“When you’re standing at the crossroads every highway looks the same”
After a “constructive” morning for our bullish EURUSD view, we saw New York hit the downside of EURUSD on their open, just as Europe had done hours earlier. What followed was a very choppy, but ultimately very profitable afternoon.
Having exited longs after the failure above 1.4300 in Asia yesterday, we were able to rebuy the European dip to 1.4206 lows, lightened these longs at 1.4270-75 into subsequent European rally, leaving us again in a position to re-buy this early New York dip. Again lightening the longs at 1.4270-75 and later easing some more out at 1.4315-20 in late New York.
Disappointing that we have not seen a more concerted push at the 1.4340 level.
USDCHF & USDJPY as mentioned we had squared longs into yesterday’s rallies, seeking better levels to re-enter. Both did try a little higher after we squared (0.8870-75 and 82.235 respectively), but traded lower after the poor U.S. data. However, either has pulled back yet to levels where we would consider it safe to re-enter longs.
EURCHF and EURJPY we have enjoyed strong rallies in both now over the past 48 hours giving us excellent profit taking opportunities. Despite squaring EURJPY longs and lightening EURCHF longs, both continue to perform well.
GBP Eventually broke higher after YET ANOTHER left hand side GBP fix at 4.00pm London, taking out 1.4200 in New York. The market has clearly been aware of the GBP sell interest this week, hence the past two days have seen strong GBP buying at the fix as investors/traders square their shorts. With EURUSD making only a lack lustre attempt at 1.4340 to this point, we’ve taken advantage of this rally to lighten GBPUSD longs, raising stop on the balance to 1.6175.
Long GBPCHF remains our “contrarian” trade and, yet again, the “Buy dips, lighten on rallies” strategy has worked very well all week in the face of significant pressure and bearish trade reccommendations from both Citibank and Deutsche.
NOTE: I am going to distribute a brief piece later today explaining this bullish sentiment, so as to answer the numerous questions I receive on this particular view.
“After a while, you can recognize the signs”
Sentiments & Views
Our over riding sentiment today is one of “CAUTION”.
It’s been an excellent week for us, but also a very bloody one for most judging by the extremely choppy price action.
As a result we have taken profit and squared most positions, leaving smaller long balances in EURUSD, EURCHF and AUDUSD.
What we do retain is our “sentiment agility”. This has enabled us to fully exploit what has largely been a rangebound intraday market on the week, “buying dips and lightening on rallies”, whilst at the same time enabling us to exploit the bigger move in EURJPY.
Light positioning today should mean that we are able to react quickly to any opportunity and ensure we are not a “victim” of what promises to be a nervous and very choppy Friday, but rather a “beneficiary”.
Very light and mixed flow this morning further confirms uncertainty.
Core
– Bullish & Long GBP. Having lightened longs at 1.6230, raised stop to 1.6175 on balance.
– Bullish but only light long now EURUSD.
– Remain bullish but square USDCHF & USDJPY but looking for better levels before re-entering. 0.8750-60 and 81.30-40 ideally.
– Remain bullish and long some EURCHF, and will take further profit into any further rallies and buy any dips back toward 1.2550-60.
– Remain bullish and Long AUD. Yet another day of selling AUD on stock market and metals woes, followed by further pain as AUDUSD recovers and squeezes these shorts. Is the tail wagging the dog now?
“So if you get it wrong, you’ll get it right next time”
Having been burned so often on a Friday, abiding by these wise words today.
UBS Investment Bank