The weekend was a mood killer for risk on camp on Monday we saw a global sell off of risky assets and another escape towards cash – reducing liquidity – and safe haven assets. On Tuesday and Wednesday things have been calmer, we will try to look for more technical setups which are more based on dots and less on panic and fear.
Oil was the star of Monday’s trading; prices collapsed after Saudi Arabia cut prices and announced an increase in production. Oil price plummeted to early 2016 lows at around 28 USD/bbl. At this point the price reversed creating a long tail on the weekly candle. We are using a hammer candle and on a support like this, it can be considered a strong buy signal.
Combined with price action, we can assume that 28 USD/bbl is an absolute low for the price of oil and the chances of it dropping further are very low. However, the short-term chart and the wedge show us that some kind of small drop is still around the corner.
Let’s look at SP500, also in the short-term, what we have here are two flags, one already resulted with the breakout to the downside, the second is just being formed as we speak. If history likes to repeat itself, the second flag, should also result with the breakout to the downside. This view is obviously supported by the negative mood around the world.
Last but not least is the EURGBP. The Bank of England cut rates, which caused a short-term depreciation of the GBP. Short-term only, as now, the GBP is back on track, shrugging off the cut. It does not change our long-term view on the EURGBP, where we continue to be bullish. On the weekly chart, you can see a beautiful double bottom formation bouncing from the 0.833 support level. The next few days could bring us a bearish correction here but in the long-term, the sentiment remains positive.
This article was originally posted on FX Empire
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