Another central bank raised interest rates. This time it is the Norges Bank, which decided to  raise its main lending rate by 25 basis points from a record low to 1.5 per cent. Norwegian central bank became second among the industrialized nations to bump interest rates after prolonged period of lowering them. Reserve Bank of Australia was first. Both of these countries represent the so called “commodity currencies”, so with prices of raw materials moving up, they may soon face some inflationary pressures. This action made the Krone strongest of this group, on a day when they experienced largest fall in weeks.

I do not trade NOK on regular bases. Every now and then trades are taken using longer term charts, most recent one covered here was a sale in CAD-NOK, profitable trade. However, move by NB was important, because it suggests more central banks will follow. During last couple of years cutting interest rates was rewarding to currencies. This trend has stopped earlier in the year and is reversing now. From now on we should expect currencies with increasing rates to be appreciating in relation to others. AUD set the tone earlier this month and I think NOK pretty much confirms it, or at least it will over coming weeks a return of historically more typical trend. Those who are trading fundamentals should take it into account before all policy setting meetings in foreseeable future.

While big time fundamentals are very important and influential, they lack the precision which I think is necessary for active trading. For that technicals are used, charts to be exact. They have own limitations and shortcomings, of course, but as far as I’m concerned trading with any frequency would be difficult without them, even if the are extremely simple. The way I kept the graph of EUR-NZD.

I’ve been tracking this pair for a few weeks now, with intention of buying it on upside breakout. Entry has been adjusted few time and surely anybody who followed it with me either fell asleep or lost interest long ago. I updated it most recently in New China scare post, just couple of days ago. Today order was triggered at 2.0030, on large adverse Kiwi move. Market will decide length of this trade, I only chose stops. Initial one is at 1.9680, and hopefully, it will be moved up soon.

I was looking at a possible beast trade yesterday, which didn’t happen. If you saw today’s headlines, you know why- “risk aversion”, “safety of the Yen” etc,. Yeah, yeah, yeah, whatever. JPY indeed had a strong day, but not as strong against GBP as other currencies. The same hourly chart of GBP-JPY I was looking at yesterday, started to build a reversal pattern, with a small cluster of bullish  candles. I went long at the market, which happened to be at 148.63. Most recent minor high gives me a target of about 100 pips, where I want to close half of the position and then try to hold on within the rest for another 80 pips or so. Maybe by tomorrow everybody forgets about safety and becomes intrepid, or reckless, and dumps the Yen.

Mike K.