19th-23rd December 2011

As we approach the final two weeks of the year, liquidity is expected to run dry.We should therefore be very careful not to get caught in the opposite side of the market as any unexpected news announcements can cause a lot of  volatility. The Euro has been on a downward decline from last week due to the inability of the Euro leaders to come up with a solution to their unending problems and the threat of the downgrade of the two main economies Germany and France by Fitch.S&P also threatened to downgrade the two nations after Fitch had also down graded some other European nations.This, together with other factors led the US dollar to soar against against most currencies with risk aversion kicking in which also sent Gold lower and the Yen higher.This week may be a continuation of the same with the Holiday season closing in.Euro/Usd may continue to dive as it did last week if it breaks through the 1.3000 psychological barrier from last week.However if there is some pleasant news coming from Europe this week like Germany not going to be downgraded and others,we may see some retracement of some sort from this level.

The Euro/Aud has reach a major low at 2945 which may hold well for a well as it has done historically.There is nothing much expected from the Aussie this coming week and due to the market volatility at this time any unexpected news may have an unprecedented move either way on any pair.

The dollar index is widely expected to continue with its bullish momentum from last week which saw it move higher against the Canadian dollar.A break above the trend line may signal further bullish strength considering the Euro crisis and the issues concerning crude oil world wide that really affect the oil producing country.

Gold which is a safe haven currency seems to have lost its appeal and has been declining in value for a while now.It formed an ascending triangular pattern that broke to the downside last week and may continue its decline as commodities continue to lose value across the board.

Nzd/chf seems to have reached a major psychological barrier at 7187 on the weekly time frame and is now headed lower this week with the formation of two spinning tops from the last two weeks.The SNB left the rates unchanged last week and it was highly expected that they will do something about their currency to reduce its strength.We will continue to watch it as the days go buy and try to look for opportunities to sell the pair to lower levels.

We should however be very cautious this week as most traders and institutions are closing shop this week and are only working on their books to close the year.Again, unexpected news releases can easily cause volatility that may affect your account negatively.Best of luck trading and do your analysis well before engaging the market.