My short from early Friday paid out well before going into the break, with strong US jobs data lending strength to greenback. The market is still digesting this news due to the long weekend, and smart money is trying to determine if they want to invest in the dollar on interest rate speculation or if they want to invest in higher-yielding currencies (i.e. the Euro or Aussie) because they are, well, higher-yielding.
I see a lot beginners get confused about that point. They assume that any good news about the US economy is dollar positive and bad news is dollar negative. What the text books don't usually cover is that things are different in markets that are risk-averse.
More positive economic news out of the U.S. has fueled expectations that the world's largest economy will grow out of its recession sooner than other countries, which has tended to support the greenback. Still, better data also supported investors' willingness to move into assets and currencies perceived as riskier but higher-yielding and likely to perform better in the early stages of an economic recovery, including the Canadian, New Zealand and Australian dollars.
Daily Outlook: In short we are technically in a bearish run here. The pair broke through its short-term bullish consolidation support yesterday, and I am eager to see if that holds in more liquid markets today. The pair is also capped by a falling daily trend resistance line (top blue line on chart below). With these bearish signals in mind I will look to sell on on rallies, preferably to resistance zone between 1.3500-1.3530.
Trading Idea: Primary trade is to look for bearish trade opportunities in the 1.3500-1.3530 resistance zone (just below falling trend resistance). Short targets from 1.3530 are 1.3500, 1.3575, 1.3545 and 1.3505. I am also anticipating some support above 1.3390 (support from late March) that aggressive traders make look to scalp, or if we see consolidation at this level a break below would be bearish.