Limited volatility but no absence of price action in the currency markets over the past couple of days before Christmas, participation might be very low hence the trading volume is minimal however there is some action to talk about. Today’s analysis will be limited in content as the market has little to show for with most traders and investors away on holidays.
As we draw near the end of the year the broader market theme is exactly what we detailed to our audience in the week leading to the holiday season: weakness for the US Dollar as traders are looking to bank their profits from a positive 2015. This year has been a very good one for the US currency and traders that betted in favour of the buck had strong profits in light of Fed’s long-telegraphed intention to raise rates.
As such the Dollar had a very good run leading up to the decision but as we had warned our readers the aftermath of the decision up until the end of the year wasn’t meant to be more gains. This is due to the fact that Fed’s intentions were clear in the months before the decision hence everyone that wanted to benefit from it did so and now it’s time to take these profits off the table and walk into the new year as neutral as possible.
Talking about Dollar’s weakness the Euro appreciated on the back of it and just before Christmas tested the 1.0980 highs. The Single European currency has been trading higher bouncing from the 1.0800 lows mid-December and at this time has been capped by the 1.0980 level while momentum and price action remains limited. We wouldn’t expect too much volatility during the next couple of days leading up to New Year’s Day however there could still be some opportunities for a few short-term focused trades for those that want to remain active in the markets during these days.
The Cable rallied higher as well last week and has climbed above the 1.4900 level to test the 200-period moving average at the 1.4940 level. Traders have been looking to take their profits away from the Cable as well in the past couple of weeks as the currency pair had dropped 400 pips since mid-December to hit the 1.4800 lows. The correction taking place seems reasonable but we wouldn’t draw any premature conclusions at this time, instead we will look to benefit from any short-term trades while the holiday season is still on.
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