Gooood Monday morning folks, its Christmas Eve!!!! Let's face it, all you diehard traders.... you should take a break today considering the fact that Japan and Germany are out (US half day) and tomorrow is Christmas Day with most of the world out. So one can imagine the liquidity condition. Even my regular 0.4pip spread in E$ is flipping to 0.6/0.8pip now and then.
For my American friends, its Cliffmas week. But let us all worry about that from Thursday onwards. Undoubtedly, it will be the main fundamental driver for the market to close the year.
For today, o/s intraday indicator should provide some form of a support for now with intraday momentum turning from down to consolidation/up. This blends in well with the current environment where there is basically no economic data releases worldwide. Attention seeking politicians or central bankers will probably keep their mouth shut as no one will appreciate their view ahead of Christmas. Expected range between 1.3150/60 to 1.3250/60.
Chart 1
Last week, E$ closed a Shooting Star candlestick pattern and this should put pressure on the 1.3144 support level (do note that the Shooting Star pattern is not always a bearish signal and it must not be read in isolation). Amid an illiquid environment, one must be mentally prepared that E$ may fall sharply to the 1.3030/40 zone (yellow line) or even retest 1.2940/50 (level for this week), the falling trend line it broke above 3 weeks ago, on any negative outcome from the fiscal cliff talk. That being said, one would have noticed I used the word "retest". The fact is, E$ has already broken higher supported by firmer momentum. Therefore, any quick sell-off should be viewed as opportunity to buy cheaper E$ rather than to switch to a trend change mentality. By the way, let me explain the significance of the yellow line. Looking at where the line cuts through 2012, one would have noticed that this band has been kind of a pivot and E$ has successfully re-captured and closed 2 consecutive weeks above.
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| Chart1: E$ Weekly |
As a day trader, it is still important to be aware of the longer term trend. In the monthly chart, one would have quickly noticed E$ bouncing off the MA200 twice. This year, the low established was 1.2042 before rebounding closer to the 2012 high so far at 1.3486. If E$ was to fall back to around 1.2940/50, as mentioned above, to close for the year, we would have formed a Doji pattern as we started 2012 at 1.2931. A Doji candlestick pattern at the lower range could be a bullish signal for E$ in 2013. Another bullish supporting signal is the fact that price has re-captured the rising trend line (circled). Main obstacle right now are the bunch of moving averages around 1.34/3500 band. Clearing that hurdle will open up 1.4ish in the new year.
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| Chart 2: E$ Monthly - MA21 (Red), MA50 (Green), MA100 (Brown), MA200 (Blue) |
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