Picking the year-end trends in the FX market

Generally speaking we get a fair amount of volatility in December and patient traders can certainly take advantage of these conditions. Now all we need to figure out is what’s going where?

  • Is the current Yen weakening an ‘across the board’ move or primarily a strengthening in USD/JPY?
  • Has the market sold enough Yen already or is there more firepower to come?
  • Will the weekly down trend-line in AUD/USD hold firm, providing another pro-USD indicator?
  • Can EUR/USD break out of range-trading mode?
  • Will the EUR crosses see more short-covering in the lead up to Christmas or will the bears get more aggressive?
  • Can cable remain below a double-top at 1.6300, yet another pro-USD indicator?

As always plenty of questions in my head as I wake up. My thoughts at this stage are that the most straightforward risk-reward trade is to be long of the USD whilst pairs like AUD/USD and cable remain below their resistance levels. Being short the EUR might be a dangerous play whilst the market is short and the bad news from the EZ dries up. In other words, I think it’s buy-dips in EUR/USD and USD/JPY, and sell-rallies in cable and AUD/USD until proven wrong.

    1. Good morning Rahul, Sean, and all,

      Golden rule number one: NEVER LISTEN TO GOLDMAN SACHS ;-), even if they are right. If anything, use it as a contrarian indicator.

      The fact that Goldman is advising a short now is an additional bullish signal for me :-). In my view, shorting the USDJPY will be much more interesting when we reach 84 (I do share your view that at the end this is going to be another round of disappointment). As for buying, when we get back to the 80.x we will have a good risk reward opportunity.

  1. Good morning Sean
    .I faded the post greek deal announcement (i had posted it as my trade idea here…fortunately it worked out that way)..and im short aussie from 1.0480 with a s/l at 1.0515.
    i exited my euro short at the 100 hour moving average because as you mentioned in your post yesterday, the market seems to be very short euro plus euro/yen flows to deal with, so id rather buy dips.

  2. Well done Rahul, nice trading yet again. I’m starting to follow you now, you’ve got the hot hand 🙂 I’d move the AUD/USD s/l 10 pips higher as good sized sell orders reported 10510/20

  3. I’ve been short EU (1.2975) and EJ (106.65) since early yesterday, and short AU since 1.0460. My style is medium term swing and I’m likely to hold these trades until the end of the week, by which time each of them should be at least +100 pips, if I don’t get stopped out sooner!
    I try not to predict the market, just take the signals from the chart. For now, all risk trades charts are pointing down, including the SP500, which strengthens the AUDUSD bear case. Good luck all!

  4. Morning Iridium, I can see that you made a comment but it hasn’t appeared on the thread. Did you hit the ‘reply’ button? Only I’ve never seen that happen before

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