Interesting day on both fundamentals and price action today.
The real news of the day was Boehner storming out of press conference after a minute following the earlier White House statement slamming his Plan B for the fiscal cliff.
Key issue seems to be who is going to take the tax hike, people earning over a million as Boehner wants or people earning over $250k as the White House wants.
The key to all of this is the certainty the markets felt yesterday about a deal on the fiscal cliff now seems a long time ago.
That concern resulted in risk-off trading at some rather key levels.
If that wasn't enough, Spain was on the wires this morning saying it may consider a bailout request in the future and the Greek finance minister said that an exit from the Euro zone was still possible.
Key for us, though, was the rejection of key levels in the markets today with strong signals.
Remember we are in holiday trade mode, therefore act accordingly.
EUR/USD
Failed test of the 1.33 handle seemed a step too far today.
There is an option expiry tomorrow at 1.3250 and 1.3300 both being key levels to watch for, however strong resistance off of a key level plays to our original strategy; I therefore like this for a retracement off of this level.
That said I am concerned that we are two days away from holiday season and we have had some incredible strength in risk recently.
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GBP/USD
As highlighted in the strategy presented yesterday a strong test and rejection of upper resistance could result in a move lower.
Again similar concerns to the Euro position but this does offer good risk reward options, especially with stops above the strong resistance level.
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AUD/USD
Aussie struggled again today.
I maintain my outlook that this pair is over valued and prefer to look for good short entry signals, reality being the breaks lower through support today would have offered them.
Instead I personally favour a clear short signal given this pairs recent chop; however breakout trading to the downside in this pair does offer good risk reward.
I will now look for any further retracements to offer short positions or a strong test of support to offer a potential long entry.
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USD/JPY
Another push higher on further Yen weakness.
Feels like this pair is really testing some limits now, a good one to keep an eye on (also watch for some of the other yen pairs I have highlighted)
Strategy wise I like the idea of playing breakouts to the downside on lower timeframes or looking for a final rejection of a move higher - we might be waiting until the new year for this though.
Here's my wider reasoning and the alarm bells ringing in my head.
- Rally has been rather aggressive without any strong pull backs - unusual but not unheard of with fundamental and technical drivers
- Some strong Divergence patterns forming on RSI and Stochastics - high highs in price but low highs in RSI and/or Stochastics tends to mean a change of direction or that the rally is losing pace.
- COT is at some significant extremes and if I look at the past history on the Yen it tends to point to a strong move lower in the near term
- Given the extended rally and large numbers long from much lower levels we could see some profit taking into year end
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USD/JPY: Weekly" width="500" height="449">GBP/JPY And EUR/JPY
Worth keeping an eye on the various yen crosses they look to be setting up nicely for reversals.
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USD/CHF
An alternative to the EURUSD perhaps?
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EUR/GBP
Trade not completely related to the risk on / risk off movement but a rejection of the weekly high could offer retracements back to the 200 day moving average.
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USD/NOK
Given the Norwegian Central Bank Governor was on the wires today highlighting a strong NOK would call for a rate cut and therefore devalue the NOK, this could offer a nice opportunity.
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