Over the weekend the US Dollar Index (DXY) gapped from 89.90 to 90.45 and then went on a rally back to the 91.00 psychological level. This sudden move was not a shock to most veteran traders as this type of volatility can be expected during the Holiday season.
After meeting 91.00, the DXY sold off heavily back down to 90.00. As a result, many of the majors such as EURUSD have given back the gains made last week. Smart money believes if the price can break the short-term high, the price can continue its path to the upside. Price action traders are waiting for last week’s high to get cleared, before seeking longs.
Last week both price action and smart money traders entered long for AUDUSD. As a result of the spike in the DXY, AUDUSD was another major that has given back the gains made last week. Price action traders are waiting for the price to clear last week’s high to confirm the original bullish bias. Smart money traders are seeking entry long once the price clears the previous 15-minute high.
Aside from the action that occurred this weekend, volume in the markets should die down as we approach Christmas Eve on Thursday. There may be bouts of consolidation followed by extreme moves in price, this may be the norm as smart money is not active in the markets during this time. We hope traders make an honest effort to avoid trading this week and to use this week as a learning experience.