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Respecting the Lean on Risk but Lack of Follow Through

Respecting the Lean on Risk but Lack of Follow Through

John Kicklighter, Chief Strategist

This past Friday left us with on the edge of our seats. With the US equity indexes closing above meaningful resistance (and dragging AUDUSD with it), we have a flashing sign that risk is pushing further. Yet, where is the immediate follow through. We need momentum and conviction at these heights, and we have yet to find it. I'm not calling an immediate false break and reversal, but this that is a risk we can't ignore.


My take on the lacking follow through in the risk-positive drive and the European currencies' catch-up rally from this morning led me to a short-term congestion based approach for GBPUSD. A short from 1.5825 (stop: 1.5865, T1: 1.5765), is a move that fits congestion and natural correction of the morning fireworks before the expected BoE stimulus pump on Thursday (selling the rumor). There is opportunity with EURUSD but I'll wait for a break of the 1.3200 to 1.3030 congestion. Of the three, I like USDCHF most (bullish bias), but that is definitely requires confirmation above 0.9250.


I have risk interests as well. NZDUSD is developing a possible H&S on the 60min chart with a sloping floor currently near 0.8295.AUDUSD can offer the same, but it is prudent to only take one. Perhaps the RBA can make the decision for me with a bearish reaction.


My too, longer-term holdings are still in place: long USDJPY and EURCHF. I'm willing to hold the former with a term up to a few months and the latter for weeks. Intervention risk is lower to start this week with the franc and yen somewhat off highs.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.