Bailout resolution hopes are initially seeing a stronger dollar tonight, as discussed in the last update. In the greater scheme, looking for continued dollar weakness in light of these deteriorating conditions and an expected increase in commodity prices; so ultimately, my strategy remains unchanged. This initial reaction is to be seen as more of an opportunity than anything else, as there are now more levels to play off of shorter term for some core short USD positions.
After sending out the last update, we immediately saw USD/JPY and related carry pairs drop off during the session, only to gain strength again during the US session. Of the levels I posted in the last update, USD/JPY is falling from 107.00 for about 55 pips. Using 106.30 would have only provided about 15 pips before the market took it out in early trading tonight. Using the EJ 156.88 level would have worked out the best; the market nailed it and is coming off of it for about 250 pips. As I mentioned, I removed the EUR/USD long due to consolidation, and its hovering above the 382 retracement right now at 1.4500. At this point, I’m simply looking for some better positioning into some more favorable reactionary levels, but there’s now an opening gap from the weekend that needs to get closed. Look for EUR to do this sooner than later and head up to 1.4600 area rather soon.
I posted a couple new trades tonight in light of this macro view, so hopefully see some of these hit sooner than later. The EUR long and CHF short have been chosen based on the most obvious areas for reversal, though it is unlikely that both will occur based on where they are. In the meantime we also have GBP’s 618 and 762 retracement lining up almost perfectly with key support areas, the core of this strategy and pretty much exactly what we look for as a whole.
Expecting gold to take off at some point this week into higher territory; oil might take a little more time. Again, we’re looking for a break of the 111-112 area on crude before we see any bigger moves to the upside. Because of the overall weaker outlook on oil, we might see EUR/USD and others decline past their 50% marks before gaining strength again. Regardless, there are some solid areas to play off of overall. The USD index still shows a massive gap down to 74.75 that has yet to be filled, and I’m expecting it will in the near future. As I write the current price is 77.13.
In lieu of posting levels tonight I’m just going to add the trades previously mentioned and post some charts; again, look for confluence of fib retracements and support/resistance levels. There are a good number of them out there which are pretty easy to spot at this point.I’m in the process of setting up a new email address for fielding any questions but for the meantime, please feel free to post away in the thread and as always, I’ll do my best to get around to them as soon as possible. Thanks all and good trading, Steve
