Got to have eyes on this 24/7 at the moment. There’s no going to bed and waking up with a 20 pip range anymore. It’s in bed with the Nikkei and not getting out.
96.74 is the 61.8 fib from the Jun/Jul lo/hi and we’ve stopped 3 ticks above and bounced to 96.95.
A break lower would target the Apr/Jun support line at 94.70 and then the 38.2 fib from the Sep 2012/ May lo/hi at 93.56. We came close to this level back in the 12th June reaching a low of 93.78.
The upside is still hard work for the pair at the moment but don’t let it suck you in. Any strong signs of the US or Japan recovery really kicking in then it won’t take much to fly. Apart from when the Nikkei (and futures) are in action the pair hasn’t looked all that great during the European and US sessions. The taper trade is still up in the air and that’s adding uncertainty. Uncertainty leads to selling 99% of the time.
The taper issue is a big mess at the moment. The US powers that be keep talking up the data yet on paper it’s not matching the expectations for tapering. As Adam said yesterday tapering will come but it might be because of the increased nervousness surrounding the growing size of it. As I’ve said before, Bernanke saying it was unlimited at the start is one thing, finding out it may actually have to be unlimited is another.
I’m still favouring building a long position from 95 down to 90. If/when the QE picture becomes clearer I believe the market will settle down and that will be positive for the dollar. That said, if the data worsens after they taper we could be in for a rough ride as the talk will turn to going back to increasing QE.
Either way it’s likely to be a roller coaster ride so it might pay to look at the wider picture and trade that rather than the noise in between. Look for the big levels, particularly the fib levels from the big move up from 75.