Both EUR/USD and GBP/USD closed beneath support that has held firm on repeated bearish attempts over the past year, casting a negative signal in stone. AUD/USD and NZD/USD, however, are holding up above similar support areas as focus increasingly shifts to German 10y rates and CDS spreads. German 10s are threatening to complete a large basing pattern as 5y CDS spreads approach their highs of the year.
This likely signals vulnerability, as does base metal weakness – particularly aluminium, which posted one of its most bearish weeks of the year. As such, we view the small bounce in risk this morning as corrective and maintain our focus on the wider range lows: 1.5270/95 for cable and the important October low near 1.3150 and below in EUR/USD.
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