What to Expect from The Markets in 2019?
Christmas and New Year’s Eve celebrations are just around the corner, and so traders are unlikely to trade for a while now enjoying the festivities. So, it’s just about the time to ponder what’s ahead for financial markets in 2019.
The very first thing most traders are really worrying about is US Dollar. What events will move it and to what side? Here we should appeal to the fundamental aspect.
It is a well-known fact that the US economy is on the rise. For many years in a row it is continuously moving up. Once economy approaches the peak, it will likely correct itself. We should also remember that the world economy can very well weaken right after growth of US economy slows down. In turn, the Federal Reserve System may delay increase in the main interest rate. This may give a negative signal to the American currency.
Another thing to really ponder is the recovery of the monetary policy by the European Central Bank that implies rolling back a quantitative easing program and an increase in interest rate. The European Central Bank really favors the Federal Reserve System’s strategy. This matter may negatively impact US dollar especially when traded along with the single currency. In principle, the US dollar will rather drop than go up. But let us investigate things even further.
Checking the chart of US Dollar index (US Dollar index is a measure of the value of the US dollar to a basket of main six foreign currencies), we can see that dollar is now right in the middle of the range formed between the levels 89.00 and 104.00. We expect the US Dollar index to drop till the level 89.00 just to pull back from it as the rate of US Dollar really likes to retest the trendlines many times in a row:
Another thing traders are really interested in is the oil. Let us remind you that not OPEC+ meeting took place a short time ago. Saudi Arabia was strongly insisting on oil production cuts by all the oil exporters till October’s levels. But the fiercest opponents of this idea wanted Saudi Arabia to cut oil production to balance the market prices since the end of spring Saudis managed to raise oil production till more than 1 million barrels per day.
Iran additionally fueled the fire wanting to exit the Cartel. Although this statement helped Iran escape oil production cuts along with Libya and Venezuela.
All in all, the OPEC came to agreement to cut oil production by 3% whereas exporting countries outside the Cartel must cut oil production by 2%. Everything seems to be fine yet small participating countries will suffer as well as they should also significantly decrease offer volumes.
And how did the market react to all of this? Oil rates did not change much, slightly going up against final announcement of final agreement just to head under the levels oil has been trading before this meeting. It is possible that traders decided to wait and see what kind of agreement participating countries are going to come to and how efficient December’s meeting will be. One thing is clear now. OPEC is no longer able to efficiently control oil rates on the market. These times are gone now. Yet oil rate of 80 Dollars per Brent’s barrel as budgeted by Saudis, seems to be quite likely the goal to be reached anytime soon.
What’s currently happening with the oil rates from a technical point of view? As for now, WTI oil rate is testing the broken neckline of reverse head and shoulders. In fact, this pattern is touching a very strong monthly level of 33.00 that has formed right in the middle of financial crisis happening during 2008 and 2009. Should oil rate pull back from the neckline, it may very well reach the level 77.00. Oil is not Bitcoin and it is unlikely that it will completely depreciate. Here one should understand that many will want to buy the oil for the price of 33 Dollars per barrel, let alone the price of 20 Dollars per barrel. Now the oil has dropped way too far so oil rates have plenty room to grow should it ever happen
Finally, let’s move to the stock market. Here we should first consider what’s going on with American stock index S&P500 that seems to be stuck in a wide weekly range. As for now, index rates are staying next to the level of 2550.00. Only when this level gets broken through or pulls back from, US stock market as well as stock markets of other countries, will move.
There are two things this index may be up to. It can either pull back from this level and quickly approach the level 2900.00 or renew historical maximums.
Stock index may also break the level 2550.00 and finely drop all the way down till the level of 2120.00. In principle, any of these things may happen anytime soon and volatility will take care of the rest:
This is the final review for this year. Receive my most sincere wishes of Happy New Year! Let the year 2019 be lucky and productive for all the traders. Merry Christmas and Happy New Year!!!