– The liquidity drain has begun: buying and selling circumstances can be irregular across the Thanksgiving vacation in the US this week.
– US markets are closed tomorrow and solely open for a half-day on Friday; key European information tomorrow might show significant, nonetheless.
– Retail dealer sentiment factors to combined buying and selling circumstances within the US Greenback across the vacation this week.
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FX markets are beginning to calm down already as merchants put together for the mid-week liquidity drain across the US Thanksgiving vacation. The US Greenback, which has been buying and selling weaker all through November, might discover diminished participation in markets a aid: merchants want to take earnings and sq. their books earlier than stepping away for an prolonged time frame. It isn’t a set of circumstances that cater to breakouts and comply with by on momentum, which has been working in opposition to the dollar’s favor.
The injury to the US Greenback’s uptrend from the September lows has been documented in latest days: the three-week vary from October 26 has damaged, in addition to the uptrend from the September Eight, 20, and October 13 lows.The neckline of what could possibly be considered as a possible inverse head & shoulders sample at 94.29 was breached. Momentum has swung decrease as nicely, with the DXY Index buying and selling beneath its every day Eight-, 13-, and 21-EMAs, and MACD and Stochastics trending decrease (not in bullish territory).
Because the technical injury completed to the DXY Index has neutralized the US Greenback’s bullish bias, two main pairs discover themselves in ranges: EUR/USD and GBP/USD. Whereas I am not a fan of buying and selling ranges – I discover them to be boring, to be frank – I do like what ranges signify: value consolidation. Value consolidation is akin to a spring coiling, storing up potential power (the vary), ready for the discharge of kinetic power (the breakout).
Chart 1: EUR/USD Every day Timeframe (July to November 2017)
After backside on November 7, EUR/USD climbed sharply till it bumped into the October 26 bearish exterior engulfing bar excessive close to 1.1837. Since then, value has oscillated between the excessive and what might have been the neckline of a possible head & shoulders sample close to 1.1715. In impact, this can be a mirror picture of the vary carved out by the DXY Index since November 14, between 93.48 and 94.29.
Chart 2: GBP/USD Every day Timeframe (June to November 2017)
GBP/USD has been consolidating for an extended time frame than EUR/USD. Value broke downinto the 1.3018 to 1.3340 vary on October 1 and has not traded exterior of it since then.
The practically two months of consolidation have not been with out drama: neither a BOE fee hike nor questions over UK Prime Minister Theresa Might’s management have confirmed significant sufficient to drive a reckoning. For now, notably as we glance in the direction of the vacation, we’ll solely need to keep watch over this consolidation, however when the breakout comes, it needs to be violent.
As markets wind down immediately, do not dismiss the calendar. The October US Sturdy Items Orders report is due out immediately, as is the November FOMC assembly minutes. Tomorrow has a great deal of pleasure, vacation on the horizon or in any other case: preliminary October Euro-Zone PMI information to assist information progress expectations as This fall information reporting will get beneath method; and the second launch of the Q3’17 UK GDP studying.
Learn extra: DXY Index Companies Up, however Nonetheless Caught in Vary
— Written by Christopher Vecchio, CFA, Senior Forex Strategist
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