Tight Ranges As Volumes Decrease
21-12-2010
Tight ranges took over the broad markets on Monday as volumes decreased dramatically as investors started to disappear because of the ensuing holiday season. The USD found a consolidated range against nearly all the majors on a lack of economic data and vacant offices. Wall Street traded sideways also yesterday. The EUR continues to hover near the lower realms of its range versus the USD as sentiment continues to remain weak because of the E.U. financial crisis and murmurs still coming from ratings agencies about further downgrading on Sovereign Debt – for example Ireland.
Gold generated some interest because of the Korean situation, but it traded in range also all day long and finds itself around 1385.00 USD an ounce. The AUD did climb slightly in value, but like the other currencies including the GBP and JPY did not find much in the way of action. In essence traders are now starting to sit on the sidelines knowing that many of the major financial institutions are winding down their positions which is creating a very quiet marketplace.
Today the GfK German Consumer Climate reading will be published and expects a reading of 5.8. Also the Public Sector Net Borrowing numbers will come from the U.K., but these reports are not considered major releases in many respects and their impact will be limited – particularly now. Tomorrow the Final GDP numbers will come from the U.S. along with Existing Homes Sales. Also the U.K. will release its MPC Meeting Minutes report and while these findings could spur on investment sentiment, the question is how many market participants will be around to create any noise.
In addition to the holiday season approaching is the fact that there has been absolutely severe weather across much of Europe causing travel chaos which has likely decreased trading volume too. Leaving much of the market taking a wait and see approach to any sudden signs of momentum. On Thursday the U.S. will release weekly Unemployment Claims, New Home Sales, and Core Durable Goods but the trading day will be a shortened one before shuttering completely for a long holiday weekend.
The crux of trading this week remains the clouds that are hanging over Europe and the manner in which the EUR flutters in the wind because of this. The EUR has not taken a major tumble in value considering all of the negative news surrounding it, and although it has certainly lost value the past two months, the question is where it will go in 2011 with so many concerns following it. The GBP remains under a EUR centric mode and it will likely find this the main story the last week and a half before the New Year.
Traders should not forget that although the markets appear tranquil that divergence is a major concern when volumes are low and they should not be lulled to sleep by quiet ranges. Opportunities do exist for traders who are able to participate and take advantage of consolidated ranges.
