The EURUSD seems to be on a roll since the previous week's support at the bond auctions for Portugal and Spain with a EUR1.1 billion purchase.Chart-wise, EURUSD had broken resistance at 1.34 and looks set to target 1.37 or even 1.39 in the coming weeks on pure momentum and the technical weakness of the Dollar Index DXY.
DCI investors can use rallies to take profits to lock in spreads as the medium term view still looks very iffy for the EUR given that their debt situation is not resolved and will take a few more months before we some concrete plans in place. Having a fund for rescueing member countries doesn't mean all is well!
Dont forget that there is some likelihood of haircuts and investors have to take some pain if there's a credit event.
Support: 1.34, 1.31. Resistance: 1.3680, 1.40.
AUDUSD
AUD has been suffering since the floods in Queensland but does show resolve to want to test parity again. It has been bouncing off 98.50 area 3 x and tested the highs around parity 3x as well but each high seems to be getting higher.
Good sign despite that the floods probably is allowing the RBA to delay any rate hikes in H1 of 2011.I would still buy on dips from 98.50-96.50 area for another test at 1.0250. Proviso is that 'Risk' is still favoured and China won't be seen as mismanaging their inflation fight. They may be expected to raise their reserve requirements in the run up to Chinese New Year next week and that would affect stocks, growth prospects in China and drag AUD down.
AUDSGD
This cross took a beating from the 1.31 area following profit-taking and the Queensland floods. With a weak DXY (Dollar Index), this drags USDSGD down and thus keeps this on the weak side. However fundamentals for AUDUSD still looks good based on fndamentals and trate differences and that should augur well for AUDSGD.. I am looking to trade the 1.25 -1.30 area but in the medium term, I am expecting this cross to pierce 1.30 again.
GBPUSD
GBPUSD pivoted around 1.53 and made a good run to 1.60 on interest rate expectations in the UK. Well me thinks this may be overdone around the 1.60 area. If i were long, I would get out now. Break of 1.59 could see GBP back down to the 1.55 area.
USDJPY
What can I say? - Boring............
On the wide, still 80-85.
EURAUD
Hmm i saw the double-bottom between 1.30 and 1.34. Break out targetted 1.37 and this has been surpassed. I am out of this one now.. Looking to trade it on the short side if it overshoots to 1.39 area. But there is time I think, no hurry to push this one too far ahead of myself.
In summary:
Dual Currency Investors who are in a good position could actually consider taking some profits, break my amounts up and take profits with a strategy as I think there is a period of uncertainty in front of us. Volatilities in the Options market is subdued and most are trading around the 10% area which means there is implied consolidation. Too many factors acting against each other now. So I am looking to take some profits.
