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
Mixed
Oil - US Crude
Bullish
Wall Street
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
Gold
Bearish
GBP/USD
Mixed
USD/JPY
Bullish
More View more
Real Time News
  • GBP/USD was putting together a strong rally yesterday, but fizzled and put price closing in the bottom half of its daily range. Get your $GBPUSD technical analysis from @PaulRobinsonFX here:https://t.co/34HxGeksHU https://t.co/qMxdumej4w
  • The Tokyo Stock Exchange said before the opening bell on Thursday that it would suspend trading in all stocks, due to a glitch in its system to distribute market information - https://t.co/CNsaUCWgBa
  • What is seasonal change in volatility. Are we going through one right now? Find out: https://t.co/G0qfpOmMl2 https://t.co/p2NG16qNBx
  • 🇰🇷 Balance of Trade (SEP) Actual: $8.88B Previous: $3.84B https://www.dailyfx.com/economic-calendar#2020-10-01
  • And so starts October: the peak of volatility as measured by the $VIX historically and the most active month according to $SPX volume https://t.co/O2HDsGgrWH
  • 🇰🇷 Exports YoY (SEP) Actual: 7.7% Expected: 2% Previous: -9.9% https://www.dailyfx.com/economic-calendar#2020-10-01
  • 🇰🇷 Balance of Trade (SEP) Actual: $8.88B Previous: $3.84B https://www.dailyfx.com/economic-calendar#2020-10-01
  • #ASX200 possibly carving out an Inverse Head and Shoulders reversal pattern above psychological support at 5,800 RSI suggests further gains are at hand if buyers can hurdle resistance at the 50-DMA (5878) $XJO $ASX https://t.co/FgdVcxqeOg
  • 🇯🇵 Foreign Bond Investment (19/SEP) Actual: ¥230.7B Previous: ¥300.1B https://www.dailyfx.com/economic-calendar#2020-09-30
  • 🇯🇵 Foreign Bond Investment (19/SEP) Actual: ¥-1525.7B Previous: ¥300.1B https://www.dailyfx.com/economic-calendar#2020-09-30
Think Hard About Holding Euro, Dollar, Risk Trades Over the Weekend

Think Hard About Holding Euro, Dollar, Risk Trades Over the Weekend

2017-04-21 03:30:00
John Kicklighter, Chief Strategist
Share:

Talking Points:

  • A drain on liquidity exposes a trader to faster moving currents and trouble positioning should conditions run astray
  • Over the weekend, traders are essentially stuck with their trades until markets come back online
  • Aside from developments that may arise, we have the French election this weekend that can impact more than EUR/USD

What are the DailyFX analysts' top trading ideas for 2017 and key lessons to take away from 2016? Sign up for both on the DailyFX Trading Guides page.

Liquidity is vital to navigating the markets. When markets are too thin we run the risk of running aground. During full drains - as occurs during the weekends - there is no room to maneuver. Should anything catastrophic happen during that downtime, those holding exposure through the lull have little recourse but to hope that they can beat a hasty exit when trading resumes the following Monday. Liquidity also doesn't always exist at the extremes - fully topped off or completely cut off. This past week showed us a backdrop where holiday conditions had lowered the water level significantly but not enough to cause serious problems with event risk. Then there is the systemic rise and fall whereby we find ourselves in a historic drought where complacency has pushed risk exposure and lowered market participants' inhibitions.

Given the complete void during the weekend, traders should take additional caution with their exposure. For those with longer trade horizons (multiple weeks or higher), the natural scale of the trade with stops, targets and accommodation for drawdown imparts a natural tolerance for weekend uncertainty. However, for those with a shorter duration, it is often wise to exit a trade and reestablish it at the open Monday in Tokyo's session when it is clear that circumstances have not fundamentally changed. The cost of the spread and perhaps a few pips between Friday close and Monday open is worth the peace of mind. For risks, there are two general types: those that we can anticipate ahead of time and those that are complete surprises. When there is a high profile event due over the weekend, it would be more than cavalier to brave the storm.

Heading into this coming weekend drain, there is both known event risk and a considerable chance of unscheduled squalls. For scheduled threats, we have the first round French election. There is a consensus that moderate parties will be able to form a coalition and keep France on a 'tolerable' status quo track. That said, the polls are remarkably close between Macron and Le Pen with two other party candidates close on their heels. For the Euro, the implications are clear. If the election offers the same surprise outcome that the US election and Brexit have before it, the shared currency will be throttled. The impact will not stop there however. As the world's second most liquid currency; the Dollar, Pound and Yen will fill the repercussions. If the result is one that furthers the populism agenda, it could further collapse 'risk trends'. The implications are clearly profound. For unscheduled event risk - the threat is the leverage that a lack of preparation adds. Tension between the US and North Korea, Syria, Russia is just one possible node of trouble. We discuss the many times it is best to remove risk before the the weekend and the few times it is okay to hold in today's Strategy Video.

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