The risk rally appears to have ended overnight. We could see more new highs but they won’t go very far and won’t be on all pairs. There was lots of bullishness after the Greek austerity measures passed in the Greek parliament but just as after the last Greek vote the optimism won’t last long. The US Dollar should advance against all the majors except the Japanese Yen and possibly the Swiss Franc. Most of the event risk is over for the day but we need to watch Canadian GDP at 0830 EDT which I’m hoping is a solid buying opportunity for the USD/CAD and we also have US employment data.
The GBP/USD has been hit very hard this morning. Even after positive UK House Price data. The technicals are too strong and they are forcing this pair lower. This pair should have good continuation all the way down to the 1.5500 area.
The EUR/USD surpassed my target by a small amount and I have reversed my position short. After a solid victory yesterday I feel more confident and have reversed my position to short. Judging by moves in GBP/USD and USD/JPY it looks like the risk rally is over and it’s time to go long US Dollar again. This move will most likely either be a C of C wave or a 3rd of C wave.
AUD/USD, USD/CAD and NZD/USD
All three of these pairs had massive USD sell offs. The NZD/USD actually made a new all time high. We had fairly negative economic releases for AUD/USD and NZD/USD overnight but I don’t think that will create moves in these pairs. I think the move will be based on risk aversion and US Dollar technical bullishness. The AUD/USD is the most bearish looking at it technically since it was unable to move to new highs but I would rather buy USD/CAD because I think it has the most room to move and we have Canadian GDP this morning at 0830 EDT.
The USD/JPY never made it to 81.50 and have reversed in a strong enough manner for me to count that move up as a small second wave. I think the USD/JPY will continue much lower from here.