Couple of months ago, China Construction Bank, the second largest bank in the country, announced a pilot program to settle trade with foreign partners in Yuan (Renminbi). I wrote about it in greater details in Reserve Currency post. This was yet another scheme to make Chinese currency more “globally acceptable”, and make it play bigger role on international stage. Announcement was made during the height of “replacing dollar” debate, one among many made at that time.

It was disclosed today, that Yuan experiment is off to a very slow start. Very few foreign trading partners have been willing to pay for Chinese goods with the Yuan. Out of about 270 Chinese companies allowed to take part in the program, only a handful reported receiving CNY from their counterparts. The biggest problem seems to be unavailability of Yuan- since it is not freely floating currency, it is not easy to obtain it. Chinese central bank keeps tight controls over distribution. Those who managed to secure some quantities of Chinese currency, are reportedly unwilling to part with it. Expectations are high for sizeable Yuan appreciation, when, and if, its peg to the Dollar is removed, so it is being horded. I expressed my thought on the subject before, but will repeat it again- make the CNY a floating currency, maybe then this kind of  experiments would work. And we, speculators, would have more trading instruments to play with.  

There are quite a few currency pairs available for trading, but few more are always welcome. Not that this would necessarily translate into profits, but more instruments provide more opportunities. Those happen without us having much influence over, but we can try to capitalize on them. Results vary. Like with this here cross, AUD-CHF, which have been rather illusive to me this year. I must have featured 4-5 trades involving this pair in 2008, and only one worked out as intended. This one followed the pattern.

I hinted on it in yesterday’s post, when I closed CAD-JPY trade. Thought the outlook was not promising here either, and was planning on closing it. Maybe 30 minute or so after the post was published, trade was exited for a gain of 41 pips. Better than a loss, but short of expectations. Maybe my goals are over the top and should be brought down to reality?

Speaking of CAD-JPY, though. Yesterday I closed a short trade there for a decent profit. Over last 24 hours this pair has built an inviting reversal pattern on hourly chart. Funny thing is, today it has signs of being about the strongest among Yen pairs, big change in one day.

Hard to say if this an end of intermediate down trend or simply possible correction within it, but I like this kind of buy set ups so taking a shot at it makes sense to me. This is expanding on a comment from previous post, price behaved the way I was hoping for. Buy order is placed at 86.50, with a target of 125-130 pips. So far this set up is not supported by other JPY pairs. Some of them, GBP-JPY and NZD-JPY, look sickly and could be a sell under latest low. Prices will probably move outside of the current congestion before week is over. I’m ready for action both ways.

Mike K.