So far this week very little of interest happened in financial markets, currencies being no exceptions. Not much movement and if there is any it lacks conviction and/or follow through. This is happening in spite developments which, in theory, should create more than a yawn. There is some talk about Austria becoming second Greece and on verge of having its ratings cut. Hypo Alpe Adria Bank has been nationalized in rapid move, preventing the bank form falling into bankruptcy. Oesterreichische Volksbanken AG, the country’s fourth largest bank, was placed “under surveillance” by financial regulators. Banks failures in Austria would have a domino effect in other countries of Central Europe, yet markets seem unconcerned.

On a similar note, Moody’s Investors Service issued a statement that Aaa rated countries will probably have to start cutting their budget deficits before economic recovery is guaranteed as borrowing costs rise. This sounds like a very sound general opinion, something just about everybody shares, but it could mean something else. Vague warning to countries like U.K. and U.S. that public debt levels might warrant lowering of ratings for them. Very significant development under normal conditions, but once again markets were quiet. Probably December effect in its incomprehensible ways, as well as waiting for the event of the week - FED policy announcement tomorrow.

Right now most of the currency pairs seem to be in a holding pattern within larger price swings, something best visible on intermediate term charts, like 4H. Especially Yen crosses, something that one of the readers called “coiling like a snake”. To make matters even more complicated, JPY is not the influencing factor of late, so all the charts look a little different and must be analysed on its own. Some are looking for direction, like EUR-JPY, while others seem to be building bases for a bullish run, NZD-JPY for example.

I would like to see to about 65 or a little more. Exact level is not as important as a pull back after that. If this happens, any move above that point is a buy. Should price drop to 64 or lower, emergence of bullish reversal pattern would signal a buy also. In this scenario I’d like to have a tight stop , about 100 SMA or so, because any negative news could easily send the price down in a hurry and change my view from bullish to bearish. Clearly there is more waiting here.

With the dominant market swings unclear, I’ve been playing with Beast on the long side. Recently I have been bullish British Pound, with couple of other trades under way. No exception here. Two trades have been taken. First one shook me out by undermining my confidence. Breakout was not unfolding as expected and I settled for a minor gain of 13 pips. Second one was a very nice trade, which produced 50 pips, targeted number. On the subject of Yen - FED announcements had strong influence on JPY recently, something that might happen tomorrow.

Some time ago I covered  Price action Forex trading. By that I mean using nothing but the price for entry and stops and no objective for the trade. For details see the original post, and see how those trades worked out. Another set up suitable for this tactic is starting to show on intermediate chart of EUR-AUD. It calls for long entry above recent high, or 1.6158. Stop would be just under the low. If price makes new low, entry will be lowered to new latest high, which appears to be about 1.6075. This will be updated every time adjustments are made. Meanwhile we wait for FED tomorrow and for Christmas next week.

Mike K.