Market signals becoming clearer
At risk of repeating myself once too often, I think the market’s reasoning behind buying the USD is deeply flawed and I am looking for opportunities to build medium-term USD shorts against one of the other majors.
The move back above 1.10 in EUR/USD is pivotal in my view and I expect to see further unwinding of speculative short EUR positions across the board. EUR/USD should now consolidate above 1.0950 and start making fresh highs for 2020.
AUD/USD is showing no signs of making any significant dips and it keeps grinding higher in the face of ostensibly negative headlines out of China. I still think we will see .73/.74 on this run.
USD/JPY is a bit trickier with significant short positioning still in play but the big institutional Japanese investors are very long of US assets and will need to start bailing out of these at some stage. Timing will be the key in this pair.
The pair with the biggest potential is cable in my opinion. The GBP is being pushed lower on the crosses with more Brexit-related negativity but once this is priced back into the market., then I feel that cable could start a nose-bleed short-covering rally. I’m looking to build an aggressive position and am hoping to get lucky on the timing (as no one likes sitting for weeks on a big position in sideways markets!). Short-term sentiment is still fragile so I’m thinking we may see levels back around 1.2100 first before the rocket gets launched 🙂 Call me mad but I see a 20 big figure rally in cables’ future.