Well at least that’s my reading of the situation.
Yesterday’s price action in the AUD/USD after the RBA raised rates by 25 bps suggested a market which is fully long close to saturation levels. With an interim top now in place at .9325 and volatility returning to the market and challenging the bull trend we’ve had since .6200, I’m suggesting that the AUD may soon be about to turn. Nevertheless we are probably in an .8850/.9325 range for the short term so I will trade this and get out immediately on a break above the recent highs.
Sterling is very oversold on the crosses, at least in my humble opinion. I think AUD/GBP and EUR/GBP are too high and must fall. What this means for cable, I don’t know but if you’re bullish the USD then I would look elsewhere for a currency to short.
Similarly for USD/JPY. There are a lot of ‘unusual’ sellers in the market and now levels like 90.60 are being considered rallies. I think it’s too dangerous to be long USD/JPY as a break below 88.00 and 87.00 would really change the outlook and have the market looking at a return to lows around 80 last seen in the mid-90’s. The USD/JPY market ignores fundamentals in the short/medium-term so I think you should also!
EUR/USD is again being dominated by the big players but the break below 1.4680 yesterday will be a bit of a body-blow to the bulls. I cannot rule out another exhaustive move towards 1.50+ but like the AUD, I think the market is tired and over-long and I prefer to sell rallies.
