Weekly Analysis: Christmas Week - Thin Trading Volumes and Irregular Price Action
Weekly Analysis: The pair had a bullish week and seemed to gain some traction but from a longer term perspective it is still trading inside a range, without a definite bias. Moreover, this ranging behavior is likely to continue throughout this week due to the Christmas Holidays.
Price bounced at the bullish trend line seen on the chart above and continued higher, reaching the bearish trend line and the horizontal resistance around 1.1875. This means that although the bias was bullish last week, we are not dealing with a breakout and the pair is still range bound. Monday and Tuesday most markets will be closed due to Christmas and volatility will probably remain irregular for the better part of the week. Caution is recommended because price may show sudden spikes due to the low liquidity, so a technical prediction is difficult to make.
During the first two days of the week, European and U.S. banks will be closed in celebration of the Christmas Holiday, so volatility will be highly affected and most markets will be closed. The first release of the week is scheduled Wednesday: the U.S. Consumer Confidence survey; however, we don’t expect its impact to be high considering that liquidity will be still affected by the Winter Holidays.
Thursday will be another slow day, with the U.S. Unemployment Claims as the only notable event and the week ands Friday with a release that usually has a high impact: the German Preliminary Consumer Price Index, which acts as the main gauge of inflation; however, its impact may be muted this time.
After a strong climb that occurred at the beginning of last week, the pair showed choppy movement and retraced most of the gains. The macroeconomic environment was slow and contributed to the lack of directional movement.
Price action is choppy and will probably remain so until January next year. For the short term we expect to see a touch of the 50 days Exponential Moving Average and the support around 1.3320 – 1.3300, where the next direction will be decided. A bounce or break in this zone can be followed by a move into the resistance at 1.3450 or the support at 1.3250 but trading volumes will be thin and may result in sudden spikes and erratic price movement.
For the first two days of the week UK banks will be closed due to Christmas and the rest of the week no important economic releases will take place. We expect choppy price action and irregular volatility.
Written by: Bogdan Giulvezan
The article above is based on the writer’s 7-year experience and it does not constitute trading advice or investment recommendations, just a personal opinion and view of the market.