SUMMER DOLDRUMS - Not much has changed at all since the Monday open and we're seeing that summer doldrums trade kick in a bit. Monday's economic calendar was super light as well which hasn't done anything to help matters. Still there is a lot going on right now and when you consider all the central bank changes, politics and geopolitics, I'm not too sure we really see too much quiet trade in FX over the coming weeks. For now, there isn't much to do other than to sit back, wait on our current positions and look out for whenever that next opportunity comes along.
EURJPY - But if I were to isolate two markets worth keeping an eye on right now they'd be EURJPY and EURCHF. Both of these markets are extended on the daily charts and both are also correlated to risk. They don't exactly trade the same though, with EURJPY generally the more active of the two. EURJPY is more interesting from a trading perspective because of the technicals, with the daily RSI up around 80 and both EURUSD and USDJPY testing major resistance at the same time. Sometimes a cross rate will be extended because one of the two major pairs it's derived from is really extended. But in this case, what's compelling, or at a very minimum interesting, is the fact that both EURUSD and USDJPY are up against it, which means if either reverses, EURJPY will be at risk for pullback.
EURCHF - This cross rate is also interesting and while it's technically extended on the daily as well, it's really less about the technicals here and more about what's been going on with the exchange rate on the fundamental side. The Swiss National Bank is fighting hard to push this rate higher as it believes the Swiss Franc is excessively overvalued. The trouble for the SNB however is that the Franc hasn't been doing much depreciating in an environment where it theoretically should have been depreciating a great deal. The Swiss Franc is correlated with safety bids and with global equities elevated, one would think the Franc should be a lot lower.
BENEATH THE SURFACE - This could reflect the false sense of security we're all living in right now and the fact that the state of financial markets is a lot more distressing than many think. And so, if the Franc hasn't depreciated all that much with equities at record highs, where will it be when equities finally do come off? This suggests that the recent push beyond 1.1000 may not hold up and the EURCHF rate could be at risk for another sharp pullback in the sessions ahead, particularly if stocks do in fact roll over. And so, these are the two rates I'm watching into Tuesday and while I most probably won't be trading both, I could very well be trading one or the other very soon.