EU Session Bullet Report – Asian Stocks Tumble, Safe Assets Rise As Oil Retreats

Oil is once again ongoing a severe drop in value with the prices now under $30 after rebounding to 34.70 last week. As a result, US stocks underwent through a sharp selloff with DJI dropping -1.8% and SP500 -1.87%. The drop was led by energy stocks along with Financials. The risk aversion, is benefiting JPY which pushed the dollar down to 119.40. USDJPY was trading over 121.60 last week.

Overnight ion Asia, the drop was carried over with Japanese Nikkei leading the drop and trades at -3.2% on the day. Chinese stocks are also under pressure (surprise surprise). The only beneficiary of this situation is gold which prices are nearing a very important resistance at 1130. A break of this level could signify a temporary bottom and a trend formation cannot be excluded.

Oil prices have fallen about 70% in the past 18 months, largely due to a growing supply but also worsened by slowing economic growth in China and other emerging markets. Uncertainty around global growth has prompted investors to cut back their expectation of future U.S. rate hikes, with Federal funds rate futures now pricing in only about a 50 percent chance of just one rate hike this year compared to 4 hikes priced in earlier in December.

Investors will shift their eyes to EU and UK PMI data but the big news are just before the US session with ADP employment at 13:15 GMT and Markit services PMI at 14:45 GMT. ISM non-manufacturing PMI will be released at 15:00 GMT. EIA will release weekly crude inventory report at 15:30 GMT.

EUR/USD Intraday: under pressure.

Pivot: 1.094

Most likely scenario: short positions below 1.094 with targets @ 1.089 & 1.0875 in extension.

Alternative scenario: above 1.094 look for further upside with 1.0965 & 1.0995 as targets.

Comment: the RSI is capped by a declining trend line.