It appeared as though there may be a lot of activity at the beginning of the week in the Forex market partially due to the fact that most US traders were out of the market at the end of the week for the Thanksgiving Holiday. The market still trades of course but anytime the traders in a major market are largely out of that market there is far less liquidity, so we can sometimes see a lot more volatility. We can also see very flat price action during this time in the pricing of any pairs that involve the market that is trading with low volume. As last week progressed more and more US traders were leaving the market, it did appear as though there may be some pent-up demand and we would be able to see some good two-way trading going into this week but for the most part the major pairs began largely flat with the notable exception of the AUD.
This week the AUD has enjoyed strong moves against most of the other major currencies and so, from a trading standpoint it has been this week’s winner. It has gained against the EUR, GBP, USD and JPY moving decisively, it does appear that those moves may very well continue and carry over into next week.
There were a lot of reports that were published around the Brexit deal that has been negotiated over the past several months; some reports state that an agreement is imminent while other reports present a list of roadblocks that have to be overcome. This has led to a good amount of tension in the UK with many of its citizens questioning their leaders and the leadership of their Government in general. You can’t necessarily say that the GBP is getting brutalized by other currencies and beaten down though it is certainly down in value by a good amount versus where it started the year.
The big story this week and thus the big mover came about on Wednesday afternoon at 12:00pm when the head of the Federal Reserve here in the US made his comments. Several weeks ago, he indicated that the Fed would continue to raise short term interest rates on the schedule that they had already set and that they did not see that changing. When those comments were made the stock market tumbled and the USD strengthened. President Trump made some comments around the disruption to the markets and the economy stating that he does not believe that rates need to continue to increase. In Wednesday’s comments the Fed is apparently back pedaling and looking to slow down increasing rates which made the stock market jump and the USD abruptly weaken.
Within a short time of when the press conference began the EUR/USD had jumped up about 100 pips and it continued up a little more from there. It took the USD the rest of the week to retrace allot of that loss though it did not gain all of it back. The retracement began in earnest on Friday morning when the London session began to trade. The same story occurred for the USD against most of the other major currencies with varying degrees of recovery except for the AUD which has held on to its gains against the USD.
This week is setting up to be a good trading week with the nice rolling two-way action that we like to see. Of course, it is impossible to predict if this in fact will be the case, but it does appear as though next week may be a good one.