“A Week to Rest”: Assessing the Path of Dollar Adjustment Amid Low Liquidity
Key Points This Week: Liquidity Decline Restrains Trading Environment
Market Trends
- Holidays Impacting Liquidity:
From Tuesday to Thursday, major markets such as the U.S., U.K., and EU will have shortened trading hours or be closed for Christmas-related holidays.
The forex market sees significant liquidity drying up as participants take breaks, marking the most illiquid period of the year.
Settlement delays and complexities in profit and loss calculations are expected to deter many traders from participating.
Dollar Market
- The U.S. dollar maintained an upward trend following last week’s FOMC meeting but appeared to undergo some adjustment by the end of the week.
- As this week begins, the market may assess the conclusion of dollar adjustment before transitioning into a wait-and-see mode.
Key Economic Indicators
U.S. Data (December 25 Release):
- Durable Goods Orders (November Preliminary):
- Conference Board Consumer Confidence Index (December): Forecast: 113.0 (Previous: 111.7)
- New Home Sales (November)
Canadian Data (Same Day):
- Real GDP (October)
- Industrial Product Price Index (November)
Other Events:
- U.S. 2-Year Treasury Auction: $69 billion
- Bank of Canada Meeting Minutes: December 11 meeting
Trading Strategies and Considerations
Forex Market:
- Focus on USD/JPY and EUR/USD given the anticipated low liquidity during Christmas.
- Maintain a primarily passive stance, only reacting cautiously to any significant movements.
Cryptocurrency Market:
- Bitcoin is likely to exhibit independent movements, making it worth close monitoring.
- Utilize its resistance to low liquidity impacts for potential short-term entries.
Risk Management:
- Sudden price swings are more likely in illiquid markets, so positions should be kept light.
- Stick to a “wait-and-see” approach, limiting trades to the bare minimum.
Summary
With reduced market participation during the Christmas holidays, adopting a “resting is also trading” stance is wise. For those trading, focus on USD/JPY and EUR/USD, carefully identifying entry points.
Bitcoin remains a key asset to watch for its unique year-end movements. Even in short-term trades, ensure trade plans remain manageable and well-calculated.
