Members login
Dollar Climb Sputtering without Constant Fundamental Reassurance, G20 Ahead
Written by article default Thursday, 11 November 2010 09:34
It's a delicate balance in assessing the strength of the US dollar to weigh the burden of the consistent pressure of a reserve diversification and Fed stimulus against its safe haven appeal as the primary alternative to the troubled euro. My focus is on the dollar first because I see considerable opportunity there and because it is a good benchmark for risk appetite trends. I'm not looking at the greenback to make a huge rally or plunge as a direct reflection of sentiment. Instead, I am seeing how the currency develops against the backdrop of other assets. If we want to see genuine trends, we need to see a risk appetite or aversion move that is strong enough to clarify this otherwise distracted and confused currency. However, that doesn't mean all our trades should be based on the majors - nor does it mean we should be focusing on longer-term position.For my carry over positions from yesterday; a distinct yen weakness has clearly helped my case. With my USDYEN long, a move above 82 has encouraged me to build up my position size to a quarter my top standard. This pair is very close to breaking its medium-term descending trend channel; which would shift the pair into a new gear. With a shorter time frame in mind on CADYEN, I have already hit the first target on long position at 81.80 and moved the stop on the remaing half up to breakeven.
Now, new to the mix, I have just recently taken a half-size GBPUSD short at 1.6120 on the technical appeal of a short-term descending trendline and 50% Fib retracement. Fundamentally, confidence found on that quarterly stimulus report will likely be short lived. With a first target and stop of 60 points, this is another one that can play out quickly. Also, I felt my entry for my USDCAD long setup was too aggressive for what the pattern was. Moving up my entry point to 1.0015; I am now in with a 75 point stop and first target.
For potential setups, I am very interested in the short-term implications of breakout momentum on a AUDUSD move below parity. Of course, I have to be cognizant of my existing dollar positioning when considering timing and objectives on this. As for EURUSD, I can see a move that lasts multiple-hundreds of points; and it would be a shift that fundamentals more enthusiastically support. So, I am still watching 1.37 closely. Others to keep an eye on are USDCHF above parity and this potential channel break of GBPYEN.
Click here to learn more about DailyFX.