The EUR/USD pair fell during most of the session on Wednesday, and even tripped a sell signal by breaking the bottom of the outside red candle from Tuesday. However, at the first sign of support the market turned back around showing just how resilient it truly is.
Of course, the comments coming out of the Speaker of the House didn't hurt either. Essentially, he had suggested that a deal about the “fiscal cliff” seemed a very likely, and the markets that that is a good sign. In fact, it was when he was speaking that the markets turned around. Adding to that was the fact that President Obama had spoke later in the day and it wasn't quite as argumentative towards the Republican position as he quite often can be. The markets took this as a sign of progress, and shot straight up.
The most important players in this pair
Quite often, central banks of the biggest players in a market. While they are the biggest players in the market, they are necessarily the most important. This is one of those times. It is become painfully obvious to me that the U.S. Congress is by far the most important player in the world's most liquid market.
This is predicated upon the idea that the slightest negative headlines and the market down. The slightest positive hint of the possibility of cooperation was in the market straight back up. Essentially, we are trading whatever the latest sound bite coming out of Washington DC is. This is going to make trading this market very treacherous going forward and the fact that we are entering December is not going to help either. The markets become less and less liquid, and more prone to significant and sudden changes.
Because of this, I am actually trading this market (when I actually have to) using binary options. Spot Forex is going to be far too dangerous at this point time, and as such I believe that putting a cap on your risk is absolutely vital at this point. I do think that overall this market is slightly bullish, but I still think it would only be one bad headline away from collapsing.