Christmas Focus: Omicron Is Still Frightening

Investors are still afraid of the COVID-19 omicron variant as lockdowns spread across Europe. The United Kingdom is looking to introduce a step 2 lockdown measure as the omicron variant cases surge above 93,000 daily. The Netherlands has been in a similar lockdown as the one established in spring 2020 since December 14.

Fears of a new wave of lockdowns in other European countries made investors nervous as it may be followed by a severe impact on the global economy. Crude prices fell by 5.0% while stock indices in the United States lost 1.0-1.2%.

The World Health Organisation (WHO) calmed down investors during a special press conference on December 20 when WHO Director General Tedros Adhanom Ghebreyesus said that the year "2022 must be the year we end the pandemic". That statement impressed investors and the stock market rebounded globally. On Tuesday Hang Seng rose by 1.0%, the Japanese Nikkei 225 added 2.08%, Brent crude rose by 1.19%. U.S. stock indices opened higher by 0.8-0.9%.

On Thursday the only important data to be published will be the November Personal Spending index. So, there are no visible hurdles to limit the rise of the S&P 500 broad market index to 4670 points. It is important that the index  be above the support level of 4580 points, and that no new lockdowns in Europe should be reinstalled. Otherwise, the S&P 500 index is likely to drop to 4500 points.

Crude prices almost regained their huge 5% drop on Monday. Brent crude prices returned to the $73 per barrel area. The next target is at $72.60-73.00 per barrel. However, if prices fail to reach this target prices may drop to $69.00-70.00, which is a strong support level.

Gold prices went sideways around $1800 per troy ounce. Though gold is likely to move to the downside at $1550-1650 per ounce, such a scenario has limited time to become a reality. If gold prices remain above $1750 per ounce until January 15 they may resume the upside movement towards $1830-1850 per ounce in January and February, and only after reaching it will prices roll back to $1550-1650 per ounce.

EURUSD has failed to touch the 1.13900-1.14000 landmark last week. Reaching this landmark would enable the Euro to continue rising, but now it is likely to fall to 1.12000-1.12200. However, the pair has no directional movements that would provide good opportunities to open any positions. So, it would be better to leave EURUSD behind this week.

GBPUSD was hammered by the pandemic in the United Kingdom as the omicron variant has reached a new record number of cases. The pressure on the Pound forced GBPUSD to decline and the pair may continue to keep to the downside this week. However, the Pound may temporarily rebound to 1.32600-1.32700 to drop back to 1.32200.