Risk Aversion Kicks In and the Dollar Tumbles, Fundamental Connections are Bending
For my positions, I have cut the NZDUSD long off at break even. The immediate lack of follow through on a breakout is leading me to further doubt the upside objective this could reasonable meet over time. Also, there is a descending trendline from the 11/16 swing high that is now working on its fourth test at 0.7250. Best to step back and reassess. As for long risk-based AUDCHF, a sharp tumble has put me back on track; but this is going to be a medium-term setup. Siding with its funding component and playing on the weak dollar, USDJPY is falling towards 87 and pushing my long deeper into the red. I won't add at the next even level as I want to keep it lower risk. Also, deviating from the general strong performance of the sterling elsewhere, GBPCHF has fallen back after the progress made in a medium-term reversal. I have set a stop at 1.5950.
As for potential setups, we are seeing some very attractive ones develop. AUDNZD is once again threatening a bearish break from its congestion of the past two months. A close below 1.2150/25 would be a good signal to start building a position. AUDCAD is questionable given its bearing; but I still consider it a potential short opportunity. CHFJPY is still holding to its rising trend channel; but 83 is my signal level just in case. For EURGBP, I am cautious ahead of the EU stress test results; but 0.84 and 0.83 are levels to watch for a potential technical move. Finally, CADJPY has retraced sharply and is once again within striking distance of a very high-profile rising trend channel. A break of this technical level would be an excellent entry effort.
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