Sign of progress today, in the fight with recession. The Treasury Department has approved 10 of the nation’s largest banks to repay $68 billion in government bailout money, which came from Troubled Asset Relief Program. Most  the banks wanted to get out of the program to escape government restrictions such as caps on executive compensation and others. They needed a permission from FED to do it.  After holding out for few weeks, authorities granted approval to some of the banks which passed the “stress test”. Even Morgan Stanley, which did not pass the test, was allowed to repay loans immediately, because it had raised enough capital quickly.
Treasury Secretary Geithner was praising the program before congress, stated that government even made some profit. The banks now have the right to purchase the warrants Treasury holds, at fair market value. Besides Treasury’s potential income from the sale of the warrants, the 10 banks already have paid dividends on the preferred stock totaling about $1.8 billion over the last seven months. Sounds great, however, banks are still dependent on government support, including debt guarantees from the Federal Deposit Insurance Corp. and credit lines from the Federal Reserve. All banks continue to hold the toxic, mortgage-backed assets at the heart of the financial crisis which still pose a danger to system . I hope the worst is behind, although not convinced.
Neither are the markets. Announcement was met with tepid response from almost every direction. On balance, currencies were a little more lively than other markets, but nothing sensational happened. Pound got a little stronger, which is good, as well as Canadian Dollar, also a welcome development.

Trade in CAD-CHF from yesterday worked out very well. Premise was to buy it at 0.9780, with a target of 0.9850. Turned out to be a quick trade, with price reaching objective, for a modest gain. I like this trade- almost exactly as anticipated. Doesn’t happen everyday.
Japanese Yen is doing what it normally does best, being vague. Not long term, JPY is bearish on all charts on daily and higher magnitude. Intermediate graphs, though are sending mixed signals. GBP-JPY looks as if it is setting up another move up and I have a buy order there. But I’ll also hedge my opinions with a sell order in another pair.

Kiwi-Yen is showing weakness. On 4H chart this would be demonstrated with move under 60.00. Price is gravitating lower, it could be forming a base, but I placed a sell order at 59.94, in case it breaks lower. Objective for this will be about 200 pips, at which point search for a buy set up will resume. Once again, if this was to happen, I see it as a pull back in a major up trend, not an important reversal. We should know before the weekend.

Mike K.