Euro: Risk And Carry Slowly Bid




Commentary[/B] - As investors slowly add capital back into their ‘risky? long carry trades, caution remains the tentative tone of the market. The high rate differential in the yen crosses clearly received traders immediate attention in the aftermath of substantial sell offs; but those moves have tapered off as fear once again blooms out of the quiet. Now, as traders look for the safer places to add to their carry portfolios, there is a clear interest in the pairs with somewhat smaller yield differentials as they are deemed better able to hold off momentum in another bout of unwinding with most of the market focusing its attention on the yen first. Technicals seem to hold something else in store for EURAUD though. Trendline support has come up to meet the 50% fib of the 7/26 to 8/17 swing high. A break of the short-term, downward sloping channel or rising trendline seems inevitable; and we remain flat on the pair until the break initiates the next leg.
[B]Strategy[/B] - Flat

Commentary[/B] - Though there has been an overriding theme of risk aversion/risk acceptance in the FX market, EURCAD has largely avoided the wild technical swings seen in some of the other pairs. For this pair, price action has been choppy since the beginning of June. In fact, looking back, this pair goes through long drawn out periods of congestion interspersed with huge rallies and sell offs. Since the carry has been absent here, we suggest sticking with the range until a confirmed move above 1.4650 or below 1.4100 confirms a turn over to trending conditions.
[B]Strategy [/B]- Bullish down to 1.4100, target just above 1.4500.

Commentary[/B] - EURNZD is producing a setup that is nearly identical to EURAUD. This offers testimony to the interest in risk rather than individual currencies. This correlation will likely continue through to next week, so an eye should be kept on leading breakouts to take advantage in the follow through that is likely to take place in the event a major level in an important pair is taken out. That being said, EURNZD has also come up on support around 1.8900 where a 38.2% fib of the 7/25 to 8/17 rally lies. There is a loose rising trendline to back this up, but it needs better confirmation before it is fully trusted. It is interesting to note that pressure from the top side is pretty consistent and has proven its potency in the break of a short wedge back on 8/22. Price action has been boxed into congestion between 1.9150 and 1.8900. A break should come soon and a position should be taken on the confirmation of direction.
[B]Strategy [/B]- Flat