Super Light Ahead of Fed

17 Mar 2015 01:05 GMT · Time Estimate: 2 minutes ·

SQUARING UP - It's all about positioning in the early week. We don't have anything of significance on the economic calendar today, and we didn't have anything yesterday. And so, the market is just left lightening up ahead of Wednesday's FOMC rate decision. I had said I would be looking to take another shot at a Euro long below 1.0500, but never got the chance on Monday. I had played this market up in the previous week but couldn't find the right point of re-entry on Monday and remained on the sidelines. Technically, there is every reason to believe the Euro will see a period of corrective upside at some point in the very near future, with daily, weekly and monthly studies all tracking oversold. And so, Monday's bullish close could open further recovery on Tuesday as traders book profit on USD longs ahead of the Fed.

LIGHT AS EVER - As far as my positioning is concerned, I am as light as I have been this year. The only open exposure I have at the moment is a very small AUDNZD long position from 1.0350. I have plenty of room to build into this position again, and will do so into another dip. Remember, this is a trade I believe will show tremendous upside in the weeks and months ahead, and I am looking for the formation of a material base off record lows. The market is going to digest the RBA Minutes today, but things will get more interesting for AUDNZD late Tuesday through Thursday, with the New Zealand dairy auction, and New Zealand GDP due. If the data is softer and opens a push higher in AUDNZD then great, and if it is stronger and AUDNZD drops to a fresh record low, that will be even better as I will buy into the dip.

More pre-event risk position squaring expected on Tuesday. Via @joelkruger

NOTHING YET - The New Zealand Dollar has relatively outperformed on its higher yield. But if global equities start to falter, as I believe they will when the Fed signals a liftoff, the risk correlated Kiwi will be exposed and should come under some intense pressure. This ultimately will be the catalyst that will trigger the major reversal in AUDNZD. I would like to be there when that happens and I believe we are already starting to see all of this playing out. Elsewhere, I continue to watch the commodities markets will great interest. Though I have no current positions, I will look to buy some GOLD again into a dip, and would consider taking a shot at a long OIL play, though not just yet. But expect Tuesday to be a wait and see day that doesn't really produce any new trading opportunities. Wednesday should then invite the next surge in volatility and fresh set-ups.

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