Low Liquidity? Play the Ranges

December 23, 2015

Key Notes:
Just two more trading days until a chunk of the financial world takes their major yearly holidays over the Christmas/New Years period, if they haven’t already that is! With this exodus of high volume market participants goes the liquidity that they provide and we often see a large trading vacuum left for the rest lucky enough to still be at our desks.

We all know that a lack of volume in the markets can cause wilder than usual swings and whipsaws. Heck we’ve all watched how markets react to orders being pulled and squaring up around major news releases, right? But with the Fed’s interest rate decision coming last week, plenty of the big boys (and girls) had already squared up then packed up and took their holidays for 2015 already. This leads me to favouring the fading of range edges across Forex and Indices markets for the rest of the year.

SP500 Daily:
Click on chart to see a larger view.

With some ‘bargain hunting’ chatter about the place in the SP500, I’d probably rather be more inclined to attribute any Santa rally as a simple range play in low liquidity conditions. Ask yourself, is there going to be a major imbalance between buyers and sellers right now? How about major position squaring setting off stops in either direction? Most probably not and this is why I favour sticking to the range edges.

As for Forex markets, we spoke yesterday about the high USD and its possible negative implications for the Fed. The last week has seen a slow grind lower for the USD, with risk pairs slowly picking up the slack. All of the majors, bar GBP/USD has seen some sort of pre-Christmas rally.

GBP/USD Daily:
Click on chart to see a larger view.

Of course the Bank of England adds a whole other dynamic into the equation, but while price is at a range edge amidst USD weakness, I wouldn’t be totally against the idea of fading somewhere around here.

There are plenty more charts at both short and long term ranges and I’d love to get some replies on the @VantageFX Twitter with some more trading opportunities in these conditions.


On the Calendar Wednesday:
NZD Trade Balance
JPY Bank Holiday

GBP Current Account
CAD Core Retail Sales m/m
USD Core Durable Goods Orders m/m

The Emperor’s Birthday (天皇誕生日 Tennō tanjōbi?) is a national holiday in the Japanese calendar celebrated on 23 December of each year. The date is determined by the reigning Emperor’s birthdate. Emperor Akihito was born on 23 December, 1933.”


Chart of the Day:
Inside the Technical Analysis section of the Vantage FX News Centre, we have been following a EUR/GBP Channel which now sees price coming into a major confluence of resistance.

EUR/GBP Daily:
Click on chart to see a larger view.

This confluence of both descending trend line and horizontal resistance (again, top of a range) zones is shown nicely on the above daily chart, with an obvious 12 month trading range having formed from January of this year. With price now back at the top of this range and low liquidity trading conditions in effect, Could this be an opportunity to continue selling into the level?

Do you see opportunity fading ranges these low liquidity conditions?

Dane Williams – @VantageFX

Risk Disclosure: In addition to the website disclaimer below, the material on this page prepared by Vantage FX Pty Ltd does not contain a record of our prices or solicitation to trade. All opinions, news, research, tools, forex spreads prices or other information is provided as general market commentary and marketing communication – not as investment advice. Consequently any person acting using forex leverage it does so entirely at their own risk. The experts writers express their personal opinions and will not assume any responsibility whatsoever for the Forex account of the reader. We always aim for maximum accuracy and timeliness, and Vantage FX shall not be liable for any loss or damage, consequential or otherwise, which may arise from the use or reliance on this service and its content, inaccurate information or typos. No representation is being made that any results discussed within the report will be achieved, and past performance is not indicative of future performance.


Free Daily Market Update

Live Spreads



Sign up to the latest forex news and daily FX trading setups

Get started with a FREE $50,000 demo account