The Swap


REVIEW - Wednesday was a wild day. Not sure how it all will play out but there was some trading going on and some decision making as far as the exposure was concerned. The general idea over the past several days, has been to sit back and wait for an opportunity to sell the US Dollar into this rally. The Dollar is still very much in a medium term downtrend and so selling the Dollar into a shorter term overextended move, back into a medium term downtrend, had made a lot of sense to me. The thing about it is that there were any number of currencies this could have been played through. I had loved buying the Pound into this dip. Buying the Franc however, was the one that came to me first. And then, the swap happened on Wednesday, where I shifted the exposure from long CHF (ie short USDCHF) to long EURUSD. The decision was made because early Wednesday after consolidating for a day or so (which was a good thing considering additional USD strength over that time elsewhere), the Euro was breaking down and traded towards a zone I had been looking for. This made the Euro the more attractive play and so with USDCHF sideways, I swapped into the EURUSD long instead. The key takeaway here is that the big position has been to sell the US Dollar and what currency I choose shouldn't make much difference when it comes to seeing profit.

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THE RISK - As far as the risk goes, I have done the same as with the USDCHF position. I am playing the medium term trend and will not be looking to get out unless the Euro really proves me wrong, or perhaps it should be better said as 'until the Dollar proves me wrong.' If this trend is going to continue, the Euro should ideally find a higher low around currency levels and ahead of 1.1700, without breaking back below 1.1500. I'll be looking for a higher low and the next major upside extension up through 1.2550 in the weeks ahead. But I will keep my eye on it and will watch to see how the trade behaves in the sessions ahead. All of the things I like are there and it also feels good to be on the dark side of this one, with the bigger FX money selling the Dollar and committed to doing so for the foreseeable future. There is one more thing I need to explain about this position. I have left myself room to add to the position lower down, as I had talked about a possible drop into the 1.1700s. So I have another half ready to go if need be, with the max total exposure in the event of adding that other half, amounting to less than 5% of equity. Right now, I'd like to see a push back above 1.2000 to strengthen the outlook. Just as an additional note - I'd love to get back into AUDNZD into a dip. When you read this, we will have a better idea as the RBNZ decision will have come and gone.

Looking for the US Dollar run to come to an end in the sessions ahead.


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