13th December 2010
The volume in the various markets were felt last week. For example on Friday the DAX futures traded 108k contracts while the 50-day average is 144k contracts. However, please don't let that fool you into believing that the Xmas spirit has wrapped its cuddly arms around the market. On Friday the 10th September, the last Friday before the futures expiration week, the Dax traded only 107k contracts. The week of the expiration that rose to 150k on the Monday, 200k on the Tuesday, peaked at 217k on Wednesday and then settled down to 180k on the last 2 days.
You would be forgiven to think that the increase in volume would mean a big move back then, one way or the other. I mean, who haven't heard the argument that big moves require big volume?
Well, take a look at the price action of the DAX at the last expiration week! Does someone want to wake me up next Monday?
Of course we don't have volume figures in the FOREX market, at least I am not privy to that kind of information. So there I will have to rely on the price action to give me a clue of the direction. The Dollar Yen has caught my attention. I believe from the kind of price action we have seen in the last week that we can expect higher prices in the pair, despite the trend being firmly down.
My argument might not be anything but my untrained eyes telling me that the chart below is moving higher. I have checked every retracement in the last 4 years, and my conclusion is that the Dollar Yen is ripe for a move higher, after a fairly sustained downtrend since May 2010. My thinking is that we will see a 50% retracement at some point in the next couple of months. The Dollar Yen tend to move quite slow unless the BOJ decides to stick their nose into the market and cause a few heart palpitations.
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But the real deal clincher for my argument is that we saw the market absorb the bad news from the Non-Farm Payroll on the first Friday this month. The chart shows it well. The Yen falls after the news is released. Since then the pair has moved up and as they say in TA land: there is nothing but fresh air above. Watch this one. I am looking 87.50 as the 50% retracement. It could take a while.
