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Technicals are Mouth-Watering, Fundamentals Questionable

John Kicklighter

Risk trends took a dive this past Friday, and a theme and pairs I have been monitoring very closely for some time started to offer the first inklings of a more serious move. Yet, as hefty as the S&P 500 and some of the yen crosses dip was; this is too young a move to throw in over the weekend when we have seen many pullbacks end abruptly in this long-lived bull trend.

That does not mean, however, that there aren't trades in this risk sensitive lot. If risk aversion starts to build steam, there is certainly opportunity. The question is how sincere does the market need to be before I'm convinced.

For pairs like CADJPY and AUDJPY, I just need to see risk aversion is still in place and the market make a move to turn those 10/11-day consecutive rallies. Both of these pairs look great from a technical perspective, and I even had a half size short in the latter (which was stopped out for 50 pips) on the potential that a short-term break would fully turn.

Those two yen crosses are remarkable and highly overdone, which lessens my need for a heavy fundamental push. I will not be so easily won over by USDJPY, EURJPY and GBPJPY. While they all look good, I need heavier risk aversion and key trendline breaks to leverage confidence: 101, 140 and 169.

Outside the traditional risk theme, I still have my USDCAD long (it survived a tightened stop and the volatility after the Canadian and US jobs reports) with a stop set 75 pips lower. I also still hold a EURAUD short and GBPAUD after their respective neckline breaks and the latter has had it stop moved up to 1.8100 (+200).

I also have my longer-term trades for 2014 on via a long AUDNZD and USDCHF. These are lower size and have wider stop to fit the longer-term outlook.

Recent developments in EURUSD and GBPUSD are particularly interesting, but I'm dubious that they can force the serious trendline breaks that currently stand in their way: 1.3650 and 1.6500. If they do, I will evaluate it for potential momentum and decide whether to participate.

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