Look for USD pairs to revert towards longer-term mean values

The end of the USD bull run was signalled last month by the drop in USD/JPY and with the speculative market still overly long the greenback, I expect to see the major USD pairs revert towards more neutral levels over coming months.

  • EUR/USD: I’m certainly not at all comfortable being long EUR against anything but I still think we will gradually edge higher and settle back around 1.18 or levels like that alter this year. This pair is ripe for range trading strategies so buy dips and sell rallies; we should have plenty of time to trade out of positions.
  • GBP/USD: I’m still moderately bearish GBP in the short term and I think the pound will continue to see weakness on the crosses. Depending on what happens with the Brexit referendum, I would not be at all surprised to see the Cable below 1.40, if only briefly. On a longer-term perspective we should revert towards 1.53/1.55 (which is roughly where it was when I started in the market in 1986!).
  • USD/JPY: I expect this pair to find a lower trading range over coming months, perhaps a wide 105/120. The fact that the pair is lower now than it was pre-BOJ is a screaming sell signal imho. Pick your levels and sell rallies.
  • AUD/USD: The market is short and overly bearish at the wrong levels. Traders are blindly using the AUD as a China proxy without quite understanding what they are doing. Real money buyers have been very conspicuous on every big dip. We may chop around .70/.74 for a few weeks but ultimately this pair will settle back comfortably above 80 cents.
  • Gold and Silver: Going Up! Just look at all major Central Bank policies.

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