Looking Through the Vault to a Holiday Shortened Week:
Welcome to a holiday shortened week, with data releases loaded between Monday and Wednesday before the US leave their desks for Thanksgiving on Thursday. With the last FOMC Minutes release shifting the focus from hikes being data dependent to more of a we are ready to go, it is data that seems less and less relevant as we creep toward the Fed’s December meeting.
Keep in mind that markets will most likely be more thin than usual this week as the shortened week will be turned into a nice week off for many traders. Lower trading volumes mean illiquid markets which opens us up to the possibility of some irrational and wild moves. With the market (read retail market) obviously VERY long USD heading into December, I’m not the only one expecting some sort of short squeeze and you should be extra aware in the possibly illiquid trading conditions ahead.
Something to consider as we head into the support/resistance zone featured in our EUR/USD chart of the day below.
On the Calendar Monday:
JPY Bank Holiday
EUR French Flash Manufacturing PMI
EUR French Flash Services PMI
EUR German Flash Manufacturing PMI
EUR German Flash Services PMI
EUR Flash Manufacturing PMI
EUR Flash Services PMI
While not a data release, this week’s most important calendar event comes in the form of a Fed meeting under expedited procedures.
1. Review and determination by the Board of Governors of the advance and discount rates to be charged by the Federal Reserve Banks.
With the Fed doing everything it can to avoid market whipsaws around the rate hike it is easing us all into, I cant see anything shocking coming out of tonight’s meeting.
But the doubt is still there, isn’t it! The chop and change over the last few months has kept the market on edge enough to present an opportunity if you are happy to manage your risk.
Chart of the Day:
Click on chart to see a larger view.
The daily highlights the overall bearish trend that EUR/USD is in, with the last few weeks undoing 8 months of bullish traction very quickly. This is a perfect example of why going with the higher time frame trend is most often the smarter play.
“It is easier to swim with the tide than against it.”
It’s so cliché but you really can’t argue with that chart.
Click on chart to see a larger view.
Now looking forward, the hourly channel isn’t so important itself because firstly, it’s a subjective trend line type setup and second, it’s almost vertical (on the more important higher time frame charts) which always makes any pure breakouts impossible to trade. What does make the level important however, is the fact that price is also pushing down toward swing lows, which also coincide with an important support/resistance zone from back in 2001 and beyond.
The bulls defending parity will be using this as the last major level of support before it opens up a serious test of the psychological, parity level. But as discussed above, the holiday week trading and overly long USD market also sees a huge risk of a short squeeze and the level looks as good as any to see the bounce come out of.
Which way are you looking to use this zone in your trading?
Dane Williams – @VantageFX
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