FX Trading – RBA Gets It Started

What did the RBA do? Nothing.

And their inaction confirmed what traders have been anticipating: a very unstable foundation for the global economy. Thus, despite the outlook for Australia’s economy in the long-run, it’s certainly no time to be raising interest rates any higher.

So after a very quiet memorial day in the FX market, the Australian dollar, naturally, is reacting most sharply to the RBA’s assessment of global economic conditions. And the euro isn’t doing so hot either.

4-Hour AUDUSD & EURUSD: correction over?

The euro has already touched fresh lows on its test of critical support levels; the Aussie is quickly erasing last week’s rise today.

And here’s another chart to pick through. It shows 1) the US Dollar Index futures, 2) the non-commercial long positioning on US Dollar Index Futures, and 3) the month-over-month change on US dollar Index Futures non-commercial long positions.

There’s been quite a steep drop-off in total non-commercial longs since the beginning of the year, but based on the long positioning action, it seems a lot of the speculative excess has worked itself out. In other words, there are plenty of buyers right now who will be looking to jump back in on the dollar as global worries provide additional fuel for the risk aversion trade.

We’d been shuffling around our positions last week and the week prior, expecting a dollar correction. We mostly got it. And based on price action alone, the buck could have easily fallen back further. But the above analysis tells us that this correction could easily be over already.

John Ross Crooks III
Black Swan Capital
www.blackswantrading.com

Black Swan Capital’s Currency Currents is strictly an informational publication and does not provide personalized or individualized investment or trading advice. Commodity futures and forex trading involves substantial risk of loss and may not be suitable for you. The money you allocate to futures or forex trading should be money that you can afford to lose. Please carefully read Black Swan’s full disclaimer, which is available at http://www.blackswantrading.com/disclaimer