With the President’s Day here in USA, currency markets moved in slow motion. In case anybody had not heard it before, or had any doubts, Japanese officials confirmed that their economy is also in recession. To be more precise, Economy Minister Kaoru Yosano stated “There is no question that this is the worst economic crisis since the end of World War II”. Even worse than the real estate buble bust circa 1990. Japanese companies are taking cue from their American peers and are cutting employment at an unprecedented rate (for Japan). Numbers are bad, Japan’s gross domestic product contracted 3.3 percent from the previous quarter, or an annual pace of 12.7 percent. With interest rates at almost 0%, cutting them does not seem to be a viable option. Officials hinted they may soon call for more government steps to stem the widening damage but urged lawmakers to first give final approval to a $52.2 billion extra budget. So, if anybody was wondering why Japanese Yen has been persistently getting stronger in face of ever worsening economic conditions, I’m afraid you will just have to keep wondering. JPY got stronger again last night, although this probably was only minor adjustment.
Which brings me to the markets open yesterday. Most of the pairs gapped at the start, so I placed few trades. This is explained in more detailes in a post Exploiting Weekend Gaps . Among other movers, Yen pairs jumped lower.
One of the trades I took was in EUR-JPY. After some initial activity, price settled into range and failed to close the gap. I exited the trade couple of hour ago for minor gain. See the rules in original post.
Some trades did work as intended, though, like this one in GBP-CHF.
Trade made 100+ pips, but I decided against a countertrade after target was reached. Bad decision, it would have been another 150 pips. With Monday relatively slow, chances are for a little more activity tomorrow. Hard to say where this activity would manifest itself, but Yen crosses are always potential buy on a move above recent highs, GBP-CHF looks bullish above 1.6715 on 1H chart. Also after a failed attempt last week, my attention returns to Canadian Dollar.
I placed a sell order for AUD-CAD at 0.8005 , seeking about 110 pips. Seems like CAD is quietly gathering strength. Than again, that’s what I thought last week, too. US dollar should also be more active tomorrow, for those who trade USD(everybody). But this week I’m mainly counting on Yen to get weaker.
Mike K.
Lately I’ve been very interested in your posts because they contain nice little trading wisdom nuggets each inside of them. So it’s not any more just reading how you are doing but learning stuff that I didn’t know. Like mini forex school for me. Thanks and great work.
Thank you for your kind opinion. Glad you like the posts.
Yen’s strength has been mysterious. Once the “carry” trades were undone, it still continued lower. I read a lot of fancy articles about why, how Japan was a safe heaven and so on. None of this makes sense, because nothing is safe there. Hope yen’s bull is over.
Mike, in your opinion ,do candlestick charts work better on any one currency, or market. Same for time frame. Could somebody use only cadlesticks for timing, for example, weekly charts?
Heather, I’m sure a lot of people want to see yen get weaker. Much weaker.
Rob, I wouldn’t be using candles alone for timing. If you are looking for classic patterns, as described in books, I think the best to trade would be weekly and daily charts of commodities. That’s only my opinion.
Mike, do you trade commodities? Actively?
Yes, but not actively. I take position trades from time to time, with outlook for weeks or months. Years ago I traded them all the time. Now forex is main focus.
Would it be possible for you post your opinions about some of the commodities markets? Oil, silver, sugar? It would be appreciated.
I don’t know, Rob. If something really interesting comes up, well, maybe. I’d rather stick to forex here.
[...] time previous trade was exited. Next week I’ll take another look at it. In the post “Japan in recession” I mentioned briefly a buy in GBP-CHF above 1.6715. I’m bringing it up because there [...]