The Forex Market is slow today, with most financial centers closed on the day after Christmas.
Liquidity and trading volume will likely remain low until after New Year's.
Today's reduced liquidity levels are causing wider currency spreads across the entire Forex industry. Periods like these also increase the risk of price spikes due to liquidity crunches and carelessly managed orders.
Consequently, we advise our Forex traders to proceed with caution when trading currencies during the Holiday period, and sticking to the most liquid major pairs (since the crosses will more than likely witness the largest surges in spreads).
Traders who operate during Asian hours using non-trending Forex strategies with relatively low average profit levels per trade (as well as those who employ a Forex scalping strategy) are at the greatest risk of all, since even one quick price spike could rapidly erase days or weeks of accumulated gains or cause a substantial loss in the portfolio.
In this environment, the Euro-USD has so far failed to take out the low near 1.2870 set on January 10, 2011 and it appears that the support level caused by that low will not be broken for the remainder of the year. See the daily currency chart below.
No one knows what Armageddon-status 2012 will hold in store for the Forex Market, but we guarantee that the ensuing volatility will be off the charts!
Until then, avoid the wide spreads the Holiday has brought upon us.
Happy Holidays from Forex Day Trading!