AUD,NZD/EUR/USD/Trade Ideas/USD/JPY

USD to stay bid, but not perhaps against the Yen

We saw some very interesting markets near the end of last week, particularly here in Asia where some major risk aversion resurfaced. It would probably be more accurate to say that we have encountered a period of profit taking in certain markets after some massive moves over the last 7 months, like in the JGBs and the Nikkei.

Mr Bernanke said much but not a lot, leaving us none the wiser on Fed tapering. This puts us back to where we were earlier last week, ie bullish USD. I think the market has decided that it wants to be bullish on the USD and when it takes such a decision it should be good for 20% moves.

  • USD/JPY has already made it’s 20%+ move, from sub-80 to 103.50, and I suspect that it may struggle to make any more impulsive gains. The profit-taking moves in the Nikkei are another indication that there is two-way risk for USD/JPY.
  • USD/CHF remains my trade of choice on which to be bullish dollars but if we see a prolonged period of risk aversion, then this pair will also struggle to rise. I sold 1/2 my long position on Friday and will now sit back and try to react to any big moves either way.
  • AUD/USD is now the pundits choice to be the big faller but I’m reading this from the same guys who were bullish at 1.04! The big difference between the AUD and most of the other major currencies is QE; Australia isn’t and all others are! This means that over time the AUD will rise against all of the other majors. I was bearish at 1.04 for .92 and I still think I’m right; and I think that the low .90’s will be the low.
  • The CAD and the NZD are in similar situations to the AUD.
  • Cable could be a surprise loser if market sentiment gets it’s way. The market wants to sell I feel and if this pair turns south then we could see prices back near 1.40.
  • EUR/USD is not the main story and the big banks continue to say that structural demand remains very solid. Pick a 10 big figure range for the next 12 months is my best guess here.

Looks like lots of volatility ahead, and maybe a few sweaty-palm days like Thursday.

  1. Dear Sean, i really would like to have right regarding chf, but if we corelate it with yen, will observe that from its 0,7 lowest value in 2011 we have around 40% usdchf increasing compared to around 33% in usdjpy (from its min around 77). What do u think? Would be this enough for chf?
    Many thanks man

  2. That’s a good point Cozmin but I guess I considered the ridiculous spike lower to 70 to be an outlier. Also then the SNB put the base in place at 120 in EUR/CHF and that changed the rules of the game. But you are right, we do need to be careful and now get overly bullish USD/CHF at these levels

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