Sticking to the crosses for some shorter-term opportunities
My longer-term fundamental view remains unchanged, the EUR, JPY and USD will struggle amid CB easy-ness and the commodity currencies will strengthen over time. The market has started buying USD in the mistaken belief that the Fed will significantly change its policy direction. We will see small changes, but no directional change. This is probably enough to ensure some USD strength against the EUR and JPY (and we’ve seen a lot already) but will not be enough to ensure longer-term USD strength against the GBP, CAD, AUD etc.
So whilst we are waiting for this USD bull trend to run its course, we should find some decent trade opportunities on the crosses:
- Already this week on the NZD, we saw an illogical sell-off on verbal intervention and small scale intervention reports. That gave us some decent NZD trade opportunities on the crosses, especially EUR/NZD, if you were quick enough to pick up on it;
- Yesterday’s EUR/NOK move showed that EUR weakness still has a way to go;
- Cable is consistently failing to generate any strong bullish momentum and surely a test of 1.60 is highly likely? With strong NZD/USD support at .7700 and USD/CAD resistance at 1.1270, there should be good opportunities to short GBP/NZD and/or GBP/CAD over coming days, if only for quick 100 pip plays.