Be on the lookout for price movements that may reflect expectations of lower volatility later in the week

Be on the lookout for price movements that may reflect expectations of lower volatility later in the week

20.12.2021

Last weekend, the three major U.S. stock indices all fell, creating a risk-off sentiment characterized by falling stock prices, lower interest rates, and declining crude oil prices.The Dow Jones Industrial Average fell by more than $500 from the previous day, closing at $35,365. Following the announcement from the U.S. Federal Open Market Committee (FOMC) meeting held last weekend, speculation about an early interest rate hike emerged, causing caution to spread through the market and leading to a sell-off.

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 decline, falling more than 100 pips from 128.98 to 127.77.From a technical perspective, the EUR/JPY 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 scheduled releases of the Eurozone current account balance at 18:00, the UK CBI Business Survey at 20:00, and the U.S. Leading Economic Index at 24:00, there are no major economic indicators or key speeches scheduled for today.This week, with the U.S. third-quarter GDP (final reading) scheduled for Wednesday, the 22nd, and the U.S. PCE Deflator set for Thursday, the 23rd, liquidity is expected to decline toward the end of the week on the 24th and 25th, as Europe and the U.S. observe the Christmas holiday.We intend to carefully monitor how the foreign exchange market reacts following these key events.