Long The Dollar? Think About This
It was a week that many FX traders will remember
either fondly or simply care to not to remember at all. The
anticipated correction in the dollar began in earnest on Tuesday and persisted
throughout the week although we are not as convinced that there is much more
upside after a key technical level knocked the dollar lower despite good data in
the US. At the very least, we expect some sideways action.
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However, Friday’s technical
obstacle might prove to be more of a minor impediment than a line in the sand
for further gains. The chart below, compliments of BCA Research, illustrates
something we have been noticing a lot in recent weeks, which was part of our
analysis in our recent long dollar positions.
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AUD/USD:
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We still favor being short AUD/USD,
but with the dollar possibly looking to consolidate, we believe the AUD might be
due to a slight correction what will offer us another entry with the hopes of
taking out the .7450 level. On Tuesday, the RBA’s Stevens will be speaking and
if his comments are anything but dovish, it should put a bid on AUD/USD.Â
Dealers have noted some buying in short dated calls, indicating that shorts
might be feeling a bit extended.
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The data from the IMM, although
not inclusive of this weeks session showed little change from the week before.
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Source: 4Cast
As always, feel free to send me
your comments and questions.