The Currency Market Acclimates Itself to Exogenous Event Risk as Speculative Interest Fills Out

Lo and behold, the building fear surrounding Europe's financials has dissipated. Should we be surprised? No. The financial media cast its gaze to the already pained region; and the market responsed. However, speculators have a short attention span. Worries that Greece is obscurring the extent of its debt, that the Stress Test was manipulated and the Mediterranean governments will be forced to tap the EU fund will all come back to bite the euro. However, it will take time for these problems to take root. In the meantime, traders will be distracted by short-term data and the ever pressing debate over whether the currency is oversold or overbought in the very short-term. What does this mean outside the euro - there is little imminent threat of a quick spreading crisis.

With today's bounce in risk appetite, I am put back on my haunches and looking for shorter term setups (as developing new trends from this position would be highly unlikely). This isn't necessarily a bad thing though. Having lowered my time frame perspective, I have come across a lot of short-term setups that are looking ripe for potential. The two most enticing pairs are GBPCHF and GBPAUD. The former has a very consistent descending trend channel on the 240 minute chart and is at the top of that pattern. Breakout or reversal; it has good potential. For the former, I would look for a close on this shortened time frame above 1.57. As for GBPAUD, I would be more interested in an upside break after testing and holding larger support around 1.6750. My 'go' level would be 1.69. Other intesting setups include a long-term descending trendline on CADJPY (a break of which would be above 82), the soon-to-fall congestion on AUDCAD (0.96/9450) and the flimsy double top on AUDUSD at 0.92.

If you noticed, I put EURUSD under both short and pending. I still have my short exposure (half size); but I'm considering building it up if we have a meaningful technical development. A short-term rising trendline and 100-day SMA coincide at 1.2660. As for GBPUSD, I have grown very wary of this pair. It breached a sloppy descending trendline of highs today; but any rebuff to progress is troubling when it is still scrambling for direction. If it doesn't get going soon, I'll just cut out and reevaluate. And, then there is USDJPY. I think it could still easily push further down to 80; but considering my small current position size and long-term outlook, that would only encourage me to build the trade. If it breaks back above 85/86, I would similar be enticed.