With the end of the month/quarter here and heading into a fresh set of tier one data on a shortened week, I’ve decided to adjust and reassess my forex positions.
Since entering my short position, EUR/AUD has gone into consolidation mode with a lack of new catalyst, normal type of behavior for the latter half of the months, and the broken support around 1.4550 seems to have become resistance.
Technically, it still looks like a valid short trade as the market is still within the closely watched area of Fibonacci retracement, moving averages and broken support. In terms of sentiment, the euro weakness momentum has subsided and with the ECB monetary policy meeting this week, a profit taking rally would not be unexpected.
I still think EUR/AUD is a short based on monetary policy divergence, and that it’s still a good short up to 1.4700, but I’ll hold for now (and collect some carry interest) and re-assess after the ECB meeting this week.
Last week, a big negative economic surprise from the U.S. was enough to push the Greenback lower, and enough to get USD/JPY to the major support area for 2014, where I was triggered. There really isn’t much to do now but let this trade run and see if buyers are interested in jumping back in.
Of course, it’s Non-Farm Payroll week so volatility could spike, but with the current trend of increasing jobs numbers through 2014 (and the tendency for this number to improve into the summer season), I see a low probability of a huge negative outlier. And with Japanese data “fluctuating” according to BOJ Governor Kuroda, I feel confident the Yen won’t find strong buyers any time soon.
But anything can happen, which is why stops are so important and I think 100 pips still gives this trade room to breathe.
As far as my open orders, I’ve decided to close my EUR/USD short orders ahead of the ECB monetary policy meeting, not wanting to increase my euro exposure into that event. After the event, I’ll revisit this pair and see if there is still an opportunity present.
For my CAD/CHF idea, the technical setup still looks strong, but there is the Swiss Franc’s strong negative correlation to the euro that has me a little worried with the ECB monetary policy meeting coming up. For now, it looks pretty close to triggering my long orders and I still think the recent positive retail sales and CPI data could be a short-term turning point, so I’ll sit on these orders for now.
And as for my NZD/CHF idea, I’ll also continue to sit on these orders as well. Despite recent weaker-than-expected trade balance and GDP reads, the Kiwi has been pretty resilient, showing that traders are willing to hold on and buy up any weakness. I’m not going to make any changes for now as I await the major data of the week, but I will look into jumping in at a higher price if the support around .7750 continues.
That’s it folks. Gonna sit back for now and see what the market gives us…stay tuned!