- US Dollar profit taking underway
- Traders square up ahead of event risk
- Stay away from the Canadian Dollar
- Key levels to watch over coming session
PROFIT TAKING - I don't think it would be that surprising to see some more profit taking on long US Dollar positions ahead of Thursday's ECB and Friday's NFPs. If you have been long the Buck, it could be a good time to consider taking some off the table, especially if you want to give yourself the opportunity to buy back in at better levels. It seems the market has priced in just about as much US Dollar bullishness as it can at the moment, and between now and Thursday, nothing is likely to change on that front. Having said that, this opens the door for some short-term weakness in the Dollar on Tuesday and Wednesday. Perhaps the one exception here could be the Canadian Dollar, which has to deal with Canada GDP today and the Bank of Canada tomorrow.
A LITTLE HELP - As far as my positioning goes, the only USD exposure I have at the moment on the currency front is via USDJPY, where I am short from 123.55. While I already believe this trade can head lower, even if the US Dollar remains in broad demand, given its correlation with risk and the possibility for capitulation in risk assets, I am also looking for the anticipated pre-event risk profit taking on USD longs to help this trade along in the sessions ahead. But as I have highlighted many times in recent days, we will need to see a break below 122.20 to get this trade going. Otherwise, my AUDNZD long is consolidating, the SPX500 short has yet to follow through, while GOLD is finally showing some signs of a potential bounce. GOLD will need that break back above 1100 to really get going and take the pressure off the downside.