These must be great times to be a financial journalist- there is no shortage to news to cover. Once again there was a barrage of new developments concerning all markets. Here is a couple of interest to currency traders. South Korea cut interest rate by 0.75%, but since Won is not widely traded by retail public, probably few people even noticed. The second one might be very important- possible coordinated intervention to bring down from these ridiculous levels. Japan’s reward for largely avoiding the credit bubble is a soaring currency. For those who don’t remember, their own bubble took place in 1989-1990, when it reached unprecedented level. Downtown Tokyo was valued at more than half of California. Japanese stock market hasn’t recovered yet. But back to currencies.Such has been the ferociousness of the yen’s rise since the summer – up 15 per cent against the dollar since the end of July, and much more against others – that the Group of Seven leading economies said on Monday it was “concerned at the excessive volatility” and may “co-operate as appropriate”. This means intervention, selling yen and buying others. Coordinated efforts would mean that resources of few central banks are used at the same time. For as long they they are talking, nothing is likely to happen, they just hope that markets will take start correcting themselves because of the prospect of intervention. However, if we here few more remarks like that and than it gets quiet- watch out! Bank of Japan is not very happy with Yen this high and they will likely start acting with or without help from others. From personal experience with past interventions, I know they can come at any time of the day. They happened in the middle of Asian session, early New York and just after America closed its business day. There is no pattern. They don’t want to piggy back anybody, but rather to change minds of players and reverse their opinions. Interesting times ahead and some wild ride, although not as severe as last few weeks. Since about all carry players have been shaken out already, there might not be much resistance, but, regardless, it will have to be done several times before trends truly change.
While we wait for the intervention, I keep playing with with GBP-JPY upside breakouts. There was a very good one yesterday right after market opened.
One of my favorite set ups- gap on the open. Very often they get filled within few hours. This one was especially nice, since 5M chart provided beautiful entry point at 147.50. I usually don’t try to close entire gap, but about 2/3 of it. These things very from platform to platform and I learnt long time ago that it doesn’t pay to try to squeeze these last few pips. I made 125 pips here and another 45 on another trade later on.
I also covered GBP-CHF here yesterday, here is what happened.
The upside move didn’t happen. I’m simply moving buy order down to 1.8150. My target for this one 1.8300.
So, I have this order pending, plan to keep buying short upswings in GBP-JPY and keep watch on news coming from G-7 meeting and BOJ. Next few weeks might be very interesting indeed, as if there has not been enough excitement to date.
Mike K.
