NEW YORK (TheStreet) - Year-end trade got into its flow after two days of regional bank holidays in Asia, Europe and Canada, ahead of another disjointed New Year week when more bank holidays will impact order flows.
Silver and gold exploded higher in Wednesday trade with moves to test 30.50 and 1410 finding little resistance but also failing to attract increasing participation. The parabolic low-volume moves look destined to reverse to 30.00 and 1400 support unless one of two things happens.
Either the dollar index reverses down through 80.25 support and breaks the sideways channel that it is stuck in which will indicate that the silver and gold moves are sustainable as dollars are switched for metal, or the two precious metals attract 50% more volume to get towards historical daily norms that could allow the breaks to hold. Neither option looks to be happening and therefore the reversal to support looks imminent.
The forex markets have been volatile overnight with reactionary moves hitting as each regional traded market opens and closes, with most currency pairs now stuck at their neutral pivot point areas. The lack of momentum in the near-term as year-end book balancing takes place has created charts that look as though price action could easily break. However the lack of volume will not allow the breaks to easily hold.
It may take the fresh momentum of a new year to generate sustainable moves, with history showing that the first quarter of the year tend to be a trending period that negates near-term volatility.
The sideways channel in the equity trade has contained the euro and Gbp, which make up nearly 75% of the dollar index, while Cad, Aud, Jpy, and Chf hold on to recent dollar losses. The low-volume trading environment looks as though it will finish out 2010 the way that December as a whole has traded; volatile intra-day moves without sustainable price action breaks.
Global equity trade looks to be closing out 2010 at the high of the year. After taking seven months to regain the losses generated in one week of trade in May on the S
, U.S. equity trade has created a net-sum gain since January 2008 after three years of roller-coaster trade that has ended up back where it started.
Volume will have to pick up dramatically if there is any chance of retail investors re-joining the equity game, after historic redemptions that have seen a move out of stocks and bonds and into cash and forex.
Marco Hague is one of the founders and principals of The London Forex Broadsheet (commonly known as TheLFB), a global forex trader portal with headquarters in the U.S. Hague began his career with the Bank of England dealing with foreign exchange control, and he has been trading for the last three decades. He has been involved with institutional risk asset ratio analysis and the implementation and maintenance of institutional trade desks globally.