Here attached the UBS pair’s weekly technical comments..
They are maintaining their bullish stance re equities and pro risk assets generally. They don’t mention the eurusd specifically but state they are bearish on the dx and so we have to assume they are bullish on the euro as the dx is mainly the eurusd pair. They use the AUDUSD as the proxy for anti or pro risk although it makes up for a very small percentage of the dx (dollar index). In spite of the recent sell off the audusd did not make a lower low. She has some relative strength therefore. They use this as supportive evidence for a continuation of the pro risk rally. They could have added the fact that the CRB did also not make a lower low and her bull trend of 3 years is still intact for the moment.
I take a very similar though slightly different view on the technicals. As i commented last week, we were over sold and a pro risk bounce was the higher probability trade, even for the euro. Although the dx is over bought, there is no indication of her strength is over following this near term profit taking. The euro chart is a weak technical chart now and the macro issues remain disasterous. The euro issues need to be resolved as Italy’s debt sale today showed yet again. Can the euro decouple from the dx, no. The maths of the dx makes this extremely unlikely. Can the dx remain strong and even add weight and asset markets rise – yes, imo. Though clearly, commodities may underperform if the dx does well vs other equity sectors. UBS misses these critical discussions at their peril. The logic of historic correlations must always be questioned and reviewed. It seems to me we are in the process of changing correlation levels between instruments. This is natural and very important to recognise and adjust technical models accordingly. Thats my two pennies for what its worth. We must all make our own decisions.
Rich
(6 votes, average: 5.00 out of 5)
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