Christopher Vecchio's Analyst Pick
Yesterday here and on the Real Time Newsfeed I was discussing ideal levels to get short the Australian Dollar. My idea was that with the Bank of Japan meeting Tuesday night, it was likely we saw some Yen weakness ahead of the policymeeting and if no new stimulus measures were announced, that we could proceed with getting long JPY against AUD.
I noted 84.60 as my ideal level to get short at yesterday. Chinese trade data helped this out - the rebound in exports was strong enough to help drive the commodity currencies higher, bringing AUDJPY up to my target short. After the BOJ's decision to hold off on any further stimulus for the time being, my AUDJPY short was entered and filled at 84.45.
I now look towards the 81.50 level to complete the measured move on the Head & Shoulders formation on the daily chart, with 82.80 as my next level of interim support. Right now, and for the time being until noted otherwise, I prefer selling the AUD during risk-averse environments and buying the NZD during risk-positive environments.
I'll be watching Federal Reserve policymakers and news out of China to guide my trades - these Euro-zone issues aren't going to be solved by another LTRO because liquidity isn't the problem right now. Solvency and credibility are. If Bernanke, Yellen, or Dudley hint at QE3 (arguably the three most important voting members of the FOMC) and/or the People's Bank of China cuts its reserve-requirement ratio (RRR), I will look to buy risk.
Any other trade ideas and general macroeconomic musings can be found in the Real Time Newsfeed, or by following me on twitter @CVecchioFX
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