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Awaiting Risk, Euro Crisis, Yen Repatriation Issues to Clear Up to Get Serious Trends

Awaiting Risk, Euro Crisis, Yen Repatriation Issues to Clear Up to Get Serious Trends

2012-03-29 00:07:00
John Kicklighter, Chief Currency Strategist
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There is a lot of potential out there, but these setups doesn't carry the kind of probabilities that would encourage me to take additional risk with positions that have yet to confirm their intentions. There are a number of things that are holding attractive setups back: risk trends, yen repatriation into Japan's fiscal year end and a range of scheduled European event risk on Friday.

...

In the meantime, I have a few trades on (mostly in smaller size, awaiting confirmation). The most recent addition is the GBPUSD short from yesterday at 1.5970. The drop back from 1.6000 has played out, but follow through seems to have stalled out at 1.5850. I was perhaps greedy not to take half off at profit in that area (well beyond a 1:1 risk/reward), but I have nevertheless trailed the stop to break even plus 10.

...

The cable is risk sensitive. other exposure in that category is my CADJPY (83.45)short, NZDCAD (0.8175) short and EURNZD (1.6255) long. The two kiwi sensitive pairs have struggled in follow through because the RBNZ rate outlook has held consistently positive (and its strong compared to its global counterparts).

...

The EURNZD has another consideration - much like the EURUSD or EURJPY which I would like if I thought it likely that they could break 1.3300 and 110 respectively (though I don't think they can). Though the outcome of the event risk on Friday (Ireland looking deferment, Spain releasing its budget, the EU discussing an increase in the ESM) seems reasonably straightforward, it could also sideline the euro in the lead up.

...

I'm also a fan of other yen crosses. I am waiting to get back in a long USDJPY after its retracement runs out of steam. However, with fiscal year end and the threat of a risk plunge so high, I don't don't feel comfortable diving yet. If risk trends do want to collapse, there are head-and-shoulders patterns for AUDJPY and NZDJPY that we should keep an eye on.

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