The one thing that concerns me is the approach to the annual decline in liquidity. This normally begins around the first ten days in December. This may generate a conundrum in that, given the vast majority of the year has been in corrective behaviour, the market is probably not going to stretch the limits in such a ragged year that we’ve seen. Therefore, liquidity could begin to wane pretty soon and that tends to suggest one of two alternatives that occur over the seasonal period – ratcheting, messy and indecisive trading or a rampant directional move.
I fancy the latter.
Coming back to today, we saw the dollar recover ground it had lost. The question for today – and probably the next day or two beyond – is whether the market will just resume its upward path. To be honest, it’s a fine line and I can see arguments for both.
The dollar didn’t much like the downside on Friday. The gains seen, except in USD/JPY, were more than I had looked for and this highlights a balanced market. In the next larger timeframe, there is room on both sides of the market and as such, we need to understand critical levels and react to breaks. If anything, there’s a risk of mild follow-through from Friday’s dollar gains and followed by a reversal.
As the week moves on, we have Thanksgiving on Thursday and this could also impact on the market activity – probably slowing it down. Therefore, it tends to suggest a mild preference for a general lack of interest that could generate some sticky consolidations at times…
In other words, in line with most of the year, negative, defensive trading…