An Afternoon in Review


  • USDCAD alert goes off ahead of Fed
  • Perfect opportunity for in and out trade
  • Patience finally rewards with USDJPY
  • RBNZ cools high flying Kiwi
  • Look out for today's US data

LOONIE TRADE - Wednesday was a good day. Nothing happened until later in the day, and at that time, I was out and about, off the desk. It was still a good amount of time ahead of the Fed decision when I got an alert to take a look at USDCAD. The pair had dropped back quite aggressively intraday, and this was ahead of what was sure to be some more volatility post FOMC. The catalyst was the surge in OIL prices, and it was a welcome catalyst as it set up a great opportunity to buy back into what has been a well defined uptrend in USDCAD. Remember, the Bank of Canada had recently downgraded growth forecasts, while at the same time, welcoming Canadian Dollar weakness.

HIT AND RUN - And so, with the market severely oversold ahead of the Fed, I took a shot and bought at 1.3102. Now, it isn't often you get trades like this with virtually no downside and such immediate upside, and so, when these trades come, you count your lucky stars and jump all over em. The Fed came out with a more hawkish (less dovish) decision and left the door wide open for a December rate hike. Unsurprisingly, USDCAD was off to the races, and within a couple of minutes, was already trading over 100 points higher. I booked a cool +100 points profit in that very short period of time. Of course, I could have held on to the trade, but sometimes, when the market gives you a present as quickly as it did, you take it and walk away grateful for the opportunity.

AT LONG LAST - But I wasn't done yet. The broad push higher in the US Dollar post Fed, also opened some significant upside in USDJPY, with the price breaking through 121.00 and back into critical resistance ahead of the multi-week high at 121.75. Over the past several days I have talked a lot about wanting to sell USDJPY, and on Wednesday, I finally got the opportunity and jumped into the short trade. Technically, the market is still confined to a consolidation below the August recovery high at 121.75, and as such, selling rallies towards the range high makes perfect sense, with a medium-term lower top also a possibility. Fundamentally, despite the favorable USD yield differentials on the December liftoff prospect, the idea of higher US rates is not something that should sit well with investors and could start to weigh more heavily on risk assets, If this is the case, USDJPY could come back under pressure, especially if the BOJ doesn't expand QQE tomorrow. Anyway, I'm short 121.22. Let's see.

Stocks defy gravity but could be in trouble later today. Via @joelkruger

EASY RBNZ - Finally, AUDNZD is showing signs of wanting to come around. Technically, I have talked a lot about an inverse H&S pattern on the monthly chart that projects significant upside ahead. Fundamentally, the trade was helped along early Thursday, after the RBNZ talked about the likelihood for additional easing, while also highlighting its discomfort with the higher Kiwi rate. The RBNZ said the higher Kiwi rate could result in "a lower interest rate path than would otherwise be the case." This has opened some upside in AUDNZD and relative underperformance in the New Zealand Dollar that is certainly welcome from my end. As much as the market is thinking seriously about an RBA cut next week, I also don't believe the RBA will move as it doesn't want to derail positive steps taken to cool an overheating property market. For today, I think the most interesting thing to watch will be the nicely distributed batch of US data. If this data comes in solid, it could really wake stocks up to the fact the Fed may actually move ahead in 2015, and in turn open an intense round of liquidation. Stay tuned.


Euro Battles around 1.1700

The Euro keeps dipping below 1.1700 but has refused to breakdown thus far. 

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