Wednesday, 3 July 2013

EURUSD and USDJPY trade update.

While writing the EUR is trading at 1.3005 vs. the USD, this is well of the day lows at 1.2920, but as the daily close wasn't below 1.2950 this trade is still open and looking decidedly bullish. With stochastics (slow) crossing over sub 10 and very bullish bounce from a key 1 year trendline, it seems maybe the USD strength could be ending. This is illustrated below

EURUSD daily. Reuters
Furthermore, a divergence still exists between the EUR and 1Y swaps, which widened 1.5pips today but still suggests the EUR should be around 1.32 +/- 25 pips.

On top of this there is the clear hourly bounce perfectly at the trendline suggesting we may bounce in the short term.

EURUSD vs. EUR1Y swaps. Reuters
So technically, the EUR looks very bullish - thankfully there may be some restbit when it comes to fundamentals also. With Draghi's press conference tomorrow we could see some volatility, not one major desk is calling for any change in monetary policy and this view is to be expected. However words can be just as powerful. Of course anything could happen but with such short term support the risk:reward is definitely skewed to longs.

The first test to the upside is 1.3050, which if cleared 1.31 will be tested and if ECB allow, 1.3150 will be seen pre-NFP. However to the downside we see 1.2950 being crucial for directional momentum with the key 1yr trendline still being in play at 1.2925.

Below there and a break of 1.29 sees the 1.28 to 1.27 being tested and most likely even worse for bulls.

Overall in terms of the EUR, I remain bullish in my long position opened at 1.30.

Now onto the USDJPY short from 99.75, the timing on the trade was poor with a 100 pip drawdown at one point but seeing as the USDJPY managed to retrace (on Portugal/Risk fears) then we traded down to 99.26 at the lows.

I covered short for +25 at 99.50 on the move back up as Portuguese spreads were turning around.

Overall, poor timing but correct direction allowed for only a small profit, but there was much more potential.

EDIT - Widened trade limits for NFP, will watch carefully, but as it stands holding -80

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