Trade view / 26 November 2012 at 8:38 GMT

Long AUDUSD on strong risk appetite

Head of FX Strategy / Saxo Bank
Denmark

Update 2: 27 November: I don't like the looks of things here - now we get "good " news out of Europe and 1.3000 in EURUSD suddenly looks like hard resistance and the USD looks firmer. As well, the market broadly speaking is seeing generally declining volatility, which usually spells constant treachery and false breaks. AUDUSD broke in Asia to new 8-week high, but is closing the day back lower instead of following through higher. Now we've backed up to 1.0460+ after the run lower did not take out the stop for this idea and I change the tactical outlook back to neutral again. Long positions taken yesterday might be in a small profit and positions taken today in a small loss.

Update 27 November: Traders who took the below position might consider raising stops to 1.0437. The trade idea is still valid as a new trade today, with entry zone at 1.0465-85 and a stop at 1.0437 offered and the same trade management tactics as decribed in the PDF if the pair progresses above 1.0500.

 

A few highlights from this trade. Also see attached PDF.

  • The market swept aside all negative sentiment last week as the focus is on the hope that China will unleash another round of stimulus, that Europe will navigate the latest systemic risks without problem and that US politicians will strike a deal on the fiscal cliff - all feeding into strong risk appetite and supportive of the Australian dollar and negative for the USD.
  • The focus on a weak Japanese Yen and the competitive devaluation game leaves Aussie in a good position with its G10 higher interest rate and its hard assets, particularly with support from metals markets as gold broke above key resistance.
  • Technically, the break of local resistance suggests attractive risk/reward for testing the long side as technical breaks offer an "either/or" way to test the short term market potential

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Non-independent investment research
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10_AUDUSD.pdf

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