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
Bullish
Oil - US Crude
Bullish
Wall Street
Mixed
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
Gold
Bullish
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
GBP/USD
Bullish
USD/JPY
Bearish
More View more
Real Time News
  • 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/cQwbeZ6Feq
  • #Oil prices saw a reprieve to the recent selling pressure but remain at risk while below downtrend resistance. Here are the levels that matter on the #WTI technical chart. Get your #commodities update from @MBForex here: https://t.co/CcXsF3JCMH https://t.co/RUmS1cX52v
  • 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/boEI8RuQdC
  • The growth-linked New Zealand Dollar may rise on the upcoming #RBNZ rate decision following rosy economic data. However, downside potential in the S&P 500 could offset $NZDUSD gains. Get your #currencies update from @ddubrovskyFX here: https://t.co/LfCe6C6G3P https://t.co/kUeBxxeaEf
  • It was a quiet week in Aussie as $AUDUSD put in its second consecutive week of indecision. But taking a more granular look highlights the potential for a reversal scenario. Get your #currencies update from @JStanleyFX here: https://t.co/PPK20nubAf https://t.co/0nfmRRFNnz
  • The S&P 500 pushed the market's comfort with a head-and-shoulders pattern through Friday's close. What should we look for in technical patterns, overlapping fundamental tides and speculative positioning for the likes of $EURUSD next week? https://www.dailyfx.com/forex/video/daily_news_report/2020/09/19/EURUSD-Pressure-Building-while-Anxious-Traders-Weigh-Did-SP-500-Break.html?ref-author=Kicklighter&QPID=917719&CHID=9 https://t.co/lgVJVwi8th
  • Sterling remains trapped by overarching fundamentals drivers and both $GBPUSD and $EURGBP are going to have to wait until the Brexit dust settles. Get your #currencies update from @nickcawley1 here: https://t.co/vF1K1cy0nd https://t.co/NSA7qiQihc
  • 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/d9EmTOHyTv
  • Traders tend to overcomplicate things when they’re starting out in the forex market. This fact is unfortunate but undeniably true.Simplify your trading strategy with these four indicators here:https://t.co/A4dqGMPylo https://t.co/xqbUxwWgTZ
  • An economic calendar is a resource that allows traders to learn about important economic information scheduled to be released. Stay up to date on the most important global economic data here: https://t.co/JdvW6HNuqV https://t.co/Gi8LHCT5sB
Liquidity Leverages Oil, Rebalances Dollar and Focuses Bitcoin

Liquidity Leverages Oil, Rebalances Dollar and Focuses Bitcoin

2017-12-26 21:11:00
John Kicklighter, Chief Strategist
Share:

Talking Points:

  • Liquidity is a dominate force in the financial markets, and its rise or fall can shift trends or revive an inactive environment
  • Thin markets usually lead to small market movements as has been the case with the S&P 500, but it can also leverage as with Oil
  • A known period of thinned price action can also motivate speculative repositioning as with the Dollar, Aussie and Bitcoin

What makes for a 'great' trader? Strategy is important but there are many ways we can analyze to good trades. The most important limitations and advances are found in our own psychology. Download the DailyFX Building Confidence in Trading and Traits of Successful Traders guides to learn how to set your course from the beginning.

Liquidity rules everything around me. It has also been one of the most consistent references I have made in my trading videos over the past few months. In the level of participation and the breakdown of the participants, we can derive motivation and influence which is the closest you will ever come to precognition in the markets. In typical analysis, we usually see liquidity grouped in as a subcategory of technical or fundamental analysis which means it is usually used to explain past events to justify technical patterns or to establish whether a market will respond to an indicator or not. That doesn't just do a key measure of analysis a disservice, it misses an over-arching filter that can significantly improve our understanding of the market we operate in.

In appreciating liquidity first and foremost, we understand the landscape of our present circumstances. Most traders do this inherently, without fully appreciating the influence of what they are evaluating and how it can better prepare us for different periods and conditions. This being the final week of the year between the Christmas holiday and New Year's, the running assumption is that the number of active traders will dramatically decline. That in turn leads to substantial changes in the market's activity profile. Typically, in these markets, we expect activity to look much like what we have found in the S&P 500 and other major equity indexes around the world. In this popular trading asset, we have seen a severe drop in volume and general price range. When there are far fewer traders in a market, that tends to occur. However, thin liquidity can also lead to significantly different results depending on the circumstances.

When there is a shallow pool of traders, a sudden urge or need to bid or unwind an asset can lead to sharp movement in price. That is what we witnessed in US oil this past session. News of a Libyan pipeline explosion that would impact the small OPEC member's output led to a far more violent rally than we would have expected during 'normal' trading conditions. This intensity fits the thinned market, but a trend should be looked upon with serious skepticism. In the anticipation of a liquidity drain, we also find that speculative exposure often rebalances. That often means that traders that have ridden a common view/trade for a while will book profit before the tailwind dies down. That is what we saw on COT figures for large speculative interst in the Dollar and Australian Dollar. And, sometimes, there are even unique situations where liquidity doesn't impact all players equally. That is the case for Bitcoin and other cryptocurrencies. Without an exchange to be off for the holiday while traders are still spurred by self preservation or appetite for yield, this can draw even more interest. We focus on the impact that liquidity can have on markets with prime examples in today's Quick Take Video.

US Dollar Speculative Futures PositioningAustralian Dollar Futures Positioning ChangeBitcoin and the Rate of Change

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