The EUR/USD pair went back and forth during the session on Friday, essentially printing a slightly positive yet overly neutral candle. A lot of this comes down to the fact that it was the end of the week, and the fact that Christmas is this Wednesday. Because of that, I believe that the markets are about to lose almost all of their liquidity, and this more or less makes trading for anything more than a short-term scalp impossible.
Having said that, I can still see some spots on the chart that are interesting. After all, the 1.36 level still looks very supportive to me, and I believe it will cause some type of positive reaction for the Euro. In the short-term, I would suspect that short-term oriented traders could take advantage of bounces from that area. In fact, I would more or less forgo the daily charts for this week, and focus more along the lines of 15 minute charts for signals. I would not expect much more than 20 or 30 pips set a time, as the 1.36 level offers slight bounces in a very quiet market.
Limited liquidity, Limited position size.
In an environment where the liquidity is going to be extraordinarily limited, I would suggest playing very small position sizes as the markets will simply fail to move. While the lack of liquidity can sometimes set up sudden and drastic moves, I really don’t see a catalyst for that at the moment. After all, we’re starting to worry about whether or not the Federal Reserve can taper quickly or not, and that of course will have a massive effect on this currency pair.
Ultimately, I think most of the answers get approached in early January, as the new jobs numbers should have the market thinking about whether or not the bond buyback program will be tapered further out of the United States, and that of course would be very positive for the US dollar. This is especially true when we’re starting to worry about deflationary issues in Europe. That being said, I think for the next several days there isn’t much to worry about beyond the short-term buying opportunities to come.
