AUD/USD: Likely to be pressured as China reintroduces coal levies
Reports on Reuters say that China, which is the world's largest importer of coal, will reintroduce import tariffs of between 3%-6%. Australia is the top supplier of coal to China and this news will definitely have an adverse effect on AUD sentiment heading into the weekend.
Reports yesterday morning suggested solid bids in AUD/USD near .8760/70, but I'm not sure if they are still live.
First technical support of note is hourly support near .8730.
Back to school for lessons in Fed-speak
We've had various Fed officials coming out overnight and telling us that 'considerable time' could be as little as 2 months! If part of a central bankers job is to prepare the market for certain policy changes through the use of clear language, then this present board is failing miserably on that score.
The USD has understandably bounced back strongly after these clarifications, which is what they were as we've had 3 separate board members on the newswires. As to what happens next? I'm probably the wrong person to ask but the FX market spends 98% of its lifespan ranging across different time-frames, so best we go back to picking range edges.
I can say TGIF with particular vengeance this morning.
EUR/GBP: Booking 80 pip profits near .7870
I could try and finesse this a bit more and sell 10/15 pips higher but I have bigger fish to fry as I think the USD is in for a sharp reversal and that the commodity currencies will fare best. I had been watching resistance near .7890 and as it's basically held firm, I will take my profits (on a small position) and concentrate on Aussie and Loonie.
I think in the bigger picture we may now see a return to the race to the bottom between the big 3, USD, EUR and JPY, and the GBP, CAD and AUD outperforming across the board.
AUD volatile post jobs data
Some interesting price action after the Australian jobs data, which if anything was a bit disappointing. AUD/USD fell briefly below .8800 but has bounced sharply, taking out overnight highs, and intraday Algo traders have been caught short according to interbank sources. The next level of tecxhnical resistance is the oft-watched 20-DMA near .8855.
I'm still long and happy to stay that way.
AUD/USD: Longs in play, look for short-term base now near .8770
This is a similar trade idea to USD/CAD but the difference with the AUD/USD is that we get more volatility during Asian trade so I get more of an opportunity to trade around the position.
I am entering this position at .8845 with a modest-sized trade and I will hopefully build on this over coming sessions. I'd expect support levels to emerge near .8770. My initial topside target is .9150.
USD/CAD: Shorts in play again
I've felt for some time that the market has been getting way ahead of itself on the bullish USD front, especially with expectations that we would see a significant rise in interest rates over a short period of time. The Fed seems to be of the same view, namely that the US economy still needs stimulus.
There is little point in fighting a strong trend but once you think it's starting to turn, then you must jump on with conviction.
I've gone short USD/CAD at 1.1105 and will look to increase the position as the important short-term levels become more apparent. I have a stop on the strategy above 1.1270.
EUR/GBP: Still long, let's see what price action is like at .7900
When I'm having a 'slow' run in the market, I often revert to trading some slower moving crosses like AUD/NZD or EUR/GBP, just to regain a bit of confidence. I don't take big positions or go for 'home run' hits, I'm merely trying to get my mojo back.
Currently I'm running a small long position in EUR/GBP, after strong technical support signals emerged ahead of .7750. The fundamental picture for this pair is still very bearish but with positioning heavily skewed to the bear side, picking bottoms at the opportune moment can have its benefits.
There is some modest technical resistance near .7890/00 so let's wait and see what the market does if/when it gets there.
USD/JPY: Positional liquidation the main driver
From the FXWW chatroom:
I'm continuing to hear reports of hedge funds having to return money to Russian investors due to worldwide financial sanctions. This is leading to positional liquidation of longer term trades in the FX market, like everyone's favourite USD/JPY trade, and in FI as well.
AUD/USD: RBA today and I prefer to be long
- The RBA will be steady as she goes with no change in policy or statement language, although there is a risk that, with the AUD/USD at more acceptable levels, the language may change subtly to start signalling a rate rise next year;
- The market is short AUD/USD and sentiment is bearish;
- Important technical support levels near .8650 have been confirmed.
I prefer the long side but we still need to pick our levels carefully. I'm looking for a wide .8700/.8820 range today and I'm in dip-buying mode.
