Here’s How I’m Getting Some Small Gains On Small Trends
With
commodity prices in general trading lower yesterday (oil topped at
$54 only to close at $52.50), copper and others also closed well off the highs,
the AUD, NZD and CAD were relatively well behaved versus the dollar, but so firm
against the Yen. The reluctance of taking the dollar too high seems to be
evident.Â
The rumor mill is on
overtime with Chinese revaluation; there appears to be no evidence that this is
true at this time despite Treasury Secretary Snow indicating that China is
committed to moving to a more flexible exchange rate. I guess that is in the
same camp as Snow’s statement that the US favors and has a strong dollar
policy. All in all, lots of words, but little tradable action in the dollar
based pairs. Our switch to the crosses in recent session, while not hitting
home runs, has damped our exposure to volatility and allowed for some small
gains on small trends.
EUR/USD bulls remain
intact, but might be starting to wonder why the 1.30 level is such an elusive
target presently. A very disappointing ZEW report out of Germany casts doubt
over a sustained recovery. As of this morning, the EUR/USD is testing key
support at 1.2240. The argument is that there are many “stale†EUR/USD longs
out there that might throw in the towel if this level gives way. For now, we
still prefer to avoid the dollar-based pairs due to extremely erratic price
action.
Commodity prices are
continuing to come under pressure on Wednesday morning. The yen crosses against
the CAD and AUD are notably weaker this AM as are AUD/USD and USD/CAD. Beware
the possibility of an unwinding of carry trades if these lose too much more
ground.
Technical Notes:
USD/JPY:Â 200 day ema has
halted Friday’s slide with 110.20 now the key resistance level
USD/CHF:Â solid move
higher this AM, however, chart formation is still unclear with 1.2680-1.2700
looming as large resistance. Near-term target is 1.2645.
AUD, NZD & CAD:Â all
pulling back hard, however, daily model indicates that this might allow for some
continuation longs on any consolidation.  For now, let’s wait to see how the
price action unfolds before dipping toe in the water.
EUR/JPY:Â 50 day ema gave
way (134.90) so we are once again in a situation where the rising wedge
formation continues to play out. 133.29 and 136.20 are the key levels for
break-out plays.
As always, feel free to
send me your comments and questions.