Don’t jump in this morning, wait and see if volatility returns
The market has been bullish USD on the back of expected QE tapering for some months now. The article in the WSJ by renowned Fed-watcher Hilsenrath titled “Fed likely to consider refining easy-money message” will have spooked some of the USD bulls. I think it’s now a matter of wait and see for a few hours as present levels don’t look particularly attractive in any of the major pairs:
- AUD/USD is still between important technical levels at .9130/.9350. We are currently in the middle of this range but if the USD bulls start booking profits then the danger is definitely to the topside. On the other hand, cross pairs like AUD/NZD remain weak and if we get some risk aversion and the Yen crosses fall, that would also weigh on the AUD/USD. So buying big dips is still my strategy but if the market can’t break below .9220/30 then I’d consider buying a bit earlier. Hope that makes sense.
- EUR/USD is nearing the upper end of its sideways range between 1.2750/1.3400 and this is not the place to be getting bullish. Keep an eye on EUR/AUD and EUR/JPY for short-term signs of topping!
- Cable will probably follow the EUR/USD to a large degree and EUR/GBP remains bullish whilst still above .8550.
- USD/JPY as mentioned below could get very volatile but I prefer to sell rallies in expectation of some risk-off and USD-bearish sessions.