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A Lot of Trading POtential but Patience Required

A Lot of Trading POtential but Patience Required

John Kicklighter, Chief Strategist

There is so much potential out there with technical patterns suggesting short-term breakouts are ready to catalyze into something meaningful if only we can get something to spark the move. It's in these kind of situations where I need to steady my hand and not jump too eagerly at early movers. There are larger, underlying drivers that carry trends (risk trends, stimulus expectations, rate shifts, etc), and if there isn't a primary driver behind a push like this, it is likely that the stand out move will likely be knocked back into line.

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For this reason, I'm currently in only one trade: my EURCHF long. To get to this position, I decided to cut my EURNZD long at break even and my CADJPY long for plus 60 pips. These setups look good, but they haven't performed in the time frame I have laid out. More concerning is the fact that they have developed into further congestion patterns, which is another technical burden.

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There are still plenty of impressive looking setups out there now, but they require progress to drive follow through and make for an active trade. The yen crosses are perhaps the best looking collective. I traded GBPJPY early Monday in the Asian session from 132.90 and took the exposure off when it made 125 on the first half and 130 on the second half (simply no follow through) when I saw the EURJPY was stalling at support. There is heavy support below for EURJPY, GBPJPY, AUDJPY, CADJPY, NZDJPY, CHFJPY. A push can move them all and thereby offer a move with follow through. The best scenario would be if a general risk aversion move catalyzed the move.

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Outside of the yen crosses, most other sensitive pairs are still beholden to the positive risk scenario. AUDUSD is working its way closer to its descending channel support, NZDUSD is just off its 0.8275 range high, EURUSD is in a rising channel facing 1.3375, GBPUSD is above 1.60 and USDCAD is at the bottom of a symmetrical wedge. Perhaps the FOMC minutes can offer resolution and some active trades...

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

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