It is remarkable that EURUSD isn't more volatile than what we have seen recently. Given the fundamental developments we have seen in just the past week; I would expect far more aggressive swings - and in fact, I am surprised the euro hasn't backed off sharply. The preoccupation is still with interest rate expectations which were leveraged with this morning's inflation data. However, the Irish Stress test results today along with Portugal's missing its deficit goal and Moody's warning that further downgrades are possible seem to be consistently pushed into the backdrop. These factors are not ignored; rather, they have been temporarily put on ice. Should the euro slip; all this pent up fundamental pressure will start unwinding rapidly.
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While we keep an eye on fundamentals to see when they will boil over, I am taking advantage of the EURJPY's follow through on its 116 break. I'm already 150 points in the money; so the first target is not far away at 118.20 (175 pips). USDJPY has also proved a buoyant pair; but we have come to some intermediate resistance. Waiting to see if we can overtake the multi-month descending trendline and double top at 83.25; my long is still small but in the money. Should we push this resistance; I'll add.
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The biggest setups for me at the moment are EURUSD and GBPUSD. Both look heavy - both for fundamental and technical reasons. Having run higher through the entire first quarter, EURUSD is burden by tremendous uncertainty that surrounds its financial health; but we need to see rate speculation to let up before the market capitulates and falls back to reality here. I'm looking for a technical entry on a channel reversal and a move back below 1.40; but from a fundamental perspective, we may need to move beyond that first hike next week. As for GBPUSD, we were looking for some consolidation after that sharp pullback; and it seems we have it. Now I'm ready to jump on a short should we move below 1.5850/75 with conviction.
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There are other pairs out there to follow along for trade potential as well. I like EURCHF as an alterternative EURUSD view above 1.3040; GBPCHF looks like a potential wedge formation into 1.48 resisance; EURGBP could play a medium-term channel reversal and CHFJPY is at the top of its very large channel once again around 90.50. Sticking with the majors, I still like AUDUSD on a reversal once momentum has been rebuffed. There are more pairs out there; but we'll update them should they actually move closer to a trade.
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