I’m having a few small technical difficulties so I’ll post some charts shortly.
My reasoning as always is a bit convoluted. I am of the view that the market is trying to lead the economy into recovery when it should be the other way around. All this stimulus spending of the last 12 months has merely papered over the problems which still exist in credit markets and will probably have made things worse when this ‘bear-market rally’ finishes. I am looking for ways to trade this view with the obvious one being to sell JPY crosses. AUD/JPY is the favourite carry trade at the moment and the market has stopped at the big 61.8% retracement level around 85.50 so this is a bearish sign. But being short AUD against anything is getting expensive. AUD/GBP on the other hand is in a solid downtrend and has recently rebounded and stalled at resistance around 1.83. So selling GBP makes sense to me so the question then is whether to sell against the JPY or the USD.
As I said earlier, I look for opportunities where I think I have a 50:50 chance of being right but the risk:reward ratio is closer to 1:5. Cable offered me this and I sold at 1.6625 with a s/l above 1.6750.
