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Thoughts about yesterday's rally

So here are a few items I took out of yesterday’s rally and its current effects.

First, the AUDUSD held last week’s lows of 0.8070.  I mentioned yesterday that this fact could be key in determining if speculator money has soured on the Aussie, or is buying demand still prevalent.  The latter appears true, as the AUDUSD was a big winner and traded back above 0.8300 as the day went on.  Also, with gold back above 1200, I wouldn’t be looking to short the AUDUSD at this point.

Second, the EURUSD managed to bounce higher but still looks really vulnerable.  It seems to be forming another bearish Head and Shoulders pattern (see chart).  Therefore, if we break below 1.2250 than I fully expect to see the stampede in Euro selling continues.  Also, the EURAUD which spiked form 1.3900 to 1.5400 last week on major short covering, appears to be headed back down, as Forex traders are getting more comfortable renewing their carry trade positions in the pair. 

Last, Crude bounced yesterday but still appears to be an afterthought to traders.  Its currently back below $70 a barrel, and doesn’t seem to have much support.  I would have thought the Korea affair would lead to a little risk premium entering the market.  In the last few months its been hard to trade as I have seen it trade lower on good news and higher on negative news.  I guess traders are getting shy about being too aggressive with it, or large suppliers figure that $70 is a pretty good price and are selling into this market.