Last week quarterly economic numbers were released in Europe. They were all bad, with Germany, the “engine” of Euro zone contracting by 3.8%. I wrote about it in an earlier post. Today it was time for Japan to show a report card. It was not pretty. The world’s second largest economy shrank 4% in the first quarter, with projected annual contraction pace of 15.2%. This is truly abysmal, the drop in gross domestic product was the steepest since Japan began compiling such statistics in 1955. To put it in perspective, current slowdown easily exceeded even the worst declines caused by the 1970s oil shocks. Those who remember that time of trouble should have a good comparison scale. It isn’t me. Outlook is also lamentable, with unemployment set to rise, deflation looming and structural challenges remaining unaddressed, including a huge fiscal debt overhang. Public debt in Japan is the highest in the developed world, at over 150% GDP. In these terms, as a percentage of GDP, it is even higher than the much vilified US debt, at “only” 65% of GDP. Of course, we are taking great strides to catch up to Japan. This is one endeavor we should aim to fail.
Treasury Secretary Timothy Geithner gave a testimony before congress, on which dollar lost ground. Must have been the remark “financial system was starting to heal after a period of severe trauma”. In other words, these would be good news (if true), on which dollar gets punished. Crazy world.  At the same, time in a report from China, member of  banking regulatory commission suggested the Renminbi could become a bigger reserve currency in the future, accounting for 3% of global reserves by 2020. So here we go again, the reserve currency. It is possible, and even likely that importance of Renminbi will increase, but before this takes place, one critical thing must happen- it has to FLOAT! Not be bound by ranges imposed by Chinese central bank. I, for one, look forward to it, one more currency to trade.
Late in a day I took one more trade in EUR-AUD. First one lost 100 pips, but later on it looked as if reversal was staging and I decided to try it again as hinted in last post.

This 4 Hour chart shows a lot indecision at just under 1.7600. Once the doji formed, I saw it as good opportunity, with reasonable risks. Lows of of the doji and hammer (strong bullish formation) provided stop loss. I got out few hours ago at 1.7700. This chart suggests farther price appreciation. I probably should have stayed in, but what is done is done. At this time 1H chart might be more suitable for more long trades, probability of a decent set up forming there is higher. For now, I’m leaving it alone.
With the Pound enjoying a strong run, it could be good time to look at EUR-GBP.

On this chart I’m looking for a sell at 0.8755, with a target of 0.8600. The way this graph is scaled, it is not easy to see, so here is daily chart as well.

I would prefer to go for 0.8500 or even 0.8400. However, there is a potential support at just above 0.8600. This might hold, considering that it was established relatively recently. The risk part for this set up is not the best on the charts used. I will deal with this problem by using hourly chart for S/L selection once the trade is initiated. Notice, that time frame used is relatively large, so this trade is not expected to come to a conclusion in a day. Must be given some more time

Mike K.