RECAP FROM LAST WEEK
We were wrong last week suggesting to buy USD dips. All the evidence was there – especially with a weak NFP the previous Friday and noticing how USD recovered. By looking at last weeks price action the market has given us many clues as to what direction it may take. In this case it was unsure and directionless – with no real conviction. That is the “direction” we need to be wary of. Profit takers were quick and nimble. Even Trumps bazooker comments preferring a weak USD could not find follow through as Fridays squaring took over. Having said USD was still the laggard, please see below:
Geopolitics should continue to take charge as North Korea’s failed nuclear test was all too convenient. Wiki leaks released a transcript of Hilary Clinton giving a Q+A to Goldman’s on the dictatorship. Despite reassurance that Kim Jong Un will be contained at the behest of China we can’t be certain because both Trump and North Korea’s finest are still trigger happy. If you’re in any doubt look at recent events in Afghanistan. Zero Hedge and has more.
JPY buying and safety plays should resume. USDJPY the big loser and 108.70 (200DMA) duly broken despite a baby bounce last week. EURUSD is thin and without direction. CABLE found support at 1.25 then 1.2530 so look for 1.2560 to break for a touch at 1.2620 – expect large sellers here which is 200DMA. NZD and AUD are still firm from last week so look for dips to buy.
See charts for levels and check out Patrick Reid on Linked in for more thoughts. Enjoy and discuss.
Patrick and Adam