by Jay Norris

I’ve been going back and forth in my own analysis as to the effects that low volume, holiday markets will have on the major currency pairs. I’m on the desk now, but I’ve already decided that I won’t likely be making any major commitments until at least past New Year’s, and possibly not until the week of Jan 7. On the other hand I understand that it’s not so cut and dry for other traders, particularly if you follow the world’s oldest currency, gold, and her little sister, silver, which do have a bit of history for price movement in late December and early January. Despite their influence and loyal following, the metals are still very small volume markets relative to the other financials, which would make them trading vehicles worth considering for traders who just can’t let go of the mouse over the next few weeks.

We do have some major technical developments in the currencies today and in GBPUSD in particular, as this pair posted a fourth point on a 17-month bull trend-line. Despite such heavies as Pimco and Goldman Sachs having put out what could only be read as sell recommendations for the Pound this month, the intermediate-term trend on the daily chart – 3 months back – is still pointed, just barely, higher. The short-term trend on the daily pound chart on the other hand is lower which has green lighted sell triggers to swing- and day-traders these past couple of weeks. That long-term trend line on the chart below does indicate a crossroads, and it also highlights the long-term trend which is clearly still up and will remain so until this market closes below the August lows. Any hints to the strength or weakness of this trend-line, which roughly traces the current 233-day exponential moving average, will come from the volume on the intraday charts in both cash and futures. Any penetration of this bull trend-line would need to come on heavy volume, and the Pound would need to close below it to be taken seriously by long-term traders. Low volume on tests of this trend-line would be seen as a tell that the line will hold.

Chart Courtesy of eSignal

Scanning the calendar for this week I don’t see anything popping out on par with the past two weeks’ central banker’s interest rate decisions, which brings me back to holiday market theme and the likelihood of continued slowing activity between now and the New Year.

For a copy of the trading plan I follow click on the link below.

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