Nasty USD reversals suggest bulls slowly losing control
- USD/JPY: On 2 occasions now in the past week we've had pretty nasty reversals from levels close to 110.00. This may not mean that the bull move is over, but it certainly suggests that bulls are losing momentum and we may be in for some protracted sideways trading.
- EUR/USD: The market was not comfortable with levels near 1.2500 and judging by the EUR rally on the crosses, it looks like the market was overly short across the board. Again, a period of consolidation is the most likely outcome but the USD bulls will have cause for concern.
- The AUD, NZD and CAD all held (more or less) important support levels against the USD and with Gold also reclaiming $1200, USD bulls should exercise caution.
The pitfalls of 'trade following'
This is an area of the business which we have been studying for the last 3 years, so you can't say we haven't been thorough :) Here are some basic observations.
- There are a lot of less-than-ethical operators. They run multiple accounts under different pseudonyms and promote the strategy which happens to be good at the moment. They make declarations regarding their risk-management practices but don't stick to them.
- Slippage and latency are real problems.
- There are not very many good traders in the market. Finding a really good trader who will allow you to follow his/her signals for $50 pm; REALLY?
- Not all traders are profitable all the time. Good traders will have periods of limited draw-downs but will maximise profits once the tide turns.
My experience has taught me the following:
- Retail traders are better off finding professional help rather than trying to become expert traders themselves;
- Good professional help isn't all that easy to find. Get to know your service provider and be sure that they are indeed capable and professional;
- Finding 1 trader to follow at 1 point in time involves a degree of luck. Consider a portfolio approach. Increase/decrease the risk associated with each trader according to their live performance;
- You get what you pay for. If you want to gamble, go to the casino. If you want to trade in the FX market, you need to have a properly funded business plan.
EUR/GBP: Longs in play but not sure at all
I'm still long the cross from last week below .7800 but it doesn't feel right yet to be long of the EUR. I will raise my stop-loss to break-even for now and see how the market develops. Cable is now settling below 1.6000 but I think it's getting to 'cheap' levels so I'm a bit conflicted.
On the positioning side, the market remains very short of this cross, which is one thing working in my favour.
Quiet start to the FX trading week
The USD is King again and all us non-believers have been sent scurrying for cover yet again. No point in trying to fight the tide for now.
- The EUR continues to look the most vulnerable to steep losses and technical targets near 1.2050 in EUR/USD look achievable. Resistance will be firm now ahead of 1.2700.
- The market tried to buy cable ahead of 1.6000 according to PB positioning reports but these positions were targeted in thin Friday trade. I am still prepared to buy dips in this pair but we could well see levels near 1.57 this week.
- USD/JPY proved the dip-buyers right yet again but there is strong long-term technical resistance to overcome between 110.50/111.00.
- The AUD/USD has made fresh lows below .8660 but trade should be subdued ahead of the RBA tomorrow.
USD/JPY: Risk-off Friday, shorts preferred
There will be a lot of long positions in the market who are feeling very unsure right now. They got the move to 110.00 as they had hoped but the sharpness of the turnaround will be casting some doubt.
The break below 108.60 will have convinced many bulls to book profits, so I'd expect 108.60/80 to be toppy on the day and if we get a big sell-off, it would not surprise me to see levels below 107.00 again very soon.
EUR/GBP: Long trade looking good, more short covering ahead of the weekend
My EUR/GBP long from yesterday is 50 pips in the money and hopefully I will get a chance to build a decent position over coming days. I only had a moderate starting position as my recent trading record hasn't been great, but if we get a significant short squeeze in this cross then my lean period will be over :)
I'm thinking that we may get some consolidation inside .7820/90 for the next few sessions but I'm sticking with a strong bullish bias.
EUR/GBP: Fresh longs in play
This is a short-term 'timing' trade and I'm looking for weekly support at .7750 to hold. The market is very short of this cross and recent price action in the GBP has been moderately bearish in my view.
I'm probably the only person in the market who is now long of EUR; not sure if this is a good thing or not :)
AUD: Mixed bag on crosses should ensure consolidation
- AUD/USD trend remains bearish but important long-term technical support at .8660 held firm on the first test;
- AUD/JPY has started to retrace and could easily fall another 200 pips but the AUD does look reasonably inviting against the GBP in particular.
Sounds like another perfect set-up for some range trading between .8650 and .8800 in the AUD/USD over coming sessions.