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The currency market is weary from reacting to breakouts (i.e. Friday) only to have the markets reverse. It has now been six months of choppy trading with declining volatility – most measures are at an all-time and currency managers/traders are challenged.
Will the sideways and difficult trading continue into the end of the year as it has during the past two, or will reduction of positions as the end of the year approaches mean we will finally see a trend?
Our thoughts: while trading has been back and forth for the last couple of months, we are optimistic that a trend/higher volatility will develop in the last 2 months of the year. Clients may consider reducing lot size on a per trade basis until conditions do improve as a way to insulate against choppy conditions.
EUR/CHF: We are looking to establish a long in EUR/CHF if it trades down to the 1.5886 level with a 25 pip stop-loss. Let's see what happens when the markets open later this afternoon before we place the order with the dealer.
EUR/JPY: EUR/JPY continues to be an interest on the short-side. As mentioned however, if the appetite for carry trades continues, this cross will not remain weak for long. As a result, clients wishing to play this one to the short side may consider a wider stop-loss with a reduced lot size.
The 149.75-80 level did hold in late New York trading and managed to close slightly lower (149.67). The key breaks in support at 149.50 & 149.30 will be the expected catalysts for lower levels. We still see 150.10 and 150.50 as the logical stop-loss levels.
AUD/USD: There appears to be no signs
of risk aversion waning (i.e. continued carry trades) despite a consistent push
higher in AUD/USD to short-term overbought levels. As such, .7650 seems likely
to hold on any pull-backs and would likely offer a decent long entry with a
stop-loss below .7585
Upside targets are seen at .7710 &
.7750-75
EUR/USD: Look for 1.2770-80 to be the key resistance/closing levels that will determine if the current move higher in EUR/USD can continue into mid-November. Conversely, 1.2645, and to a lesser extent, 1.2715, should provide support.
NZD/USD: Continued strength on Friday suggests that kiwi is still in play and will likely move higher in the days to come. Minor pull-backs towards .6595 are possible, but this level should hold, and prices could track towards .6670 & .6725 by weeks end.
Short-Term Reversal Levels (STRL’s):
valid through 10/30 at 21:00 GMT
As always, feel free to send me your comments and questions.
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Dave Floyd is a professional FX and stock trader based in Bend, OR and the President of Aspen Trading Group. Dave's approach to FX combines technical and fundamental analysis that results in trades that fall into the swing trading time frame of several hours to several days. For a free trial to Dave Floyd's Daily Forex Alerts click here or call 888.484.8220 ext. 1.
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