European Central Bank cut its benchmark interest rates by 0.25%  to 1.25%. I doubt anybody was surprised by this move, except perhaps those who wanted more. President Jean-Claude Trichet left the gate opened for farther cuts if warranted, although the tone of his statement indicated reluctance to that. I think that most people wanted to see what additional action would ECB take, this so-called “quantitative easing” which broadly covers any other move by central banks. None of this happened, also, much as expected. To date EU has been very reluctant to follow in footsteps of BoE and FED-  policy of expanding the money supply in the economy by buying securities from banks. Trichet stated vaguely that ECB would examine other options but didn’t elaborate. Just like other CB’s they could, in theory, buy government bonds in the secondary market, buy face operational difficulties in how they would allocate that across the 16 member countries. It is not as straight forward as elsewhere. So, for now at least, no additional steps were announced.
The G20 members, on the other hand, did come up with some new measures. There is a whole list of them, which I’ll skip for now, but one stands out. Prime Minister Gordon Brown, the host, said leaders at the G-20 summit have agreed to give $1 trillion to the International Monetary Fund and the World Bank to help struggling nations around the world. Details of who would contribute how much and over what time span were not immediately available. One thing is clear, donors will have to borrow that money themselves before they contribute. Mad world.
Tell you what else is mad, the weather. It was snowing here yesterday. For at least three hours. Couple of blocks away from my place there is a large landscaped area which is attended to once  a week. I guess yesterday was the day, because there were people doing the work. Including mowing lawns, while thick snow was coming down. It was quite hilarious, I pulled over to take a closer look. Too bad I didn’t have a camera with me, most people will not believe.
Here is the chart of EUR-PLN trade that was mentioned in last post. And the details.

If you recall I wanted to sell it upon emergence of bearish candle after Sunday. Monday was still bullish, but Tuesday’s candle changed color. I was hoping for smaller reversal candle like doji or a star, which would close somewhere between 4.7000 and 4.8000. Instead market painted a Bearish Engulfing Pattern (A), not a problem in itself, but this limited my profit potential, entry was lower, and original stop at 4.9500 became too big. Eventually, decided to sell with a stop just above the minor high of 4.7500. Entry was at 4.6200 and price moved swiftly my way. Rumor has it that ECB stepped in to support Central European Currencies, but who knows? By the time it was time to call it a day profit was good so decided to close it at 4.4947, for 1250 or so pips.
Sell order at 4.4000 is still valid, main trade, if this move happens. The above position was a bonus play. Price action didn’t develop exactly as hoped for, but close enough  to produce few pips. I’m happy.
Trade from yesterday also came to a conclusion already.

Target was not very ambitious, only 55 pips, but nice little trade. Swissy played ball and took a dive. There is something about EUR-CHF I should cover, but there are so many other things going on it has to wait. Tomorrow, Friday, might be better time for that. I’m placing one more new order before the weekend.

Euro became a little stronger today, but it might be running its course. Want to try EUR-CAD on a break below last lows. Sell order is placed at 1.6585. Objective is 160-170 pips at the moment. This might be a little rich, so if the trade happens and shows decent profit tomorrow, I’ll close it before the weekend. We will see tomorrow and also take a look at the long term GBP-JPY trade, which is under way.

Mike K.