We have taken new positions | A long threatening comes at last

There was a fair amount of volatility in Foreign Exchange trading after the US Federal Reserve December meeting yesterday, when the start of tapering was, at long last, announced. The beginning of the end of Quantitative Easing (QE), albeit of a tentative nature (monthly Federal Reserve bond purchases are to be curtailed by a mere 12.5%) in order to preserve, as far as possible, order in the markets, coincided with the passing of the vote in the US Congress to ensure that there would be no repeat of the government paralysis which led to a partial Federal shutdown in October, for at least two years (which is a long time in politics). Prior to that, Mr. Bernanke had made it known that the uncertainty caused by the political stalemate at the time was a factor in delaying the start of tapering.

As mentioned yesterday, we sat on the sidelines while the currencies with which we are concerned gyrated quite alarmingly. Things have now settled somewhat and we are again taking positions. These are in EURUSD (Short), Gold (Short), USDJPY (Long), NZDUSD (Short) and AUDUSD (Short). We also have a conditional short on the AUDNZD, which has reached a resistance level on the four hour chart.

Of double tops and double bottoms

As can be seen in the chart above, the Euro seems to have finally embraced what we would regard as reality, and might be starting to head back down after its counterintuitive rise on recent times. A clear double top looks like forming at the level of just over 1.38 to the US dollar.

No corresponding double bottom seems to be in prospect for the Aussie dollar, however. It is too early to say yet whether or not it will overcome the support it has met at 0.884, but price on the chart looks like it is about to do so.

In addition, we have the target rate set recently by the governor of the Reserve Bank of Australia, Glenn Stevens, which is 0.85 Aussies to the US unit. Our outlook for the Aussie is still down. Our belief is that price will proceed past this support to form a lower low on the weekly chart, to complement the lower high set in October, which in turn will describe a definitive downward dominant trend.