The next week or so of trade is likely to be characterised by what happens in the JPY crosses. Yesterday’s events suggest to me that the immediate danger is to the downside in crosses like AUD/JPY and GBP/JPY and so I try to position myself accordingly.
- USD/CHF: Might be toppy now near .9800 with scope for a fall towards .9500 in next week or so if Yen crosses collapse and USD/JPY trades back towards 98.00? I am looking to book some profits somewhere in mid .97’s, depending of course on how the Yen crosses are looking.
- EUR/USD: The EUR is playing second or even third fiddle at the moment and will likely stay in a 1.2750/1.3000 range.
- Cable: Certainly felt very heavy yesterday and if the Yen crosses break lower then I’d expect to see cable back below 1.5000, especially with market seemingly very keen to be short sterling.
- AUD/USD: Same as above, if AUD/JPY gets hammered in a risk-off environment than AUD/USD will be trading below 95 cents in all liklihood.
In short, I think the Yen crosses are the key in coming days.