FX Futures Edge Nov 7

The forex markets are trading in rather strange manner, with the EUR/JPY/GBP/CHF all trading higher against the US dollar, whereas the commodity currencies of AUD/CAD/NZD are all trading lower. We find this rather curious to be sure, and we cannot fathom but one situation where this would occur and it is with the expectation that market participants believe the Greek+Italian drama is coming to some sort of short-term resolution…in the least. We could go on repeated about the various scenarios that will play out, but the fact of the matter is that it is changing on a minute-by-minute and hour-by-hour basis. Our duty will be to follow the EUR and her technicals, for they shall impart what the masses believe about any type of agreement or disagreement as the case may be. We’ve wanted to be short EUR/USD and against the crosses for a number of weeks, but haven’t had the high-confidence move necessary to do so.

With this said, we are long the AUD/USD, with our positions trading at roughly where we entered into it last week. We don’t have any intention on adding to the position yet, but continue to think selling either EUR or CHG against it makes better sense at this point. If we had to venture either the EUR or CHF, then we would obviously think EUR would be the proper one given the challenges in Europe. But CHF’s technical pattern is more conductive to be long the AUD/CHF rather than short the EUR/AUD cross. So, today with the CHG gaining on the USD…we’ll take our long AUD position and make it a long AUD/CHF position by selling CHG against it.

LONG: Aussie Dollar — 1 UNIT: Last Thurday’s key reversal from major support levels at the 80-dema/200-dema confluence was sufficient to warrant a long position; hence on 11/4 we recommended a long position at 1.0364 (CME: 1.0315). Now, we shall add a short CHF position to this to make it a long AUD/CHF cross.

SHORT: Swiss Dollar — 1 Unit: Yesterday’s weakness coupled with today’s strength against the USD is sufficienct in combination with the AUD/CHF cross pattern technicals to warrant a short CHF position. Therefore, we recommend shorting CHF at .8931. (CME: 1.2010). This brings the AUD/CHF cross in at .9256 and the CME spread in at -16.75.