Maybe not yet but the day is coming sooner than you think!

Guess we’ll have to have a go ourselves!

1. Commodity Prices: Continue to drift lower from Covid-inspired peaks and are lower on both MoM and YoY basis. Impact = Negative.
2. Interest Rate Differential: Market expectations are mixed in short-term and medium term. Impact = Neutral.
3. Economic Performance: Recent jobs data and thawing relations with China give the Australian economy a slight edge in the short term. Impact: Positive.
4. Market Sentiment: Nothing clearcut but large Hedge Funds are said to be building USD long positions again, albeit more against the JPY than the AUD. Impact = Negative.

Based on this, and until something substantial changes, I’d be looking for a sideways/lower move over the next 3 months. I’m visualling a sideways channel with extremes at .6450-.7050. Not overly helpful I know as we are currently close to the middle but sometimes it helps to take a big picture view.

The US couldn’t afford their debt interest repayments when interest rates were at zero! Bit of an exaggeration but you know what I mean. Plus the political situation seems so divided, there seem to be more risks than upside for the USD in 2023.

With war raging in eastern Europe, I cannot justify being long European currencies to any significant extent and the JPY lost its ‘risk off’ status last year and I’m not sure where it’s headed.

So that leaves me two options; one risky, one less so.

The less risky option is to stay in my home currency, the AUD. There are undoubtedly some geo-political risks but the domestic political and financial situations are stable and for now, I’d rather be long AUD than any other of the majors.

The risky option is to build a portfolio of emerging currencies, particularly Asian and South American. Unfortunately I don’t have the energy or risk appetite anymore to manage the swings and roundabouts because this could well be the year of the underdog.

The economic stand-off between Australia and China is not showing any signs of improving and this is eventually going to have an impact on the AUD. Australian government stimuli packages are starting to ease off and an economy which relies heavily on overseas tourists and students is in for some very tough times ahead.

I am not a fan of the USD either in the current climate and would be cautious about being overly short AUD/USD. I expect some range trading here in a .69/.73 ish range over coming weeks.

We’ve just seen AUD/JPY shorts get squeezed and technical stops above 74.60 were triggered. The big levels seem pretty clear here, with big figures at 70-77 providing support and resistance. I prefer to look for exhaustive spikes to re-launch shorts for a final test lower.

I’m a bit annoyed that I missed the buying opportunity in cable near 1.2450 but I expect to get more chances. I’m hoping to build an aggressive long position for a move into the high 1.30s.

AUD/USD should be s/t toppy near .71c and support should be powerful on dips to .67c. Range trading advised until the noise is over.

Ergo, trade of the moment, sell USD/JPY rallies for a move towards 102 in coming weeks.

It’s Friday and Wall Street had another shocker overnight, which means that the risk off plays will be front and centre. I’m not exactly sure how far we can go but I hope to start picking up some AUD/USD on the approach to .6735 and my ideal entry levels for medium-term longs in cable look to be around 1.2410.

USD/JPY looks like it could fall off a cliff and I’m staying small short there and will add on the day if bearish momentum starts to build again.

Should be an interesting day

Cable is still my preferred play and I’m hoping to get back on the long trade somewhere on the 1.24 handle (with a bit of luck and wishful thinking!). One point in my favour is that the bears at 1.22 have turned bulls at 1.27, a sure sign of an interim high! If I told you where I think it might go in the next few weeks you’d probably have me committed so suffice it to say I’m expecting some over-extensions if/when the over-hedged GBP shorts get scared.

AUD/USD should be more sedate, having unwound much of its over-sold properties on the crosses (AUD/JPY, EUR/AUD etc). I’m expecting this market to slip back into more traditional Aussie trading patterns and plenty of sideways stuff should be the order of the next few months.

I’m trying to trade the upswings in cable and any 50 pip dips are buying opportunities whilst this bearish USD momentum holds sway. I’m expecting this 1.2410/20 level to provide some short-term resistance and dips towards 1.2360/70 are now buying zones. I feel that we will see levels near 1.28 before too long.

AUD/USD is headed to .73c in my view but this may take some time. Patience required.

EUR/USD has the potential to really hurt some of the big shorts out there but personally I feel a bit nervous about being overly long and I prefer to look elsewhere. Similarly with USD/JPY; it will head towards 100 eventually but the market might already be too short the JPY crosses.

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.

I know I said last time that I was going to stay away from cable until I had more information but I got impatient and I have a small long position, a little out of the money. The latest Brexit stoushes between Brussels and London have put the “no deal” words back on the front pages and that has driven EUR/GBP back up towards .90. I’m keeping a close eye on the cross and will have to decide this week whether to add or exit my cable long position. Let’s hope that we get some clear market signals.

AUD/USD is trading like a pair that wants to go higher imho. ALL of the news out of China should be very AUD negative and yet any dips are very limited. What can’t go down will do up!! I still target .73c on this pair. Any dips to the low .64s are buying opportunities imho.

Gold is also giving me no reason to sell so I’m just going to sit on that until things get silly.

Have a great week++

The AUD/USD has held up well but if global stock markets hit the skids again, the Aussie is likely to come in for some short-term punishment. I’m square here as well but am a convinced dip-buyer and will look for good risk-reward opportunities.

