Breakout: EURUSD new carry tradeWith the technical validation of the fundamental environment, it appears the new range for EURUSD is 1.08 to 1.055
The continuous slide of USDJPY without follow-through in the dollar lends itself to the conclusion of winding down long positions in USDJPY lacking the apparent short in dollar alone. The prevailing rhetoric is "safe haven" seeking, that leads to the appreciation of yen, with a flight from risk evident in mainland Asian markets. I believe the movement in pair is more likely removing profitable trades while the underlying factors affecting carry trades do not reflect a further return on investment.
The opposite exists in EURUSD: the headlines can describe policy divergence better than this post. However, less covered is the future value of the carry trade as a product of central bank policy. Policy (carry) favors short EURUSD in addition to the bearish sentiment enveloping the pair. If this assumption stands, the pair will be subject to a somewhat wide, but defined, range.
A short term reversal at 1.075 allows additional short entry opportunity at: 1.0780, 1.08, 1.0830. This is likely to be a very short term correction in order to define the trough of the range.
