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Sentiment Building, Technicals Breaking and Yet Momentum Still Questionable

Sentiment Building, Technicals Breaking and Yet Momentum Still Questionable

2010-07-14 15:30:00
John Kicklighter, Chief Currency Strategist
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Investor confidence continues to develop; but the foundation of support this recovery is basing itself on is far too unstable. Troubles in US economic data, European financial readings, Chinese efforts to prevent an uncontrollable market slump suggest there is plenty of risk to be concerned over. However, regardless of how dire the outlook may be, the speculative interests of the crowd are what define a successful trade. Therefore, I will defer from short-term trades that fight this current and not take any lasting or large trades that counter my personal fundamental bearing. Reconciling these rules to my current trades; both my AUDCHF short and USDJPY long meet my long-term forecasts and are set for a lasting time frame. For the former, the stop on the remaining half of my position (the first half was taken off for profit some time ago) holds at my breakeven point at 0.9415. USDJPY is set for the long haul; so I wait am waiting for the Fib at 89 to give way. Dropped from my book, my GBPUSD short was stopped out at 1.2565 this morning. The channel reversal did not ultimately grow legs; and scheduled event risk coupled with interest rate expectations has produced volatility. Taking the cable's place, I have taken a long GBPCHF position at 1.6080. This is another trend reversal opportunity; but this time, I fit the prevailing trend for risk and the weak outlook for the franc is encouraging. Another new one is NZDUSD. A break from congestion coincides with a long-term technical pattern break, encouraging me to go long on a small position at 0.7210 with a stop at 0.7150. As for potential setups, I'm seeing a lot. I'm particularly interested in a meaningful USDCHF reversal that depends relatively little on risk appetite trends. A break above 1.07/0675 would signal a push from congestion and reversal progress. Another reversal opportunity that goes outside the normal bounds for risk appetite is CHFJPY. Here, I'm looking at 83 as the signal point. Perhaps interesting alongside further price developments is EURGBP. Along similar lines, I'm waiting for AUDCAD and AUDNZD to develop before taking a stance (but I'm liking the short-side on both).

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