exit from the Euro.

Tomorrow, politics from Italy, Germany, U.K, and U.S will continue dominating the markets as we don’t expect any major economic data.

EUR/USD

The dollar, which fell against the euro last week tried to recover some of the losses. As of writing, the euro was off 0.42%. This reversal came as the pair completed the motive Elliot Wave and started the reversal wave. Therefore, we expect the pair to test the strong support level of 1.938.

AUD/USD

Australian dollar, helped by strong commodities prices continued its upward moves against the US dollar. In the past one month, the pair has moved from 0.7501 to a high of 0.7873. As long as commodity prices continue their upward trend, and as the budget funding issue continues in the United States, expect the upward moves to continue. The RSI is currently at 43, an indication that the upward moves might continue.

EUR/NZD

The New Zealand Dollar continued to strengthen against the euro fueled by strong commodity prices and political uncertainties in Europe. The pair seemed heading to the lowest level since 11th November. As long as the NZD is supported by the strong commodity prices, the pair could continue testing lower levels. However, traders should follow closely the political news coming from Germany.