Price action over the past 12 hours has been very interesting. Volatility has increased significantly from yesterday and a few stand out currencies posting extraordinary moves. However, through this, there is little consistency in the fundamental interests that have developed over the past weeks. On balance, a look at the financial and economic backdrop suggests conditions continue to deteriorate; but traders and investors determine the market‘s immediate trend. Therefore, the rebound in sentiment continues. However, the bullish drive in today’s session is already starting to waver. Following yesterday’s stall, this morning opened with a jump in European hours thanks to the ‘successful’ Spanish debt auctions (I am doubtful that this is all private bids), which set equities and other growth-linked assets on the advance. Yet, come the US session, the advance would fall apart leading the S&P 500 and Dow to turn lower. It seems that its is becoming more difficult to maintain the bullish correction. I am going to have to watch out for shifts in sentiment.
For my positions, this morning’s temporary boost in risk appetite would pair nicely with a strong bullish reaction from the franc to the SNB’s statement following its rate decision. This pushed my USDCHF short sharply lower. Given the momentum behind this run, I decided to take profit on half my position at 1.11. Having trailed my stop on the remaining position to just above today’s high, I will leave the door open for a potential follow through to 1.09 or 1.06 depending on how things develop from here. My other carry over position, short EURGBP, was pushed this morning; but ultimately, it would move little. It is particularly interesting that this pair has not moved further given the rise in activity from the currency-trading.ch/”title=”forex” >forex.com/category/british-pound/”title=”pound” >pound this morning. As for my unintended AUDNZD long from yesterday, I had set my stop below yesterday morning’s low and have therefore been taken out. This was clearly a trading mistake and shows the importance of watching the market as you enter and exit a position. In AUDNZD’s place though, I have taken a AUDCAD short. A long-term 38.2 percent Fib and pivot at 0.89 has encouraged me to take a reduced size position. I like this pair long-term to the downside given the shift in growth and interest rate expectations (not current conditions which are already priced in) in the Canadian dollar’s favor. The position size is reduced and I have set a stop above the 5/28 high at 0.8970. Two other pending positions that I am particularly interested in now are GBPJPY and GBPAUD. The UK’s emergency budget is due next week; and its release can perhaps lift the anchor on volatility for the sterling (for better or worse). For GBPAUD, a bounced at 1.70 is having trouble taking off. I could play this as a range or wait for a bearish break depending on how fundamentals evolve. For GBPJPY, a choppy ascending triangle has developed on the 240-minute chart. With resistance at 136 and the rising trendline narrowing congestion to 240 points; a breakout could be soon at hand. I would prefer a bullish break; but that could conflict with my medium-term outlook for a revival of the larger bear trend in financial markets. If this becomes a problem, the pound will really have to shine on its own.
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