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Daily Observations: May 09, 2013

By , Currency Strategist
09 May 2013 15:10 GMT

Current Positions:

- Flat

Pending Positions:

- Short AUD/USD from 1.0150, Stop at 1.0330 (-180-pips), Target 1 at 1.0105 (+50-pips), Target 2 at 0.9980 (+170-pips), Target 3 at 0.9900 (+250-pips), Target 4 at 0.9860 (+290-pips) [final reward:risk 1.61]

- Long USDJPY from 99.95, Stop at 98.60 (-135-pips), Target 1 at 100.65 (+70-pips), Target 2 at 102.00 (+205-pips) [final reward:risk 1.52]

Typical Time Frame: 1-day to 1-week

Despite a much stronger than expected April Australian labor market reading, the AUDUSD finds itself trading back under 1.0200 and facing the daunting task of nullifying a developing daily Inverted Hammer, typically a bearish signal (bears retake lost momentum from bulls to bring prices back to or below the opening level after earlier gains). Although the descending trendline off of the April 11 and May 3 highs at 1.0250 would have presented the best opportunity to sell the pair, I chose to stick on the sidelines given the reversal in near-term fundamentals.

However, with the labor market report's gains wiped out at this point, it seems that my original plan to short the AUDUSD once price breaks the three-day base formed above 1.0150 remains in play. I'm watching this develop, and any positive news out of the US is likely to be the accelerant for a move lower. I'm watching the USD Advance Retail Sales (APR) report on Monday, even though it is forecasted to be a disappointment.

Beating the same drum from yesterday: "The USDJPY hasn't budged the past several weeks since the initial test of 100.00, and I think that a break spurred by optimism in the US will be necessary. Otherwise, because the BoJ's near-term policy decisions are priced in, there are few irons on that fire that could weaken the Yen immediately (aside from verbal intervention). A break of 100.00, should it occur, is likely to result in a quick run higher towards 102.00 as a significant number stops are broken. "

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As always, any other trade ideas and general macroeconomic musings can be found in the DailyFX Real Time News feed, or by following me on Stocktwits/Twitter @CVecchioFX.

I also host a weekly Live Trading Q&A in DailyFX Plus, on Tuesdays at 07:15 EST / 12:15 GMT, in which I delve deeper into my positions and thought processes behind my analyses.

--- Written by Christopher Vecchio, Currency Analyst

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09 May 2013 15:10 GMT