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As forex traders it seems that there has never been a more important time to monitor the fundamental driver of each pair, and to ensure that things are aligned so that volume and speculative interest have no option other than to join in when the next major break comes.
There are times in the year that volatile intra-day moves continually fail to follow through, with pairs locked in ranges that they cannot seem to easily break. We see dollar strength and dollar weakness in equal measure, and see swing points on most pairs setting up on the daily charts that just cannot break out.
We can look at the technical set-ups, the fundamental set-ups, and the mix of them all, but whatever our opinions, at these times of continued failed moves the markets are signaling one thing; they are not going to be moving too far in any one direction, usually because of reducing market participation and a distinct lack of volume.
None of the 2009 forex set-ups have generated enough speculative interest to do anything more than oscillate around the daily chart simple moving average areas; it seems that half of the markets are watching and waiting for the other half to break price points down.
To even out the ebbs and flows of market participation tenured forex traders tend to run a ten period moving average through the volume study. When there is divergence between the average volume read and price action that is testing support or resistance, the market will not be going too far either way. Without increasing volume, as denoted by over the counter (OTC) broker flows, or via the exchanges in the futures markets, the price action is very unlikely to follow through to much.
The average trading ranges (ATR) tend to drop, indicating that speculative interest is on the sidelines, and unable to impact the amount that the pairs move in each trading session. As those situations form it is easy for price action to them be held around the daily chart simple moving average areas (SMA), and when the 50, 100 and 200 SMA's are in play, as they are on most currencies right now, it is even more important to align price action breaks with increasing volume.
Trading the summer price channels is similar getting dealt a pair of Ten's in a poker game; we know that they look good, we know that our pot odds are just above average. However, unless a few more players get involved, we know that we may be holding them until the River, as we maneuver around the fact that not enough people want to get involved with things to make it worth our while taking a chance on the break-through.
Sit tight and wait it out, and whatever happens, unless a major support or resistance area gets broken on increasing volume, we really should not be getting too exposed. In in thirty years of forex trade we have seen that low volume equates to failed break-outs and consolidation; neither of which are that appealing.
Those who have mastered patience know that once the main price points break on increasing volume, that come on the next major leg of global equity trade, the volume and ATR will move higher in quick fashion. The technical and fundamental mix at these times of low volume and low ATR is very important to monitor. It will be a fundamental break that starts the technical ball rolling, drawing in strong volume that allows price action to hold.
As forex traders it seems that there has never been a more important time to monitor the fundamental driver of each pair, and to ensure that things are aligned so that volume and speculative interest have no option other than to join in when the next major break comes.