Cable broke out on Tuesday. In yesterday’s post, we noted that we thought the bias was to the upside, despite the resistance around 1.6475. When that level broke, the pair rallied more than 100 pips. We talked about buying at 1.6500 and perhaps some of you did, but we did not have a buy order in play.
The reason we didn’t have a buy order is because we hoped the pair would come back and re-test 1.6475. It’s an effect called ‘buyer’s remorse’ where the pair will re-test a breakout level. This is generally where we like to pickup breakouts. Sometimes we miss the trade but it diminishes the number of false breakouts.
With cable trading at 1.6513 at the moment, we are getting an itchy trigger finger. What’s making us hesitant is that we have had 5 consecutive days of gains in the currency that we believe holds a heavy short interest. The weekly IMM data from the CFTC shows GBP is the only currency held short against the USD. That could mean we have been experiencing a short-covering rally. If that’s the case, it’s probably running out of gas and could reverse.
Ideally, we would like to see a day or two of consolidation with the pair generally holding above 1.6450. This would relieve somewhat overbought conditions and give us the confidence to aggressively buy. At the moment, we’re going to wait, watch and stay disciplined.
Our AUD/CAD trade was up more than 200 pips on Tuesday but has pulled back to 1.0312, which is still 60 pips above our first unit and 20 pips above the portion we added on Monday. We will stay patient but might trim some of our exposure on a close below 1.0296. We are still very confident in this trade and like how the technicals have progressed.
- I'm not fond of the look at the daily S&P500 chart at the end of the day. AUD looks terrible but gotta wait for a bounce to sell. 2012-10-05
- Forexlive is hiring http://t.co/9atdb6wM 2012-10-04
- I'm fairly certain the RBA will cut rates today, may even cut 50 bps. AUD vulnerable. 2012-10-01
- @jonathanspicer Take Montreal's jobs like they took our baseball team? in reply to jonathanspicer 2012-10-01
- @DougSaunders In that case, so is Texas, NY and MA within the US in reply to DougSaunders 2012-09-29
- I spoke to Reuters earlier about the Canadian dollar. $CAD http://t.co/ea2OcNsS 2012-09-28
- @aussietorres I wish I hadn't even read that story, can't imagine watching it on live tv. in reply to aussietorres 2012-09-28
- @greg_ip Because you left. You're slipping. Time to come home. in reply to greg_ip 2012-09-28
- @aussietorres That's so depressing. So sad. in reply to aussietorres 2012-09-28
- CFTC data show the market is less bearish on the euro than any time in the past year. http://t.co/QjPfiE9E 2012-09-28
- More updates...
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