It’s been a widely accepted truth over the past few years that “buying the dip” has been the successful strategy of choice and even now having seen two successive weeks of declines for global stock markets there are those who firmly think that this successful strategy will once again overcome any concerns nervous investors have about recent global stock market weakness.

The big concern is that a lot of this nervousness, unlike previous occasions, is coming at a time when a majority of fund managers aren’t sitting on huge amounts of cash. As far as US markets are concerned the last two weeks declines haven’t been particularly significant with all of the major markets still within touching distance of their recent all-time highs. In fact last week we saw the Nasdaq close at a new record peak.

The wider concern comes when looking at European markets and the Japanese Nikkei which have seen more significant declines in the last fortnight, with the Eurostoxx50 closing at its lowest levels since the end of September, while the German DAX posted its weakest weekly close since 20th October.

Even the Spanish IBEX35 which rallied strongly in the aftermath of the triggering of article 155 of the Spanish constitution has slid sharply posting its weakest weekly close since early March. For all the improvement being seen in recent economic data across Europe investors appear to be starting to lose faith in the European assets, and becoming increasingly risk averse as we come into the end of November.

Also likely to weigh on risk this morning is the government coalition talks in Germany, which many anticipated would take a while to come together, appear to have collapsed completely and now raise the prospect that we could see new elections, as well as continued political uncertainty and deadlock in Europe’s largest economy.

Another thing that has been particularly noticeable is that commodity currencies have been particularly weak in the past few weeks, with the Australian, Canadian and New Zealand dollar all falling heavily, while the recent rebound in the Japanese yen also suggests a market that is becoming more risk averse.

This week’s agenda is once again likely to be dominated by the Brexit negotiations, after reports that the UK government might be looking to submitting an improved “divorce bill” offer to the EU in order to move things forward with respect to the beginning of discussions on trade talks.

We will also be looking towards this week’s UK budget with the Chancellor Philip Hammond, despite all the fiscal “doom and gloom,” actually sitting in a better position than he could have anticipated at the beginning of the year with respect to borrowing, on course to come in at least £10bn under his fiscal target for this year.

US markets are likely to be dominated by all the speculation about potential tax reform in a holiday shortened week as Thanksgiving and Black Friday looms at the end of the week, while the Fed minutes are likely to be scrutinised for any potential clues as to the Fed’s thinking about additional rate rises next year.

EURUSD – last week’s failure just below the October peaks at 1.1880, has seen the euro slide back, away from the right shoulder peak. The nature of the move does suggest some failing momentum, which could see a move back to the 1.1700 level. While above 1.1700 the risk remains for a return towards 1.1910 and the recent peaks above 1.2000. 

GBPUSD – continues to look supported making a high of 1.3260 last week with larger resistance at the 1.3320 area.  A move below 1.3120 opens up the prospect of a retest of the range lows at 1.3030. A move below 1.3000 argues for a move towards 1.2930.

EURGBP – three failures thus far since the beginning of October at the 0.9020 area could prompt some weakness if we break below the 0.8900 area. We have resistance at the 100 day MA at 0.8940 which if it holds could see a return to the 0.8870 level, towards 0.8820.

USDJPY – the break below the support at the 112.40 level opens up a retest of the 111.50 area and 200 day MA, as well as the October lows at 111.60. We have resistance at 113.20. 

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