Yen Strength Helps US Dollar Weakness

The BoJ kept rates on hold overnight, which buoyed the Yen initially and provided some weakness in the Aussie. The U.K. saw some relatively good Industrial Production numbers and mixed manufacturing. The euro has primarily helped by unwinding Emerging Markets currencies and the U.S. Dollar weakness, primarily driven through USD/JPY flows.

We have been talking for a while about holding Long positions and looking for a short, noting that we are still holding long while looking for this ever illusive turning point. Strategy has been playing out well, the primary reason being the number of traders positioning themselves short in the market. Each recent move higher seems to invoke a spur of selling in most currencies.

Whilst picking tops and bottoms can be a fun pastime, it isn't normally as lucrative as jumping on a trend and following it. It may be boring but it works for the most part.

Latest moves on Tuesday again saw further selling in most pairs, including some selling in the Aussie, much to our relief. For markets to really make a move lower we need to see further closure of short positions (stops or reversals), or a more balanced order book.

EUR/USD
While we are still holding euro long, we saw a recent spike over the past two days that could have lead to some topping formations in the order book in prep for a reversal. However, Tuesday's moves drew us slightly further from this conclusion.
We continue to hold long looking for the next short, but with traders focusing on shorts a continuation of correction and push higher for further shorts could see this pair test the 1.3400 mark.

The daily chart sits in our key resistance zone, but with Ichi Cloud and Line Cross now pointing higher, we could see the pair test and correct around these levels only to push higher still. A clean switch in bias in most traders is likely to see this pair push lower, but while the majority continues to like shorts we still hold longs.


GBP/USD
The pound followed the euro relatively closely, as primary price action is driven by the U.S. Dollar.
Like the euro, the Pound sat again within a key resistance zone on the Daily Charts.


Again like the euro, the Pound also has been attracting far more sellers than buyers recently. While this trend continues we expect the pair to push higher still.
The euro is closer to its extreme levels. The pound does have slightly more room in the order book.



AUD/USD
The aussie continues its high dose steroid run, still chopping around. Key with the aussie is the aggressive stance of many traders remaining long with this pair. Although it does need to correct, traders are far too biased in one direction.
We started to see a clear out of some longs on the dip lower on Tuesday, which allowed a spike higher in the afternoon. However, this needs to continue for the move higher to stand any chance - otherwise we will simply drop lower again.


The daily chart does give a really nice Pin Bar rejection of lower prices, but this does need some follow through in the order book for it to stand any chance. Recent strong pins have been followed by moves lower.
That said, nice short term plays using the Stochastic cross method and settings in chart above are playing out well; also worth checking out are the AUD/NZD longs.

USD/CHF
The pair dropped today and seems in a similar conundrum to the aussie in that it looks like it wants to correct higher on aggressive moves lower. However, a one sided order book (although not as much as the Aussie), needs to clear before it stands a chance.

The daily chart shows some key support levels. A break lower could see a test initially of the 0.9175 level.