Big day in Forex. Most currencies had large moves, majority of them in both directions. I wouldn’t say this was very easy to trade, none of the days this week were, but swings were large enough to satisfy not only scalpers and other short term traders. Even people looking for results in the intermediate range, like me with trades in this blog,  could have had good day.
European Central Bank decided to join the rest of leading CBs in lowering rates to record levels. ECB lowered its benchmark interest rate by 0.25% to 1%, which is the lowest ever. More importantly, they also stepped up “quantitative easing” efforts, something that ECB has been very reluctent to pursue. Bank plans to purchase around Euro 60 billion in euro-denominated covered bonds, trying to spread it across all member states. This has been always seen as a major obstacle to “pumping” money into economy- there is no single, prevailing Euro denominated bond market (like US Treasuries). All issues have different rate and safety rating. Details about allocation of purchases were not disclosed, but Euro reacted sharply, gaining significant ground. With Swiss Franc in tow. ECB’s action of increasing money supply means they must think FED’s earlier moves are bearing fruit, and they are following this example.
The stress test results revealed that some banks need additional funding. This is hardly any news, which makes the long waiting period even more puzzling. I wrote about it yesterday, as well as about EUR-JPY trade. I went short this pair late in the day. Price moved nicely for a little while and then stalled. About 12 hours ago I closed it well short of target, but with some pips.

Trade was closed for about 70 pips gain. Move down was not quite as fast as on reactionary swing. By the way, this is when I start my day. I got up, looked at the charts, other Yen pairs had bullish characteristics, so this trade had to be cut. Later on on ECB announcement Euro made strong move and current quote is 132.80. Speaking of other Yen pairs, here is the trade in NZD-JPY, also from last post.

This turned out to be a very nice breakout, with minimal pullback shortly after entry. My objective was 130 pips and that’s what market gave. It was a little surprising, though that price didn’t go for the “big figure”, 60.00, before retracing. It still might do it. I’ll watch.
With EUR enjoying good fortune, I want to see if it is going to last. EUR-CAD has fallen 1500 pips in 2 months. It is possible price is trying to level off or reverse. Hourly chart moved to just above most recent high and I think it is worth exploring.

One order is placed at 1.5745 with an objective of 200 pips. This last leg up was fast. It would not be unusual if pullback was also substantial. With this in mind second order is placed at 1.5555, which gives it about 100 pips risk. I’m not looking for a major reversal, but rather this one play. If this works out and price gets to 1.6000 neighborhood, I will give it a second look through a prism of a longer term chart.
Not long ago I had a post about longer term view on GBP-CHF. Trade happened and there were additional developments, apart from today’s plunge. I will try to cover that in my next post, most likely tomorrow. And I also closed CAD-CHF trade on the collapse of CAD. Chart tomorrow.

Mike K.