Once again rumors fly regarding Chinese foreign reserve. I already received an email from one of the panic mongers screaming that “China is dumping USD” if favor of other currencies. This new “revelation” is supposedly based on a statement by one of the Chinese central bank’s officials. However, according to more reputable sources, no official statement have been issued regarding this matter. Mr. Yi Gang, a central bank vice governor, told reporters that diversification of foreign reserves is a long term policy, without getting into any details. Absolutely nothing new or even remotely interesting. This process has been going on for a long time now. It must be that putting “China” and “foreign reserves” together makes for good headline, one more scare for the Dollar.

Speak of the devil. Even my local paper got in on the act last week, publishing an alarmist story about USD. Subject was the 1.5000 level of EUR-USD. Now, currency is not a subject of daily or even regular coverage in local press, it starts to surface when it becomes a “hot” topic. This goes for all other financial markets outside of stocks, such as commodities, normally after a prolonged move. When people who clearly have no business talking about something, all of a sudden become “experts”-  watch out. This could mean that market of interest could be very late in its move. Our paper has fantastic record of developing interest in “hot” markets at precisely the wrong time. It happened to Canadian Dollar two years ago, grains, oil at the top last year and bottom this year and many others. Perhaps it is time to start looking at weekly charts of Dollar crosses, using Seattle Times story as a contrarian indicator?

Joking aside, opening for currencies was relatively docile, But things changed after Europe opened. Not dramatically, but enough to get noticed. Looks like after Friday beating, Pound is reversing again. GBP has been rising all day, seemingly expecting bad economic data from last week to get better. This remains to be seen, but last few hour have been promising.

The Euro-Cross received good amount of coverage from me, including the SNB post from yesterday. Focus was on daily chart of EUR-GBP, with a remark of possibly switching to 4H graph if needed.  Well, price appreciated after opening, but ran into heavy resistance at around European open, forming bearish engulfing line, strong reversal pattern and a sell signal. I used it as a short entry. Heaving a signal on larger time frame would be better, but the way price is unfolding, it could be a late entry with too large of a risk. As is, the stop was at just above preceding candle, or about 32 pips. But this situation has its shortcoming also. Going for target of 0.9000 could be a little over ambitious. We can see massive bullish candle dominating the landscape. Very often, middle region of out of proportion candles creates support/resistance. I will have to watch 0.9080-0.9100 zone and probably close the trade there, if it even gets that far. For now short trade is on.

It is time to return to my original price action trade. Two different trades were suggested at the beginning, one of them, GBP-JPY came to a successful completion, while the other lingers in obscurity. Well, I’m going to renew the quest.  Buy order for EUR-NZD had be to lowered few times and currently stands at 2.0030. Once again, no objective is set. If executed, market will decide how far this trade gets. Stops will be moved under latest lows, just like it was done with the beast position.

Mike K.