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Recharged Volatility This Week Could Trigger Short-Term Breakouts
Analyst picks for: 2008/12/29 Written by the DailyFX Research Team [B]Recharged Volatility This Week Could Trigger Short-Term Breakouts[/B] The holiday liquidity drain is still hanging over the markets for the first half of this week. However, the exceptionally high level of volatility and dramatic flux in fundamentals that have preceeded this lull will no doubt pull traders back. And, now, after a period of choppy congestion, the call for breakouts is greater than ever. [IMG]http://www.dailyfx.com/images/moderator4.gif[/IMG] [B]Currency Strategist John Kicklighter[/B] [INDENT][B]My picks:[/B] Long GBPUSD [B]Expertise:[/B] Combining Money Management with Fundamental and Technical Analysis [B]Average Time Frame of Trades:[/B] 3 days - 1 week[/INDENT] It is a new week and almost a new year; but I don't expect the markets to be topped off and volatility to explode within the next few days. For those traders that have a vested accounting interest in waiting until January 1st to reenter the market and those that just want to wait until market conditions are capable of reviving trends, there is little reason to enter the market before the turn of the year. What's more, unlike the religious-based holiday period that is just passing, the New Year celebration is an event that most of the world follows. Altogether, the damper on volatility is vital for holding back breakout pressure that has built up for GBPUSD. A wide range is pulling at the pair and there is a reasonable amount of economic data that has presented a sense of caution. Market-wide volatility is key to trading conditions (more so than usual) for much of this week. With expectations for supressed momentum, I will look for significant technical levels to hold up to the modest pressure from event risk and thin drives. This is a particularly important scenario for GBPUSD as the pair is now testing its hand at a major triple bottom around 1.4500/75. Historically, this area represents the 61.8 percent retracement of the broad range of price action from January of 1985 up to the highs set in November of last year. However, realistically, most traders still keeping an eye on the market are probably just concerned in recent congestion points and volatility. I will approach this pair with caution. Since liquidity is still thin, the market can be whippy; so I wide stops are a must. Also, I will start with a reduce position size and build up after a confirmed turn to avoid a significant loss on a break against the postion (the market could stall where it is until breaking when volatility returns at the end of the week). I will also be ready to flip my stance should the market make a confirmed move below 1.45. [IMG]http://www.dailyfx.com/images/moderator5.gif[/IMG] [B]Currency Analyst David Rodriguez[/B] [INDENT][B]My picks:[/B] Reduce position risk across the board [B]Expertise: [/B]System Trading [B]Average Time Frame of Trades:[/B] 2-10 weeks[/INDENT] Forex trading market conditions will remain challenging in the week ahead, as illiquid markets could make for especially volatile moves. I will look to reduce position risk across the board--especially given the unpredictability of major moves. I will wait until the new year to take normal-sized positions in the market. [B]Other Analyst Picks:[/B] [LIST] [*]Terri Belkas: Long AUD/USD [*]Ilya Spivak: EURUSD Short (pending) [*]John Rivera: Long GBP/USD [/LIST]