News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Mixed
Wall Street
Mixed
Gold
Bearish
GBP/USD
Bearish
USD/JPY
Bullish
More View more
Real Time News
  • The US Dollar will be bracing for a cascade of political risks including the first presidential debate, ongoing stimulus talks, the Supreme Court vacancy against the backdrop of key employment data. Get your #currencies update from @ZabelinDimitri here: https://t.co/quU4MmUjxA https://t.co/jF6ubwRz1P
  • The Indian Rupee may be at risk to the US Dollar as USD/INR attempts to refocus to the upside. This is as the Nifty 50, India’s benchmark stock index, could fall further. Get your $USDINR market update from @ddubrovskyFX here:https://t.co/3wsYlSxd26 https://t.co/PfIVibmqn1
  • Did you know a Doji candlestick signals market indecision and the potential for a change in direction. What are the top five types of Doji candlesticks? Find out: https://t.co/td5WA4hCZC https://t.co/lKvEMf4QRe
  • Weakness in equity markets continued last week as losses built and technical patterns hint further bearishness might be ahead. Get your #equities update from @PeterHanksFX here: https://t.co/GGVrB3r7if https://t.co/HPHUC8EG3o
  • Forex liquidity makes it easy for traders to sell and buy currencies without delay, and also creates tight spreads for favorable quotes. Low costs and large scope to various markets make it the most frequently traded market in the world. Learn more here: https://t.co/5uSWKoLkd6 https://t.co/q80wSAoxXP
  • There is a great debate about which type of analysis is better for a trader. Is it better to be a fundamental trader or a technical trader? Find out here: https://t.co/aVAzFypAg1 https://t.co/7mc19Gxrvm
  • #Gold prices succumbed to selling pressure as the US Dollar soared this past week What is #XAUUSD facing these next few days and can these fundamental forces extend its selloff? Check out my outlook here - https://www.dailyfx.com/forex/fundamental/forecast/weekly/chf/2020/09/26/Gold-Price-Outlook-Rising-US-Dollar-Sinks-XAUUSD-Will-Losses-Extend.html?CHID=9&QPID=917702&utm_source=Twitter&utm_medium=Dubrovsky&utm_campaign=twr https://t.co/gPhy0KoW3W
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here: https://t.co/38gTDnpPbn https://t.co/Xtk5g4JQEB
  • Many people are attracted to forex trading due to the amount of leverage that brokers provide. Leverage allows traders to gain more exposure in financial markets than what they are required to pay for. Learn about FX leverage here: https://t.co/3Wked6GBOp https://t.co/SsUguHB39W
  • Key levels in forex tend to draw attention to traders in the market. These are psychological prices which tie into the human psyche and way of thinking. Learn about psychological levels here:https://t.co/1oygcFMFNs https://t.co/aD1ZWhTWZp
Adapting to Holiday Trade Ahead: S&P 500 Reversals or GBP/USD Ranges?

Adapting to Holiday Trade Ahead: S&P 500 Reversals or GBP/USD Ranges?

2017-11-18 01:50:00
John Kicklighter, Chief Strategist
Share:

Prepare for holiday trading conditions ahead. Markets are already running at the unprecedentedly quiet levels, but the upcoming holiday week is due to further suppress liquidity and make trading difficult. How do we adjust for trading equities, Dollar pairs and more?

Talking Points:

  • Thanksgiving week may be specific to the US (and Japan), but the market implications are historically global
  • A seasonal liquidity drain will exacerbate structural complacency that will require a very clear trading approach adjustment
  • Short-term setups with clear technicals and event risk (like GBP/USD) are preferable, but be wary of surprises

Retail traders are more focused on short-term opportunities rather than long-term trends. See how retail traders are positioned in the most liquid Dollar based pairs such as EUR/USD, GBP/USD and USD/JPY on the DailyFX Sentiment Page.

We are heading into the Thanksgiving holiday period celebrated in the United States. While this particular market closure is generally unique to the US, the market implications are historically felt throughout the global financial system. The absence of the world's largest economy creates a sizable gap in the continuous liquidity global speculators rely on to build trends and even short-term momentum on. This is particularly problematic this year as there has been a particular deep level of complacency across the markets which has already rendered the lowest measures of volatility - from benchmarks like the VIX Index - on record. It is important to head into this truncated week with reasonable expectations on how to identify trade practical trade opportunities.

Looking at how the markets have unfolded during previous such holidays can give us good guidelines on setting expectations this year. While the drain of liquidity is not specific to a certain holiday, basing conditions on past Thanksgiving periods can give us the best circumstance for other seasonal aspects. We can use measures like the ATR to measure historical volatility, comparisons of short to medium-term duration ATRs to gauge deceleration and historical range measures for obvious purposes. We review all three for the S&P 500 over the past four years to assess how this period can impact a market whether active or not. During periods like the remarkable volatility seen in fall of 2014 and 2015, we saw a remarkable drop in activity levels for just for that period around the holiday. In an already quiet market, the implications are clear, it draws activity levels even lower.

To adapt to these realities, we shouldn't try to seek out the few assets that we believe may be able to overcome the global crush and produce surprise volatility. There are active markets and some noteworthy event risk for different assets on the docket, but we've seen periods of far greater activity grind to a halt. Instead, choosing trades that fit the context of our circumstances is better probability. Short duration setups (less than a few days) that targets a reasonably proximate target with ready stop fits reason. Further, looking for pairs and markets that has already resorted to congestion in technical patterns and/or has distinct event risk can improve movement expectations. Further, those markets that are beholden to risk trends or overwhelming themes like a driving monetary policy speculation will further be less encumbered.

All this being said, there is always the possibility that 'this time is different.' While there are few instances of extraordinary volatility and market development in holiday liquidity conditions, it is certainly not impossible. The degree of quiet we have experienced has come with a matching grade of skepticism. Further, we have a range of fundamental threats on the horizon that pose greater threat and don't come with clear bounds on timing - such as the tensions between the US and North Korea. There is very little potential to earn from risk on positions for the short period of liquidity drain but extreme risk of loss should thin trading exacerbate an unexpected panic. Little is lost to hedge or book significant risk-oriented exposure that is latter reestablished when conditions normalize. We discuss trading through holidays conditions in this weekend Strategy Video.

Adapting to Holiday Trade Ahead: S&P 500 Reversals or GBP/USD Ranges?Adapting to Holiday Trade Ahead: S&P 500 Reversals or GBP/USD Ranges?Adapting to Holiday Trade Ahead: S&P 500 Reversals or GBP/USD Ranges?Adapting to Holiday Trade Ahead: S&P 500 Reversals or GBP/USD Ranges?

To receive John’s analysis directly via email, please SIGN UP HERE

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

DISCLOSURES