I remain short AUD/USD since yesterday with a profit target at 85 and I expect more Australian dollar weakness going forward as risk-aversion takes over the market sentiment. This week, the Reserve Bank of Australia left its benchmark interest rate unchanged. The market had been pricing a rate hike and the RBA announcement caught many carry traders by surprise. As a result, many currency traders have been selling short AUD/USD since the rate announcement. While AUD/USD long positions are 1.7% stronger since last week, short positions are 34.3% stronger since last week, according to the FXCM SSI, which measures the positioning of thousands of retail traders. Good luck

I continue to look lower in anticipation of a break below 15700. Risk on shorts can be moved to 16080. While there will be retracements higher following a break of 15700, strong support does not come in until 15070. Former support at 15850 is short term resistance.

I’ve been away from markets the past two days, but that may have actually worked in my favor because I’m still short the New Zealand Dollar and wasn’t at all tempted to trim exposure. As it stands, my order is over 200 pips in the money and my stop is very far away. I’d like to tighten risk and move the stop above 0.7000, locking in a very respectable profit but not taking myself out prematurely. I’m on the lookout for other short ’risk’ trades but no firm ideas just yet.

There were two high-powered interest rate decisions this morning from the Bank of England and the European Central Bank. However, these events were otherwise overlooked as the winds of risk aversion once again whipped up. This is an unusual burst of energy considering the presense of one of the most market-moving economic indicators (NFPs) scheduled for release tomorrow. However, preemptive moves like this are not that unusual. This particular move is especially reasonable considering this recent move is a revival of an existing trend and financial cracks seem to be developing at a rapid pace. The most pressing threat this morning - sovereign credit rating concerns among the troubled European economies.

With this tumble in risk-laden positions, the various positions I have held on to with the belief that sentiment would once again capsize have found significant gains. This morning, I’m taking profit on the EURUSD short I established at 1.42. The presence of a long-term 50 percent Fib retracement suggests we could see a stalled move. If the market surpasses this level, I may be encouraged to jump back in. However, I am still short both EURJPY and EURGBP which have technically more room to fall and are fundamentally more appealing. considering the dollar has gained significant ground over the past two months and risk unwinding in the FX market is growing somewhat mature; it is important to look for pairs that are lagging this hearty trend. GBPUSD looks to be the ideal candidate on this front. This pair has been bound to a 1.7000 (1.6750) to 1.5700 range for the past eight months. This morning, we are testing the swing lows from October and the long-term 50 percent Fib at 1.5750. If we see a close below this level, I will establish a short with a wide stop (150 points or more) and set wide targets. Obviously, with that level of stop, I will have to adjust position size to control risk.

GBPUSD is once again testing 1.58, a level that has served as support of a well-defined range since late May 2009. I will look to enter short on a daily close below this level, initially targeting resistance-turned-support at 1.5280.

The objective from the 1.4200-1.4600 consolidation break is now being tested, with the market dropping into the 1.3800’s thus far. However, while our core view continues to favor additional downside, short-term technical studies are now oversold and warrant a much needed and healthy corrective bounce. Any additional declines on Thursday should be very well supported on a dip below the 1.3800 figure, and as such, we will look to establish a very playable counter-trend long in anticipation of some major corrective relief. STRATEGY: BUY @1.3790 FOR AN OPEN OBJECTIVE; STOP 1.3690. RECOMMENDATION TO BE REMOVED IF NOT TRIGGERED BY NY CLOSE (5PM ET) ON THURSDAY. POSITION SIZE SHOULD BE 3X TOTAL EQUITY.