Risk trades are back after US GDP. For how long?

US GDP coming way better than expected at 3.5% brought back the risk trades. Long gone are times when better than expected US news meant stronger USD. In today's environment strong US data means recession is over, the economic patient is cured, we all sell the USD and live happily forever after. Well, let's see how tomorrows PMI numbers come out. If they disappoint, we could very easily lose today's gains in equities and commodities as risk aversion would likely come back.

As said before, USD was sold across the board (except against JPY of course). Gold bounced of two trendlines support and formed a nice bullish engulfing pattern. Bias would turn down only in case of a break of 1030.

The USD index broke a very important downward sloping trendline few days ago and came down to test it. In an ideal world it would bounce off this "resistance turned to support". If we hold 75.70 than the bias is still up.

I expect risk trades to continue (sell USD, buy equities and commodities)to continue through Asia and probably London session as well. However, if Chicago PMI disappoints than we could see a reversal. In EURUSD this idea translates to up move to 4920 (61.8% of move from 5060 to 4680) and then back down to 4700 area.

There is also an interesting set up in GBPUSD. Daily chart shows two resistance points: 6680 and 6745. We can expect a strong selling pressure there. However, if this level gives way, there is really no resistance above it and price should easily reach 1.7050 level (previous high)

USD collapsing, major psychological levels within reach

USD continues to collapse against virtually every currency. CHF parity first mentioned on 10/8 now seems even more likely as we trade around 1.0125. USDCAD in a strong downtrend is now trading just above 1.02 (150 points from a level where I first mentioned going short on Monday) is probably on the way to parity as well. EURUSD in now only a whisker from a major 1.5 level and now it would be almost impolite not to reach that level. The aussie continues its ascend as expected reaching a high of 92. Traders who followed my advice from last week to continue buying AUDUSD should have handsome profits by now.

Story of the day is Dow reaching 10000 and more importantly closing above this level at 10015. I still think that retracement (and probably a large one) will happen. But for now it does not make sense to fight the bullish trend.

USD index looks very poor again (or still?) and is closing very weak. Currently trading at candle's low around 75.27. The only hope now lies in a trendline support that comes around 75.15. Maybe will touch it when EURUSD breaks 1.50?

Gold made only marginally higher high but held yesterdays low and is closing reasonably strong. Oil which I mentioned last that there was a possibility of it breaking out of the recent range did break up higher and is on the way to touch 76.

When it comes to trading, my strategy does not change for now. Continue to sell USD on strength. Retracement is coming but so far there is no indication as to when it will come. Before I see any turns (hammers or at least doji, breaks of trendline supports/resistances or close below previous days lows/highs it doesn't make sense to fight the trend. Remember "trend is your friend". Keep your stops tight and be agressive with taking profits. Good trades.

USDCAD breaks support, downside momentum increases

As expected, the USD continues to be sold on rallies across the board (with the exception of GBP). One of the largest moves was seen against the Canadian dollar.

The CAD appreciated significantly after last Friday’s great labor report. Unemployment decreased greatly from 8.7% to 8.4% and number of jobs increased by 30.6 thousand vs. exp. 4.9 thousand confirming improving fundamentals.

Selling pressure was sufficient to break a trendline support at around 1.0450 and reached a low 1.0409. After a short period of consolidation the pair broke below the psychologically important 1.04 level and reached 1.0317 today. Daily chart shows a strong momentum to the downside and unless we break up and close around 1.04 (in which case the price would form a hammer formation) today’s close will be another huge bearish candle pointing to additional USDCAD weakness (CAD strength).

Placing a sell stop below today’s low at around 1.0310 with 1.0350 stop and 1.0240 limit looks like a good strategy to take advantage of the strong bearish momentum.

Further AUD strength and USD weakness anticipated

The Aussie has behaved exactly as anticipated. AUD appreciated across the board reaching a high of 9090 against the buck (from 8918 in the last post when going long was advised). Last night's labor reports underpinned the aussie as unemployment dropped and the number of jobs created increased as well. The Australian economy is getting a firmer footing and if we continue to see positive news releases we may very well get another rate hike before the year end. The yield differential between the AUD and the rest of the world (especially the USD) will widen further and this should propel the AUD higher. The second recommendation to buy EURCHF at 5100 also worked out very nicely as we are trading at around 5180.

The greenback was sold across the board today and the USD index looks really poor. The price broke below all major support levels and unless we trade back above 76.50 the bias is clearly down. The USD is collapsing practically against all majors. All charts have important moving averages (10, 50, 100 or even 200 hour) stacked in a "correct" order pointing to strong momentum and further USD losses ahead. CHF parity anyone?

Spot gold reached higher levels again and one must ask whether oil will follow and break out of the relatively narrow range where is has been stuck for many months now. Again, if oil breaks out higher, the USD will continue its rapid decline.

As far as trading: do not fight the trend (at least not yet...) and do not buy the USD yet. The time may come but not now. So continue to sell USD on strength (test of 20 ema on hourly chart) preferably against fundamentally stronger currencies like the AUD.

Aussie flies as RBA unexpectedly increases cash rate by 0.25% bp.

The aussie is boosted across the board as The Reserve Bank of Australia unexpectedly increased rates from 3.0% to 3.25%. The RBA is the first central bank that started to tighten its monetary policy lifting the cash rate from it's 49 years low. What central bank is next?

Against the greenback the aussie advanced from 8754 to 8918 (for now). Against the sterling, the aussie also appreciated considerably dragging the GBPAUD pair from 1.8219 to 1.7861 (current lows). This move was exacerbated by much worse than expected GBP manufacturing production coming at -1.9% vs exp. +0.4%. As a consequence GBP is a relative strength loser.

USD index broke below it's uptrend support around 76.55 area and reached a low of 76.15. If 76.00 gives way another round of USD selling will be upon us. The talk of meetings among Arab states, China, Russia and France to stop using USD for oil trading certainly did not help the buck.

When it comes to trading, we can expect few more sessions of AUD strength, so continue to buy on pullbacks. EURCHF is close to 1.51 again so buying with expectation of SNB intervention, or at least a talk of intervention that would push EURCHF up makes sense.

USD strength to continue. At least till NFP

Buying the greenback on pullbacks have proven to be successful strategy over the past few days. This trend is likely to continue at least until we get new labor market data. USD index quite nicely held the trendline, did not break yesterday's low and bounced back rather significantly. As of now, the dollar index is looking pretty good and I am still waiting for the much anticipated test of the downward sloping trendline which is currently around the 77.65 area.

Gold chart looks promising to the downside further reassuring my USD bullish bias. Recent recovery proved to be short lived, price bounced off the downward sloping trendline and today the price of the yellow metal broke back below 1000 level. I'm still targeting 960 - 970 area within the next few days.

EURUSD continues to drift lower with 10, 20 and 30h emas all stacked in correct order pointing to additional EUR weakness. EURGBP looks pretty weak as well - I predict that EURGBP will sell down pushing euro lower against the buck with it. Recent concerns that EU commissioner expressed regarding the strength of the Euro certainly helped. I also want to point out nice bearish reversal on the AUDUSD daily. Bearish engulfing pattern that broke below 10 day ema points to furhter AUD weakness.

Tomorrow's NFP release may alter the currency outlook. But given that the equity markets sold off very aggressively today (Dow -2.1% and S&P -2.58%) the risk aversion trades seem to be back. If NFP and maybe more importantly the unemployment rate bring surprisingly negative data, the skepticism regarding US recovery may increase bringing equity markets down, the dollar up and commodities down.