Sideways Action
23-12-2011
The broad markets have entered the full brunt of the holiday season. Volumes continued to decrease on Thursday and will become even thinner today. A long holiday weekend awaits most traders. The EUR, GBP, AUD, and JPY essentially traded sideways against the USD yesterday. Equities in the States turned in slight gains, but the results must be taken with a grain of salt. Traders choosing to participate in Forex and other markets today should consider that volumes will be low and because of this ranges may appear at a standstill for moments. However because of the low volume a big order coming from a far off corner could cause a sudden burst of momentum.
The U.S. turned in better weekly Unemployment Claims results yesterday and the Revised Consumer Sentiment reading from the University of Michigan was also an improvement per the estimate. Today the U.S. will release Core Durable Goods Orders, but it is questionable what type of impact this data can produce taking into consideration that many financial institutions will be closing relatively early today and investors that are sitting at their desks may have their minds on other subjects. The USD still must be considered a safe haven asset and with the huge amount of questions still surrounding the European Union’s financial crisis traders should carefully consider taking any positions over the weekend. While the major currencies may in fact turn in very cautious movement, any type of surprise developments could set off a tricky market early next week with less than full volume.
Gold as of this morning is around 1610.00 USD. The precious metal like other assets has found a consolidated mode as the holidays approach. Upon the strength in the USD, Gold has found some headwinds and this may continue. But the real question is what would happen to Gold if the worst case scenarios should somehow come into play with a major currency like the EUR. How would safe haven traders react even if the USD is strong?
The U.K. will see the release of the BBA Mortgage Approvals today, but the data will go largely unnoticed. The Sterling remains locked in a EUR centric mode and it is clear that this will not change anytime soon. However, a divergence from the EUR remains an interesting trade prospect via the EUR/GBP pair. If the EUR continues to face long term problems it is possible that the GBP may prove the better currency in the long term and offer relatively less volatility than a EUR/USD trade in terms of risk management.
The broad markets will trade with nearly full hours engaging today. However on Monday most major equity markets will be closed along with most commodity exchanges. Some Forex trading will be possible on Monday but traders who choose to participate should be ready for very quiet and thin markets the day after Christmas.
