Indices getting more confident with bearish correction

Tuesday brought upon quite a significant bearish correction on indices, marking a triumphant return of sellers on the market after days of absence. A significant cooldown can, in fact, prove positive if we consider the Santa Rally expected to happen in the second half of December. It is always preferred for it to occur when the market is not too overbought.

Nasdaq lost 2%, SP500 1.4% and Dow Jones was down 1%. Today, negative sentiment remains and Asian indices are finishing their sessions on the red side of the market. That is happening despite the fact that China announced further easing of Covid restrictions. We might be possibly looking at one of the “buy the rumors, sell the facts” kinds of movement.

Things are getting interesting in the world of commodities. Monday was not the best day for oil and precious metals and Tuesday did not bring much improvement, either. Brent oil dropped 4%, while WTI lost -3.5%.  Both of them managed to set new mid-term lows, reaching the levels from the beginning of the year. Drivers at petrol stations across the globe should receive a nice Christmas present of lower prices of gasoline soon.

The weakest currency among the majors yesterday was the British Pound and the strongest one was the American Dollar. So far, everything points to this trend keeping up on Wednesday as well. Today’s calendar is interesting, especially for the commodity currencies like AUD and CAD. GDP from Australia generally disappointed with 0.6%, where the expectations were 0.7% with the previous number being 0.9%.

In the early stages of the American session, the Bank of Canada will reveal its decision on interest rates. A chunky rise of 50bp is expected from 3.75% to 4.25%. Anything less than that should be a strong sell signal for the CAD.