The long awaited European summit took place with mediocre results. Although similar debt crises will be avoided in future by the new fiscal union, the current crisis is not yet resolved by a long shot. Still, after a tough year it seems as if the bears are getting tired and markets may have a small little Christmas rally.

WTI declined by 2.4% for the week. The decline can mainly be ascribed to persistent fears that the European debt situation has not been put to bed.

On 5 December WTI formed a bearish “shooting star” formation and reached a high of $102.5, before declining and falling below $100 on 7 December. After declining below $100 WTI tried unsuccessfully to once again close above the level. We now see $100 and $101 as resistance. Although we believe $101 may be tested intra-day, we expect the decline to continue and look for support at $96.5 to be tested.

We expect a range of $95-101 for the rest of the week.

The Rand lost 1.5% as market participants lightened on risky assets in the run-up to the European announcement. All trading is headline-driven at the moment. Should the dust settle in Europe, we expect the Rand to strengthen significantly. If not, we may see a dramatic decline in thin volume towards year-end.

As mentioned last week, the Rand is setting up a nice “head & shoulders” formation. A break of the neckline at R7.8/$ (close-below) will see it strengthen significantly. A significant bounce off the R8/$ level will however indicate that the formation has failed. This will be very bearish for the Rand and as mentioned above can see the Rand weaken significantly in thin volume.

We expect a range of R7.8-8.3/US$ for the rest of the week.

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