Aside from a EUR/USD stop-run effort up to 1.3720 before New York traders came in for the morning, the overnight sessions, as expected, were generally quiet. But the action heated up this morning as President Bush urged mortgage lenders to work with borrowers in the sub-prime sectors because it is not the government's responsibility to bail out those speculative homeowners who are about to lose their homes. The markets took this as a sign to reduce holdings in the risky markets including equities and the carry trades.

I traded AUD/USD a bit this morning on the trendline break of 0.8180 shown below. The top in wave 4 labeled in blue looks to be in place, which leaves a 5-wave decline in wave 5 left to play out. While below 0.8180, I would like to be short with tight stops in place just above 0.8200. The reward-to-risk ratio on this trade is exceptional, as the payoff here is 0.7970 at a minimum.

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Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

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The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.