Forex Updates

With the reaction to Friday's data the opposite of what one would expect, the market was clearly positioned too aggressively against risk appetite and we are seeing a short squeeze on these positions. That means the currencies that the former weaklings are turning stronger and vice versa. GBP, for example, which was pounded to new record lows against the Euro on Thursday last week, has come storming back and GBPUSD has already punched its way back to the 1.5000 level in this morning's trade. USDCAD headed back to 1.3000 as we expected last week, but the turnaround from that level has given us whiplash - we look at the 21-day moving average with interest for that cross to see if the triple-top is confirmed. As stated above, we have little faith in this rally in risk beyond the shortest term, and the challenge becomes gauging whether we are seeing a rally that peters out today, tomorrow. or not for another week or two. We suspect that this rally has limited legs and would prefer to see signs of reversal by midweek, but we'll keep our minds open for a large countertrend rally if, for example, 1.3000 in EURUSD is achieved and maintained in the days to come.