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Forex: How Long Can Yen Crosses Run, USDollar Consolidate?

Forex: How Long Can Yen Crosses Run, USDollar Consolidate?

John Kicklighter, Chief Strategist

Talking Points:

• The traditional December liquidity freeze is thwarting FX and capital market themes

• Yet, the yen crosses started the week off with a gap and extension of a prominent rally

• A solidifying December Taper forecast is engendering little positive bias to the dollar

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The December liquidity suppression is having an uneven effect on the FX markets so far. Growing speculation amongst economists, dealers and traders of a FOMC Taper next week is having little of the expected detrimental impact on capital markets; while the US dollar has further tightened its anemic trading range. Meanwhile, the yen crosses opened with a bullish gap which leveraged EURJPY to a fresh five-year high. Fading liquidity can support prevailing trends, but it also cubs momentum regardless of direction. So, which theme will capitulate: the bull run for yen crosses or tight range for the dollar? We discuss this important question in today's Trading Video.

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.