The risk of an immediate, global financial crisis has eased substantially with Greece finding another temporary carry over. My longer-term view is that this country won't be able to avoid a strategic default in the end; but the market has proven that it doesn't want to look that far ahead. Therefore, we are trading with a short-term view in mind; and the relief rally is a good sense of what the general sentiment behind the market is. That said, the broader balance of risk trends does not just rest with Europe - there is the US debt limit, slowing of global growth, Chinese credit issues and a general strain in liqudity to deal with. We have to remain vigilant on these issues and more importantly, how the market reacts to them.
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In the meantime, we have seen a remarkable jump in the euro and risk-based (higher yield) positioning. That has cleared out my small NZDUSD short and (smaller) AUDUSD short. In reviewing these two setups, the setup for AUDUSD was reasonable. Alternatively, I sat on kiwi short for too long. A time limit was needed for that setup and it should ahve been taken off when momentum failed to develop over a few days. I still like AUDUSD on a break of 1.04; and if I weren't out on Friday, the 1.0750 level could also provide something against the backdrop of the drop in liquidity as the US holiday period saps liquidity. NZDUSD will be a consideration when 0.8125 and 0.7975 give way.
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As for the alternative view setups I was looking at (AUDJPY and CADJPY long on their respective wedge breakouts), they were never entered. My hesitance was due to a desire for a better entry price; but that was a poor excuse for not taking on some exposure. Both are significantly higher now. The most remarkable setup I have overlooked though was the EURCHF setup. I was looking at that hourly, inverse-head-and-shoulders pattern; but didn't place orders. That was bad form.
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For the rest of the week, we are riding on the back of strong momentum; but the holiday weekend is coming up for the US. That means we are likely to see a natural correction. Though it may not be very deep for the S&P 500 and EURUSD; for a pair like GBPUSD which doesn't have a strong yield or risk reflection to base its run on, the pullback can turn to a genuine reversal. I have taken a small (I'll continue to take small positions on swing positions until real trends evolve) short from 1.6065 with a stop at 1.6165, first target at 1.5965 and tentative second objective at 1.5764.
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Other pairs I'm keeping an eye on are EURUSD, USDCHF, AUDCAD, NZDUSD, EURNZD and GBPJPY. More on those when they give something active.
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