Forex Strategy: Stay Short EUR/SEK and GBP/USD
I sold EURSEK at 8.7315 on December 19 expecting Risksbank to keep rates on hold while the ECB begins easing in 2013 as recession lingers while falling bond yields mark policy transmission normalization. I added to the position last week at 8.6409 as the corrective rebound launched in early January faltered and prices turned lower anew. I am initially aiming for the 8.4994-8.5054 area from here. A stop-loss on the cumulative position has been set to trigger on a daily close above 8.6942.
I have also sold GBPUSD at 1.5662. Prices put in a bullish Morning Star candlestick pattern in a support cluster marked by two alternative rising trend linesset from mid-January 2009, based against the May 20 2010 low and the other against the June 1 2012 low. The setup warns of a reversal higher, with confirmation to be seen on a break downward-sloping barrier set from the January 2 high (now at 1.5771). Such a scenario would expose 1.5877 as the next upside objective. I will continue to hold short for now but would consider closing the trade if the break of 1.5771 is confirmed on a daily-closing basis. A stop-loss will be activated on a daily close above 1.5878.
--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com
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