FX Market Overview for December 23, 2019

First, I would like to wish all our readers happy holidays. Writing for you was a real pleasure and I hope you liked my comments. Next year we will make some interesting announcements, so please stay tuned.

No one should be surprised by the calm nature of Monday’s trading, which was the last full day before the Christmas holidays. For those who are going to work in the next 2 weeks: Tuesday will be a shortened day in most markets, and on Wednesday all of them will be closed. While U.S. markets will reopen on Thursday, many European and Asian venues will celebrate Boxing Day. Reduced activity means less liquidity, which tends to narrow trading ranges, but can also provide the perfect backdrop for strong breakdowns. This has already happened in 2019, when on Thursday January 3 the pair fell by 4% in a matter of minutes. This was partly due to concerns about the trade and Apple’s comments (NASDA’:) financial results, but the catalyst was low liquidity and position adjustment at the beginning of the year.

In the last few weeks, the pair and USD/JPY traded in narrow ranges, indicating the possibility of a breakdown. There is no shortage of potential triggers, such as a possible missile launch from North Korea on Christmas Day, the us reaction, the risk of a failure of U.S.-China trade talks, lingering uncertainty over Brexit, the risk of Trump’s impeachment or a panic sell-off at the start of the year. The U.S. data is disappointing, and fears are growing that the Fed may have to fall again in 2020.

There are very few macro-statistics on this week’s calendar, but data released on Monday reflected a slowdown in the U.S. economy. At the end of the year, u.S. statistics have changed for the worse, and while all major economies will be able to avoid recession in 2020, the pace of growth in the U.S., in particular, may slow before things improve. The unexpected decline, which was reported on Monday, reinforces the weakness of other production indicators. Although it increased in percentage terms, in absolute terms this figure decreased in November compared to October. All this means that the record highs of the US stock market are unsustainable, and the deterioration of macro statistics may lead to a correction in 2020.

also declined amid weak data on . According to the latest reports, Canada’s economy slowed by 0.1% in October. Over the past few weeks, the Canadian dollar has shown strength despite weak data on , and economic growth. As with U.S. stocks, it should be difficult for the currency to continue to strengthen in the coming weeks. The Bank of Canada is comfortable with the current monetary policy parameters, but if U.S. growth slows and data on Canada continues to deteriorate, the central bank could go for policy easing in 2020.

The sell-off intensified on Monday; the currency continued to lose everything it earned from the election results. British lawmakers supported Prime Minister Boris Johnson’s plan to leave the European Union on January 31. With this Brexit bill, the UK will have until 31 December 2020 to agree a trade deal with the EU. It also increases the likelihood of a “hard” Brexit, which Johnson will agree to if he fails to reach an agreement. Meanwhile, the data were weak and are likely to remain so in the coming year if Boris Johnson does not agree with the EU.

Meanwhile, the dollars continued to strengthen, and recovered. There were no important economic data publications, but Germany grew stronger than expected. While the euro may continue to recover from last week’s sharp sell-off, AUD and N’D are approaching overbought levels, and the latter is becoming the main candidate for profit-taking at the end of the year.