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I have received alot of notes on my bearish AUD, EUR and CAD calls, so here is a quick update. If you missed the call, I’ve copied all the info below. Updates in RED.
1) Short EUR – Looking good. Would be smart to take off half here, still looking for a move down to 1.30/ > EUR/USD European sovereign debt problems have not gone away and despite the weak U.S. NFP report, traders have resumed their sale of euros. All eyes are still on Spain and Portugal and this is not likely to change anytime soon. EUR/USD is currently trading @ 1.3270 and I am looking for another move into the 1.30 handle.
2) Short CAD – Also in the $, Still looking for some upside here in USD/CAD Same story in Canada. Even though there was an increase in employment last month, it was all in part-time and not full-time work. If this shift becomes a continuous trend, it would suggests that companies are growing concerned about future business activity. Back in October, the Bank of Canada downgraded their growth forecasts and last month the BoC warned that they could intervene in their if there was extreme movements in the currency market. As a result, with USD/CAD trading just a tad above parity (USD/CAD now @ 1.0070), I think that the BoC will remain cautious, warning of the downside risks that will impede them from normalizing monetary policy. There is a good chance that USD/CAD will be trading back above 1.02 before the end of the year.
3) Short AUD – The strong employment number has helped to boost the AUD, but AUD/USD is in the money. AUD/JPY however is getting killed – I would look to exit the AUD for a small gain and bail out of the AUD/JPY for a loss After last week’s disappointing GDP, retail sales, service and manufacturing PMI reports, there is no chance the RBA will be talking about another rate hike this evening. The last time we heard central bank governor Stevens speak, he was crystal clear in saying that the current level of interest rates is appropriate. He also indicated that the next rate hike may not be until mid next year. Last week’s dismal economic reports served to confirm that not only is now not the right time to continue raising rates, but it would be smart to let investors know that the RBA is officially on hold until the U.S. and/or Chinese recovery gains momentum. Now of course, the U.S. has its own problems so even though I am bearish Aussies against the U.S. dollar (AUD/USD now @ 0.9875), I particularly like shorting Aussies against the Japanese Yen (AUD/JPY now @ 81.65).