It’s not unusual for the big macro funds to unwind their books late in the year but traders see that phenomenon playing out a bit earlier in the calendar than normal this year.
Yesterday may have been the watershed in EUR/USD with very large turnover taking place below 1.3500 yesterday before the US open. Despite the heavy sales, EUR/USD did not even test the Tuesday lows at 1.3446, bottoming at 1.3460.
Since that point we have managed a grind higher, absorbing decent sales along the way.
What I take away from the combination of year-end book squaring and the fact that we’re bouncing from the 50% retracement of the 1.2587/1.4283 rally is:
- the easy money for this move has already been made.
- markets may be thin and illiquid for the balance of 2010, making it far more difficult to sort out the “signal” from the “noise”.
It was a very good year for trend followers and they look happy to head to the sidelines and give thanks…