WAITING A LITTLE LONGER - We haven't really seen the bounce in currencies I have been looking for. While I continue to see the US Dollar in the driver's seat across the board, I also think there should be a few more sessions of broad USD pressure before the Greenback is ready to reassert. The Euro has recovered off of recent yearly lows, but will need to break back above 1.3445 to open the door for that correction I am looking for towards 1.3500-1.3550. I have been waiting for a bounce in Kiwi as well, and would like to sell on a rally back over 0.8500. Yet this market is also not showing any pop just yet, and continues to threaten a more immediate break below 1.3400. Elsewhere, USD/JPY and EUR/CHF have stabilized a bit after some recent selling pressure, and the minor recoveries here can be attributed to a renewed demand for risk assets. US equities have benefited from a nice recovery in recent sessions, and this has propped these risk correlated pairs.
KEEP AN EYE ON THE EURO - Still, I have a feeling USD/JPY, and certainly EUR/CHF, could see lower levels and I am hoping we get a drop in EUR/CHF towards 1.2000 so I can have a shot at buying this cross rate. Ultimately, some diffused geopolitical concern is the fundamental driver behind this latest pickup in appetite, but I don't expect this to last. The S&P 500 got close to testing 1950 on Monday, and any move into or just over this level should be used as a fresh opportunity to sell. Another push higher here should open a Euro break above 1.3445 and fuel more broad currency gains. But if we can't break back over 1.3445 on Tuesday, this could delay the correction I have been looking for and open a fresh drop towards and below 1.3300. I think the key levels to watch in Tuesday trade will be EUR/USD 1.3445 and 1.3335, with a break on either side likely to have an influence across all markets and help to establish a clearer short-term directional bias. Until then, stand aside.