XM Group - Analytics

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    Post-thanksgiving trade session sees volatility

    Friday’s trading session following the Thanksgiving Thursday holiday is traditionally a quiet affair as many US traders remain away from their desks the day following the holiday.  The trading day itself is shortened (half-day) and there are no US data releases.

    This results in a lack of liquidity and thin trading conditions as this is a day when big real money investors tend not to execute their orders.  When these conditions occur, two things can happen.  Either trading itself becomes very quiet and there are no significant moves to speak of or certain sizeable orders catch the market by surprise and result in big moves and volatility.

    There were indeed some sizeable moves in today’s trading as for example some commodity-based currencies posted significant declines.  For example the kiwi and the loonie lost more than half a percent against the US dollar.  Gold plunged to a fresh near 6-year low by losing around 1.5%, while the euro was also testing its own 7-month low.

    Another mover for the day was the Swiss franc, which fell as much as 0.70% against the dollar and was the biggest mover among developed country currencies.  There were rumors that the Swiss National Bank was preempting next week’s ECB possible announcements about a deposit rate cut and enhanced quantitative easing.  The Swiss might have chosen the post-Thanksgiving trading session as the most opportune moment when intervention would have maximum impact as it would encounter less resistance than on a busy trading day.

    Therefore, on days such as the ones following Thanksgiving or the days just before or after big Western religious holidays such as Easter and Christmas, particular care should be given that in otherwise ‘quiet’ markets as there could be unexpected and quite volatile action despite the absence of news.  Some market participants advocate the avoidance of volatile and erratic conditions that can occur by keeping away from trading altogether during these days.

    Risk Warning: Forex, Commodities, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you fully understand the risks involved and do not invest money you cannot afford to lose. Please refer to our full Risk Disclosure.


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