Bank of Japan held its regularly scheduled policy meeting, last of the year. While it is always possible that an emergency meeting could be called by one of central banks around the globe, after all BoJ held one earlier this month, this marks the end of activity by financial authorities of major economies. No more scheduled policy meetings in 2009. This one was pretty standard, as far as most recent history is concerned- no change in interest rates, just as expected.

It appears that deflation is once again the focus for BoJ. Core consumer prices index fell at a near record pace of 2.2% in October from a year earlier, the eighth straight month of decline. The bank said it “does not tolerate” a situation in which the country’s main price index remains flat or decreases on a yearly basis. However, no specific steps were outlined about what they’ll do. With interest rates cut to the bone already and massively negative balance sheet, observers agree that BoJ doesn’t have very many options left at its disposal. Nothing new about strength of Yen was said, probably because of its recent weakness against the US Dollar.

Currencies have been rather volatile, probably one of the last spurs activity before holiday season sets in for good. Japanese Yen had good size spikes, as well as the commodity currencies. Once again Euro came under strong pressure and diverged fro Swiss Franc, which continued to rally. For the most part, at least.

I had a standing sell order for NZD-CHF. It was placed at 0.7427, with an objective of 70 pips. Price had large down spike, just missing my target by 2 pips. Very unpleasant situation. What do you do? Do you stay with the trade, for possibly much longer, or is this a reversal and you should try salvage as many pips as possible? Under most circumstances, I try to close the trade shortly after an event like this and that’s what I did here. Move happened during my sleeping hours, but I as soon as I got up the trade was closed at 0.7393, or 34 pips. Chances are good that price will test this new low again, only when? It could be after the weekend, so I’m more comfortable just taking smaller profit and be done with it.

I also decided to close AUD-CAD trade covered in “New currency might not happen” post. Sell order was set at 0.9525, using daily chart. Price has been moving my way, falling to 100SMA. I decided to get out here for 71 pips gain. Set up is still valid and good for probably another 130 pips. However, there is a chance for reaction at 100SMA, before down trend is resumed. I don’t want to have too many trades going into next week and even consider not trading at all. At this point I’m content banking pips rather than trying to max the trade out, but this cross will be revisited later, looking for more short trades.  Have a great weekend!

Mike K.