The extraordinary levels of volatility observed across the financial markets this week following Donald Trump’s historical presidential victory may be an event which remains cemented in the minds of all participants moving forward. Global stocks initially plunged to heart-wrenching regions during early trading on Wednesday after the dreadful mixture of uncertainty and anxiety triggered a tidal wave of risk aversion.
The temporary period of despair was swiftly erased following Trump’s presidential speech that sent major stocks to gravity-defying levels. With the Trump effect elevating global sentiment during trading on Thursday, stock markets traded higher as the renewed risk appetite encouraged investors to pile into riskier assets.
Markets awoke with a change of heart during early trading on Friday with emerging market stocks descending into the abyss as fears heightened over higher US interest rates under new U.S. President Donald Trump. Asian shares also displayed some exhaustion from the Trump effect with the slowing momentum potentially contaminating European markets later today.
Although Wall Street was a star performer on Thursday as the Dow Jones lurched to all-time highs, questions should be asked over the sustainability of the current rally. Financial markets have been clearly Trump driven this week with more time needed for investors to fully digest and weigh the impacts of a Trump presidential victory.
Sterling bulls on the prowl
Sterling bulls have strategically exploited the Trump developments to quietly propel the GBP/USD to fresh five week highs at 1.2650 as of writing. With all attention directed towards the shocking market shaking presidential victory, some hard Brexit concerns may have eased consequently prompting buyers to attack.
Regardless of the short-term gains, Sterling remains cursed by the Brexit woes in the longer term with the current technical bounce providing a foundation for sellers to pounce in the coming weeks. From a technical standpoint, bulls may ferry the GBP/USD towards the 1.2800 resistance which could mark the end of the technical bounce.
Gold hovers above $1250
Gold was erratic this week with prices violently swinging between losses and gains as the conflicting combination of renewed US rate hike expectations and risk aversion amid the Trump uncertainty sparked explosive levels of volatility. The metal ended up relinquishing most of its gains during trading on Thursday with prices descending towards $1251 after dollar's revival encouraged bears to install repeated rounds of selling.
Although gold remains heavily bearish on the daily timeframe, bulls could be provided a lifeline in the new trading week if the lingering uncertainty re-attracts investors back to safe-haven investments. From a technical standpoint, bulls may be a step closer to losing this battle once gold achieves a weekly close back below $1250.
Commodity spotlight – WTI Oil
WTI oil continues to be infected by the persistent oversupply concerns as well as fears of softening demand amid slowing global growth has ensured prices remain depressed. The excitement towards November’s end of month OPEC meeting has been quelled by pessimism over the success of a meaningful freeze deal.
Sentiment towards oil remains bearish with steeper declines expected in the coming weeks as a strengthening dollar amid renewed US rate hike expectations provides a fresh opportunity for sellers to attack. From a technical standpoint, a breakdown below $44 could trigger a selloff towards $43.
Currency spotlight – USD/JPY
The Bank of Japan was placed on an emotional roller-coaster ride this week as the initial risk aversion from Trump’s victory strengthened Japans yen to shocking levels. Markets still remain highly sensitive to Trump developments with the Yen poised to strengthen further as uncertainty attracts investors to safe-haven assets. From a technical standpoint, the USD/JPY may be vulnerable to further losses in the medium term if bears manage to breach back below 105.00.
Disclaimer: The content in this article comprises personal opinions and ideas and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability as to any loss arising from any investment based on the same.
Risk Warning: There is a high level of risk involved with trading leveraged products such as forex and CFDs. You should not risk more than you can afford to lose, it is possible that you may lose more than your initial investment. You should not trade unless you fully understand the true extent of your exposure to the risk of loss. When trading, you must always take into consideration your level of experience. If the risks involved seem unclear to you, please seek independent financial advice.