The commodity currencies have suffered from the same volatility that has roiled the rest of the market; but the distinct correlation that these particular fiat units have to underlying sentiment trends has created ugly chart patterns. Many of the crosses are in the middle of ill-formed ranges or are pushing new trends. In this volatile mix, there are few clear levels to mark entry and stops; and the general lack of a clear trend means most positions would have to be actively monitored with a high level of risk given the presence of volatility. Nonetheless, there is considerable opportunity out there. Should risk trends rear next week or the RBA deliver a surprise; it could develop breakouts that are perhaps a little vague right now. For now, it is a wait-and-see game in looking for new positions.
As for my existing commodity currency exposure this week, I had two setups. I am still long EURAUD (in a reduced size) after it bounced up from the bottom of its descending trend channel. However, it is important for me to keep things in perspective and realize that until there is a bigger reversal, this is just a counter-trend bounce. An objective of around 1.54 is a reasonable target. If the market moves back above 1.55 (a long-term pivot) or 1.57 (the top of the 10-month trend channel), I will reevaluate the opportunities. In the meantime, I’m happy with reasonable and more modest targets. My other position – AUDCAD – has not be as successful. The pair has tentatively pushed above 0.9450 and has come close to being stopped out before a 61.8 percent Fib stepped in at 0.9475. With a cutout point just below 0.95, there isn’t much room for the short-term rising wedge to push. As a side note, to those that were cognizant of AUDNZD’s advance to the LT triple top of 1.2935 and subsequently shorted at that level: kudos.
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