I’m still comfortable holding onto my long bullion trades and see no reason to exit these at the moment.

I’m still in total disagreement with the majority of analysts out there who have been expecting a strong USD rally. Any structural liquidity issues, especially in emerging markets, which might be USD bullish will be more than outweighed by the fact that the collapse in global trade has led to a huge drop in demand for USD. Add in all sorts of uncertainties surrounding US Treasuries and I could not feel at all comfortable in holding USD for any length of time.

So what to trade?

USD/JPY: For now, be short and stay short for a test of 100.

AUD/USD: Any dips driven by AUD/JPY selling will be short-lived imho and I’m in dip-buying mode. The levels I’m watching are .6325/50 to begin with then .6260-80. Once the USD really turns, I’m expecting a 15% move higher in the AUD/USD.

Cable: Similar to AUD/USD, any dips will be driven by GBP/JPY selling and I feel that levels around 1.2250 will provide good value entry levels. That said, with cable we always need to be particularly vigilant as 300 pip over-shoots are almost the order of the day! I’m not leaving any orders, preferring to trade it on a day-by-day basis.

EUR/USD: The EUR looks pretty ordinary on most of the major crosses so I’m leaving it alone for now. Speculative positioning in some of the EUR pairs is getting towards ‘painful’ levels so no doubt we will get a very nasty stop-loss driven rally one of these days.

I have exited my short AUD/JPY trade and am looking for dips to reinstate my long AUD/USD trade. I am expecting some short-term consolidation between .6350/.6475 over the next few days and will trade this view with a neutral bias. Ideally I would like to be building longs for the next run higher on the .62 handle but we will have to be patient and see how long this temporary AUD bearish momentum holds for.

AUD/JPY is my preferred play and the ‘gap-closers’ amongst you will no doubt have recognised the fact that the move back to .6995 has closed a gap from 4 weeks ago. I’m edging into shorts ahead of .7000 with stops above .7050 for now.

EUR/AUD also feels seriously oversold as indeed do most of the EUR pairs. There have been plenty jumping on the ‘end-of-EUR-as-we-know-it’ bandwagon yet again but this trade is heavily overdone in my view. Not so sure on the levels in EUR/AUD but I’m looking for some basing formations on the short-term charts.

AUD/USD is still my favourite play, as it was chronically oversold, and I favour a test of 65 cents before we get another decent dip-buying opportunity. Cable has weathered a few storms and should test levels near 1.2850 from here (currently 1.2450). That said I feel that the GBP will, sooner rather than later, start to under-perform on the crosses as the BoE measures start to take effect. Not sure on levels yet, so its a matter of waiting for the right time on the short-GBP trades I feel.

We certainly can’t complain about the volatility and with speculative positioning at mature levels, we can expect more of the same for the next 2-3 months.

Based on the data I am receiving on the strategy side, the discretionary traders are still lording it over the systematics who are still struggling to get to grips with the changed environment. Swings and roundabouts.

Stay safe out there.

There have been some short term changes over the last 3 weeks with AUD positioning back to neutral, CAD longs reduced and GBP longs starting to build. CHF and JPY shorts are also building albeit slowly and from neutral levels. The markets core positions of long USD and very short NZD still remain intact.

There are no major discernible changes underway and it looks as if the market is fairly comfortable and looking for the next impetus.

STRATEGIES:

NZD/USD: Range trade with a bullish bias.

GBP/USD: Range trade with a neutral bias.

On the other side is the professional trader community and there I am seeing an overwhelming bias towards buying the Commodity Currencies against the USD in particular but also against the EUR and the GBP.

So who will win? History would suggest that the traders will win once again. I wouldn’t count the legendary Soros et al exploits from the 80’s and 90’s as they were basically professional traders who managed money. The current crop of money managers are generally box tickers who follow each other around like a herd of sheep; one sells, all sell.

Not sure when, but I am backing the professionals and I expect the AUD to reverse fortune (sharply) sometime very soon.

CONCLUSION: The market is starting to get comfortable with the trends which started earlier this month. Short-term positioning is getting over-stretched suggesting that we may see a short-term rebound in the USD. Trade-of-the-moment: Buy dips in AUD/CHF towards .7425.

• AUD/USD: Any initial rallies to .7650 are likely to attract selling interest, first up, so I will lighten my position near there. I expect technical and market support to be extremely solid near .7570/90 so I will add or re-buy there, market conditions allowing of course.
• USD/JPY: 104.20/25 is expected to attract decent supply from Japanese corporates and that should prove toppy in early trade. Stale shorts will undoubtedly welcome any dips towards 103.60 and I expect this level to provide strong support during the Asian session.

Sorry no strong views or information on other majors.

Any intraday dips to .7670/80 are now clear buying opportunities in my biased opinion. I’m not sure which level will trigger any bullish acceleration but it could happen as soon as a .7760 break.

I remain a USD bear around current levels so therefore I prefer the long AUD/USD leg as opposed to the long USD/JPY leg of this cross trade. In fact I will feel quite comfortable in selling USD/JPY rallies if/when resistance is reached and confirmed in the cross.

That said, my preferred trade is to be long AUD/USD on all time-frames. For now I see medium-term support holding around .7500 and short-term support at .7600/20 providing a good entry level.