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  • IG Client Sentiment Update: Our data shows the vast majority of traders in USD/CAD are long at 76.24%, while traders in France 40 are at opposite extremes with 77.03%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/kWZjjvlIhL
  • $EURUSD now testing 1.2000, $USD still going https://t.co/kPh5m2y3OB https://t.co/TLqQsuBkJB
  • $USD still going, resistance nearing https://t.co/laG0JqjQVT https://t.co/Tak9nEizO2
  • Indices Update: As of 20:00, these are your best and worst performers based on the London trading schedule: France 40: 0.03% Germany 30: 0.02% US 500: 0.01% Wall Street: 0.00% FTSE 100: -0.22% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/TqNCKZXVgt
  • $Gold trying to hold this support, 's1' from the article earlier today $GC $GLD https://t.co/1lQ3c7CPkE https://t.co/NjIk6UPYlN
  • Fed's Powell: - The economy is on the mend after a long period of decline - We will keep a close eye on inflation to make sure our assumptions are correct
  • DAX is making its way higher, but the grinding wedge behavior is concerning CAC has been extremely impressive, but a dip could be around the bend. Get your #DAX market update from @PaulRobinsonFX here:https://t.co/rD3sYiWGk4 https://t.co/8PLSIwLlAl
  • Fed's Powell: - The problem we have with inflation has nothing to do with the central banking system - We will taper when we feel the economy has achieved substantial further progress
  • trendline dance $ES $SPX looks almost too clean with scope. almost 'easy' with enough hindsight. reality is this was a messy scenario and the short-term chart shows that (img 2) ES +36 as of now https://t.co/2qhaz0w6mB https://t.co/qIRIZ9DJ7B
  • Fed's Powell: - There is nothing in the framework that prevents us from achieving our objectives - We are not in a "behind the curve" scenario
Trades with an Eye on Risk

Trades with an Eye on Risk

John Kicklighter, Chief Strategist

I am concerned about the extraordinary low level of volatility we've seen over the past months. This complacency towards uncertainty moving forward hit an extreme this past week following the December NFPs. Under normal circumstances, the big payroll miss may have stayed the Fed's hand, but the momentum of the first Taper in December likely keeps the central bank on pace. That will create confusion amongst traders. In turn trends will be smothered before they can take root and there will be a looming threat to volatility.

My only exposure at the moment is a EURAUD short that I am carrying from Jan 3. I'm sure from 1.5230 with a wide stop at 1.5400. While the ECB decision has dampened the pressure on an imminent Euro selloff, the general bearing in this pair still looks good. If there is a swell in risk trends, it benefits the Aussie more than the euro. If risk aversion kicks in, the Aussie pairs have meaningfully diverged from the S&P 500. And, generally the pair is overbought on a technical basis.

Looking ahead to next week, there are plenty of setups that look good from a strictly technical position or given the fundamental bearings; but I need both elements to make for an active trade.

Should risk trends remain steady and the dollar flounder from last week's NFPs, I will look for AUDUSD to extend its tentative rebound beyond 0.9000.

The Aussie is undervalued for its yield and yield forecast in general, which presents other opportunities - I like GBPAUD in particular should it break a head-and-shoulders neckline below 1.8200.

Another pair not dependent on risk trends and encouraging for its extended yield outlook - something that has driven a six month trend - is a possible GBPUSD reversal. If the pair breaks 1.6250, it stands to trade deeper within a multi-month range.

The list of opportunities should risk aversion kick in is long. I like USDJPY extending this turn below near-term support at 103.75 - but only if it is supported by broader risk aversion such as a drop in equities.

Arguably the most exposed of the yen crosses is EURJPY. Fundamentally and technically speaking this pair has run far beyond its reasonable bounds. I'll look for a drop below 141 on general risk aversion, but it is unlikely I would take both this and the USDJPY at the same time. Between the two, this is my preference.

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

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