Price action in the currency markets was once again limited over the past 24 hours as we discussed in our previous report. This year there is a lack of any fundamental developments during the holidays’ season and this leads to traders staying out of the markets and benefiting from this low volatility to enjoy some away time. The Fed decision earlier this month was the last important development of the year and given that everybody knew pretty much what was going to happen there was little room for surprise.
We will keep monitoring the markets on a daily basis up until New Year’s Eve in order to keep you informed of any fresh news so we can start the new year strong but the low volume and lack of direction in almost all of the major instruments doesn’t offer too many opportunities. However we don’t expect a similar performance when traders start coming back to their desks, 2016 will be an interesting year and there will be plenty of issues to provide friction in the markets and create opportunities for us to take advantage of.
Yesterday the broader theme of the market was a mild Dollar rally against the Euro and the Pound but nothing too exciting, the British currency was the one that came under more pressure with the rate dropping below the 1.4900 support area. Overnight though the currency corrected back up to 1.4900 and we will need to see fresh lows below yesterday’s 1.4870 in order for the Cable to extend its decline. The economic calendar doesn’t offer too many news to drive momentum higher but the Consumer Confidence report later in the day might be a strong enough catalyst to apply some pressure.
The Euro was bearish as well yesterday but unlike the Pound it was able to remain above the 1.0950 support area. The Single currency is trading within a narrow sideways channel and a successful breakout from this formation could offer an opportunity for a short-term trade, our bias is to the downside and if momentum picks up pace we could be visiting the 1.0900 area. As we mentioned above the calendar is mostly empty but a surprise higher on the Consumer Confidence report from the US could prompt traders to sell the Euro against the Dollar.
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