NEWS / Foreign Exchange

Lands of Opportunity (revisited)

The day before yesterday I read on Bloomberg.com one of the most EUR/USD bullish articles I have checked in quite a while.
At some point somebody is quoted in the article saying: 'The euro's the safest bet'. To me, however, the safest bet is actually not betting at all.

I wrote here on Sunday:

'I would not be wise to make detailed comments about the US Dollar markets right now.
 
However, my interest has increased significantly about most FX markets I have been looking at for some time: the major US Dollar pairs, the Yen crosses, the Canadian Dollar crosses. I am moving from chart to chart, and I see lands of opportunity.
 
I know I will have to be quite contemplative during this weekend.'

Several days prior to Sunday, in my letter to clients of April 5th I was noting:

'Getting back to the US Dollar markets of these days - by compressing hundreds of daily chart data in the EUR/USD, I still have the feeling an ambush may be due soon. This doesn't automatically make me an unconditional US Dollar bull, though.'

As of right now I remain in perfect agreement with both sentences of the above quoted paragraph.

I wrote not a long time ago that in the months ahead I would rather take trades out of conviction, than of just intuition. In my view, intuition does a fairly good job to preserving wealth, but it is a strong conviction which builds wealth.
However, to avoid getting caught in tricky positions, intuition is still most of what one has at hand.

Now, if you allow me spelling it out in trivial words - I still 'smell a rat' about the bullish impetus we are seeing these days in the EUR/USD, once this bullish impetus is placed against the pair's big picture. Against the big picture, even a 1-day price action may play the 'butterfly effect'.

These days I also have strong observing interests, contemplative interests for now, which link to the one-way momentum we have seen as of late in some of the Yen crosses, as well as to the Canadian Dollar and Australian Dollar cross pairs.

What I see now in the AUD/JPY fairly reminds me of the major European currencies against the Yen in the days immediately prior to February 3rd, last year. Back then, upon acknowledging the upward price extensions started in mid January (in the GBP/JPY, such upmove had been preceded by a '2B bottom', daily chart wise), I was only waiting for an 'anomaly' to allow me taking a short position.

In terms of my own perception, in the EUR/JPY the 'anomaly' came on February 3rd, in form of a low-volatility, 'harami' day. The short EUR/JPY position I put on that Friday, at the expense of less than 40 pips in the stop-loss order, achieved a reward/risk ratio of 7:1 after just 5 days of active holding. Unfortunately for my model account, though, the leverage deal utilized was roughly mediocre; I know now I could have risked around 2% of the whole model equity playing that early February setup in the EUR/JPY, and even that would have been a conservative bargain.