Monday, November 25, 2013

It was all about Iran yesterday | Thanksgiving in the US Thursday

Yesterday’s session was dominated by reaction to the news, over the weekend, that an agreement has been reached to restrict Iranian development of its nuclear capacity in return for the partial lifting of sanctions. This had the immediate effect of lowering the price of oil, as Iranian oil can now be expected to come back onto western markets.

The Norwegian Krone (Four hour chart above) reacted immediately on the opening of the Aussie / Kiwi / Asian session, as Norway is a big oil producer and its currency is sensitive to oil prices. Gold also took a hit, on the basis that the agreement lessons geopolitical tensions and risk is therefore back “on”, although it would not take much to depress the price of gold at this juncture. Pretty much any old excuse will do.

However, it must be borne in mind about this Iranian deal that it is, right now, an interim measure, designed to last for six months in order for a more permanent solution to be found. This creates lots of scope for reversals and therefore the potential for volatility in the market. Volatility is what makes the markets tradable, so long as it is not of the bi-directional kind and / or too extreme. Even the Krone can be seen to be retracing late in the day yesterday (Monday).

This week also sees Thanksgiving in the USA, which is next Thursday. That will create a thin market as the week progresses. We are also approaching the end of the month, when account balancing is likely to take place. For positions with good intrinsic value, tight stops are in order.

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