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Posts Tagged ‘CADJPY’

View full post on DailyFX – Analyst Picks – Today’s Picks

View full post on DailyFX – Analyst Picks – Today’s Picks

View full post on DailyFX – Analyst Picks – Today’s Picks

The market at large had a week to digest the EU stress test results from this past Friday. Anyway you slice it, the statistics look flimsy and to a considerable extent warped to reflect an undeservedly positive outlook. Just in this report we see evidence that different standards were used for different regions and banks. The accounting of bond exposure allowed for losses to be skirted. Counter-party risk was almost completely left off the books. That is just the least of the problem; but it is important because it diminishes the credibility of officials in the region should they be (when they are) proven wrong. What’s more, we have to consider that this once again just their assessment of the situation. Should one of the Spanish, Portuguese, Hungarian bond sales this week fall through, fear could just as easily return. Long-term, the balance of austerity and growth for this region will require its pound of flesh. However, in the short-term speculative interests can shift. I don’t think that they will will shift to a meaningful optimism though. A reversal is very likely to come from some – if not EU uncertainty – soon.

Nonetheless, I need to be more cautious with my setups. A break in favor of risk appetite could very well turn into a false move that is quickly reversed. On this point, I will be extremely skeptical of a bullish break for EURUSD, EURJPY or GBPUSD. A confirmed close (with a 60 or 240 minute candle) above 1.30, 113.50 and 1.55 respectively will mark a possible trade. However, follow through will still be difficult to encourage unless there is a clear, fundamental drive behind the markets. If this turns out to be the case, I will look for confirmation in correlations across these various pairs to a rally in equities and risk appetite in general. What’s more, my initial objectives would be set relatively close. In reality, I would prefer a correction in sentiment that would pull EURUSD below 1.2750 and GBPUSD below 1.5125; but that could still be a ways off.

A couple of other pairs that look particularly interests are GBPJPY and CADJPY. Heavily influenced by the Japanese yen, we have risk appetite to deal with as well as the unusual distortions on the yen. I’m watching 136 and 131.50 for GBPJPY while 82 is the level to watch for CADJPY. My favorite setup at the moment is for a breakout from USDCHF. Recent congestion between 1.0550 and 1.0400 after a sharp and consistent decline begs for a breakout and reversal. I’ll wait for confirmation of such a move; but given this pair’s general proximity to risk neutrality, it could open up a reversal move (especially considering the correlation it has with EURUSD seems to be diverging).

For my active positions, CHFJPY has made no progress. It is working its way into a congestion pattern following the failed reversal effort on the rising trend channel. I have dropped this pair at a negligible profit and will look for any potential in a break below 82. As for USDJPY, recent congestion could given opportunity for a short-term play on a breakout; but my aims are longer-term and my position smaller size so I will just hold on until I see progress or a better price to add.

View full post on DailyFX Analyst Picks – Today’s Picks

I was debating over whether to update my picks before or after the Stress Test. I think it is better to do it before; so I can look back at my potential setups to see how well they were formulated. Heading into this event; we have to first considered whether it will be actually market moving. We have seen too many instances in the past were big indicators have let us down when it came to actually fulfilling its unspoken pledge for volatility. As for this event, there is a reason EU officials decided to release the results at the time they planned – it is after the European market close and therefore most market participants will be forced to stew on the results until the following week. That being said, the FX crowd isn’t barred by such restraints; but we still have few hours of liquidity to work with. That being the case, volatility may spike; but follow through could be lacking. I may be encouraged into a very attractive technical and fundamental scenario to hold over the weekend; but the hurdle will certainly be set high. Short-term reactions offer better probabilities.

There is a lot of pent up event risk before the EU drops the bomb on the market. While there are reversal and trend revival opportunities out there; those are setups for more calm market conditions. We don’t have many trading hours left in the week; so I am taking stock of possible breakout candidates. And if we don’t get a breakout before the weekend, all the better. I think a break after reflection just increases the potential for follow through. A quick stock of those pairs I am looking at for this event. EURUSD could extend its run above 1.30; but there is a good opportunity for a steeper retracement below 1.2750. EURJPY is a consistent one with a ceiling at 113.35. GBPUSD is stations between two very large levels at 1.55 and 1.5150. CADJPY is creating short-term technical levels to work with; but the long-term and gradual rising trendline is my main concern. And, my favorite potential breakout opportunity is USDCHF on a break from 1.0550/0400 congestion following a very steep and consistent decline. A correction is long overdue.

For my currently held positions, only two survive. The remaining half of my AUDCHF short was knocked out at breakeven this morning on a delayed follow up to AUDUSD’s impressive breakout yesterday. As for the other trades, they are still floating. The CHFJPY short is highly prone to the forthcoming event risk; which is to be expected. In hindsight; I should have reduced position size ahead of this event risk when I slipped back to breakeven; but we don’t trade in hindsight. My stop is set at 84.60. As for my USDJPY long, we are stuck between 87.50 and 86.50. A bearish break will just encourage me to add to the small position size I have. Since this is for a longer holding period; I’m not too concerned about this pair ahead of the Tests.

View full post on DailyFX Analyst Picks – Today’s Picks

The countdown is winding down. Tomorrow, we have the last gasp of big event risk that will define both growth expectations (with the UK 2Q GDP release) and more importantly, risk appetite trends (through the EU Stress Test Results). This is a round of events that will cover the entire market; so there are very few pairs that could be expected to avoid risk all together. For this reason, we should be looking to pairs that are setting up to substantial trends, breakouts or reversals rather than those that are already underway. Most important of all, it is important to avoid taking any freshly developed moves just before the release. While you can come out on the right side of the event risk; you could just as certainly be on the wrong side and see a position that was supposed to last for a little while and offer a sizable return force you out for a large loss almost immediately. Those are odds I like to avoid. That being said, I do modest exposure going into the release. It is relatively limited though; and I will remain flexible. Ultimately, we may not have an opportunity to take a new trade until Monday given the late release of the EU report; but it is better to wait a little bit for a good trade rather than force a bad one.

For my book, there are only three open. One trade is still in the money and has a stop set at breakeven. Currently, AUDCHF is struggling with very consistent resistance set at 0.9325 which gives good enough distance from my stop at 0.9415 to allow this to play out into a possible risk aversion trend. For my USDJPY long interest, I’m still in a small size position and I am looking for a much longer term and am therefore able to survive short-term volatility. That being said, a demand for a safe haven or yield will put the dollar in the driver’s seat regardless. Finally there is my CHFJPY short. My only remaining full-size position, this one lost all momentum after putting in for a trend channel break and reversal. A stop at 84.60 offers room to work and this pair is not highly sensitive to risk trends; but it is enough to push risk above what I like.

The real interest now comes in potential trades. There are plenty of them. EURUSD is at the top of this list with 1.30 closer now than it was at yesterday’s close. A truly positive outcome could overwhelm this level and there are few resistance levels above that. Alternatively, a reversal would be easy to accomplish after the past two months’ run. For a straightforward risk appetite outcome, I like EURJPY on a break of 113.25/50. GBPUSD is another pair that could go both ways. A rising trend channel can encourage continuation or offer momentum in a potential reversal. Another major to add to the list is USDCHF. An exaggerated range bottom at 1.04 is begging for resolution. A similar long-term support is found in GBPCHF at 1.5850. CADJPY has a rising trendline as a consistent floor. All of these are high potential opportunities. These will be our trades for next week.

View full post on DailyFX Analyst Picks – Today’s Picks