This week marks a short trading week due to the Christmas holidays which are observed in the developed world which means major trading hubs such as London, New York and Sydney will be closed as traders will take off time to celebrate this major holiday. The forex market will be open, but trading volume will be razor thin which means liquidity will also be severely reduced as there are simply not enough traders in the market place.
Forex traders who decide to trade should be aware that tomorrow on the 24th of December many trading floors at institutional offices will either be closed or close early which means that liquidity could dry up. On the 25th of December and the 26th of December most traders will be off to celebrate Christmas in the developed world while some volume could be possible out of Asia. In general the entire trading week will see a decrease in trading action.
On the 29th of December, the start of the last trading week of 2014, some volume could return to the market. A lot of funds will try to make last minute adjustments to their portfolios and trading could be hectic. Given the below average volume this could led to big price spikes and the creation of gaps. Expect spreads to widen temporarily given market conditions. Those who will be trading are likely to have a shortened day on the 31st of December while there will be no trading on the 1st of January.
In general the first trading week of a new year is rather slow as many will still be absent from trading in order to enjoy a few more days to relax. Given that the New Year falls on Thursday we could see a full return and official kick-off to the 2015 trading action on the 5th of January. The majority of traders will be back at their trading terminals and start to navigate their portfolios for a successful outcome. Volume will return back to normal and spreads will be tighter.
There will be a few economic reports which will be released during the period and given the lack of volume forex traders should be prepared for a bigger reaction to those reports which means an increase in volatility. It may be best to seek out those trading opportunities over the next three weeks as the markets may lack an overall trend and will be stuck in either a sideways trend or extend their longer term trends which developed throughout the year with some profit taking during the last two trading days.