Waiting to See if European Financials and Risk Carry Trends Before G20

We have seen some pretty remarkable volatility since the FOMC's decision last week; and within that period, the dollar has put up a commendable advance. That being said, I am still very skeptical of the currency's ability to sustain a favorable trend. At this point, the greenback is burning off excess speculative interest - after the two months of consistent selling, it isn't too much of a stretch to suggest that the market is one sided. How much pent up speculative positioning needs to be unwound is a prominent question mark. There could be a wave of profit taking and speculative buying ahead of us. Then again, it could just be a modest correction to get back to 'fair value' before the market starts pricing in the troubles for the dollar a little later down the road. At the moment, it is up in the air. Placing trades on this is dangerous. Therefore, I will remain small, flexible and maintain close targets. I could change my outlook though should a bigger driver accelerate the move or generate momentum in a reversal. What has the necessary influence for such a drive: risk appetite trends, a revived stimulus forecast, financial crisis rumors or a definitive G20 policy.

Waiting for a bigger trend to confirm itself (technically and fundamentally), I am keeping my position few and small. That said, there are a number of potentials. For my live trades, I am sticking with my reduced USDJPY long. We are back up to 82; and a break here will encourage me to add to the position (but without a good fundamental backdrop for the move; I will take a more cautious build). My other live position is the CADJPY long I took on a pullback to 80.80. With a stop of 79.80 and first target of 81.80; a profit or stop should be turned over relatively quickly. Another position that I was close to taking was a short EURUSD on a break of a five week rising trendline at 1.3820; but I would rather wait for a more meaningful trend reversal below 1.37. That would necessarily require a more hearty fundamental driver.

Besides EURUSD, a more active potential is my USDCAD setup. Having held up that long-term rising trendline; it looks good for a true stop and reversal. I'm looking for a half size positon with a retest of 0.9990 (with a 60 point stop and first target). If we don't get back there within the next 36 hours though, I will cancel the order. As an offset to the Canadian dollar; I also have an order to short a reduced EURCAD position at 1.3940 with a 140 point first target and stop. This would be a pullback to former support to fresh resistance on a break of 1.3940. With a shorter time frame than my EURUSD view; I am also looking at AUDUSD as a dollar long setup. A drop below parity will encourage me into a smaller position size with an initial stop and target of 100 points; but that could get altered depending on volatility and fundamental developments.