The final trading week of 2018 has been explosively volatile and wildly unpredictable due to geopolitical risks.
Global sentiment repeatedly swung from extremely bearish to bullish this week as investors tussled with concerns over slowing global growth, US-China trade developments, Brexit-related uncertainty and a partial US government shutdown. Although US stock markets bounced back to life yesterday to end positive and Asian shares traded mostly higher this morning, it is certainly too early for any celebrations. With investor appetite for riskier assets seen diminishing amid the unfavourable market conditions, global equity markets remain vulnerable to downside shocks. The geopolitical risk factors weighing painfully on global sentiment are likely to encourage investors to seek safety in the Japanese Yen and Gold.
Dollar hit by growth concerns and US politics
Buying sentiment towards the Dollar was dealt a sharp blow after a drop in US consumer confidence rekindled fears over a slowdown in economic momentum.
Concern over a partial US government shutdown compounded to the Greenback’s woes with the Dollar Index trading marginally below 96.45 as of writing. With slowing growth fears threatening the Dollar’s safe-haven status, the sentiment pendulum could swing in favour of the bears in 2019. In regards to the technical picture, the Dollar Index is shaky on the daily charts with prices trading below the 96.50 support. Sustained weakness below this level has the potential to open a path towards 96.00 in the near term.
Commodity spotlight – Gold
It is shaping up to be an incredibly positive trading week for Gold prices thanks to heightened geopolitical risks and Dollar weakness.
Explosively volatile equity markets, global growth fears, Brexit uncertainty and political instability in Washington have accelerated the flight to safety – ultimately sending Gold prices to levels not seen in more than 6 months. With turbulent market conditions guiding investors towards safe-haven assets, Gold is on route to concluding 2018 firmly above the $1,272 resistance level. The yellow metal has the potential to become a major talking point across markets next year, especially when concidering how the Dollar is seen weakening on growth concerns and Fed expected to take a pause on rate hikes in 2019. Taking a look at the technical picture, a yearly close above $1,272 is likely to trigger a move higher towards the $1,288 and $1,300 level.