Investors should watch for price movements that may reflect expectations of lower volatility later in the week

Investors should watch for price movements that may reflect expectations of lower volatility later in the week

20.12.2021

Last weekend, all three major U.S. stock indices fell, creating a risk-off sentiment characterized by declining stock prices, falling interest rates, and lower oil prices. The Dow Jones Industrial Average dropped more than $500 from the previous day, closing at $35,365. Following the announcement from the FOMC meeting held last weekend, speculation about an early interest rate hike emerged, leading to a sense of caution in the market and triggering a wave of selling.

As of last weekend, the U.S. dollar and the yen emerged as the strongest currencies in the foreign exchange market, causing cross-yen pairs to decline slightly. Among the cross-yen pairs, the euro/yen saw the most significant drop, falling more than 100 pips from 128.98 to 127.77.Technically, the EUR/JPY pair has pulled back as its upside was capped by the daily 200-day moving average (MA). Since it has fallen below the recent low of 127.87, we will be closely monitoring whether it breaks below the next support level at 127.49.

Apart from the release of the Eurozone current account balance at 6:00 PM, the UK CBI Business Survey at 8:00 PM, and the US Leading Economic Index at midnight, there are no major economic indicators or key speeches scheduled for today.This week, with the US Q3 GDP (final reading) scheduled for Wednesday the 22nd and the US PCE Deflator for Thursday the 23rd, liquidity is expected to decline in the latter half of the week on the 24th and 25th as Europe and the US observe the Christmas holiday. We intend to carefully monitor how the foreign exchange market reacts following these key events.