There is an EXTENSION (a-b-c) that is targeting 127.00, that level coincides with a FIBO on the daily chart, making it a plausible target and one that we will look to take advantage off. This is coinciding with a weak RISK sentiment in markets.
EURAUD should hypothetically move HIGHER in periods of RISK AVERSION. This chart is constructive, leading us to believe that the move in RISK is broad and should affect HIGHER BETA currencies more negatively than FUNDING currencies. Friday’s PRICE action was EUR negative, so we are keeping an eye out and will look at other EUR high beta charts.
EURNOK also has a constructive chart. We could identify the current wave as a possible beginning of a wave-3, that should take the cross materially higher.
EURCAD looks like it has fulfilled a cycle. The chart has been choppy and erratic, as most of FX and seems to be looking for direction. We notice a slight double top, but in a RISK OFF environment, this cross should move higher.
This is the most perplexing chart for us. During both periods of RISK ON/OFF this cross has been MOVING LOWER. We know that the SNB is a big participant in FX, but from looking at this chart we can see they have not been defending the floor in EURCHF as the demand for CHF has been relentless. We are seeing some consolidation and a BOTTOM FORMING. The corrective move higher should be significant, but we would like to see more consolidation before we commit.
The bottom line is that FX has been erratic as of late, choppy and lacking clear direction. We suspect that beyond the EUR, there may be a broader RISK OFF sentiment starting to creep into markets. Being that this is happening at YEAR END, we will be cautious and reduce our notional size and exposure as liquidity at year end will be compromised and moves can become even more complex.
If RISK is to sell off hard, we suspect the USD will do well, as will the JPY and then the EUR. The most at risk currencies we feel will be the higher beta ones.
We will continue to do work this weekend and post any relevant and actionable charts.