Risk-Off Trade Returns

Article originally published on innerfx.com and republished here with permission

Quote of the day: “Everyone is born with genius, but most people only keep it a few minutes.” ~ Edgard Varese

Good morning. Dollar is advancing higher while the euro, Aussie dollar and others are pulling back in risk-off trade as Italian bonds came under renewed pressure yesterday. The euro is already trading well below last week’s pre Brussels agreement market levels. It is a busy week – interest rate decisions being the most important events of the economic calendar, but also the NFP data on Friday.

USD Index

As seen below – the dollar has closed above resistance yesterday and the said line is again providing support. Well, it’s the risk-on / risk-off pattern that dominates the market since the crisis began.

USD Index Chart Daily 11-1-2011USD Index Chart Daily 11-1-2011


It wasn’t a good idea to buy at 1.400 expecting the support to hold, but the breakdown was a great opportunity to join the bears, which are still in control. Next important support comes at 1.3700

Euro Vs US Dollar Chart 4hrs 11-1-2011Euro Vs US Dollar Chart 4hrs 11-1-2011


There are two reasons why the Aussie dollar declined and is still testing the downside: 1. the risk-off game started yesterday in Europe and 2. RBA’s decision to cut rate by 25-bps. Downside is currently under pressure on bets that more rate cuts are coming but there’s also no reason yet why last week’s optimism should return. Important support is not far from current trading levels, between 1.0300 and 1.0340

Australian Dollar Vs US Dollar Chart Daily 11-1-2011Australian Dollar Vs US Dollar Chart Daily 11-1-2011


Cable is still holding onto recent gains against the dollar but the question is whether it is simply lagging behind others such as AUD and EUR and support is about to break soon? Well, I for one will keep an eye on the support formed by today’s and yesterday’s bottom near 1.600, planning to sell on break below.

British Pound Vs US Dollar Chart 4hrs 11-1-2011British Pound Vs US Dollar Chart 4hrs 11-1-2011


About abwehra group

The Art&Science of Trading Gold
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