I hope everybody had nice holiday break. Mine was great. Good to spend some time away from your work, whatever it happens to be. In my case there wasn’t all that much to do anyways (work-wise). Rightfully so, world focused on other things than financial markets, or, at least, they took a back seat over last few days. One could argue that this coming week also should be treated easy by traders. After all, it ought be a mirror image of last one. More on this a little later.

In an interview published in China, her Premier, Wen Jiabao, expressed interesting opinion about Chinese currency. Not that long ago this country’s central bank signaled that it was ready to allow Yuan to appreciate against other major currencies. In a strange turn around, Mr. Wen said that China will not yield to any pressure forcing currency appreciation. He went as far as saying that current policy is a contributing factor to recovery of global economy.  In other words, when they pegged Yuan to the Dollar last year, they did everybody a favor. What a guy! Don’t know why I’m even surprised by this change of heart. Every other statement contradicts the last one in this variation of cat and mouse game. If Chinese officials had a collective “tongue”, it could open a wine bottle. Surely new year will not bring any changes and we will be treated to more of this farce.

Liquidity is expected to remain relatively low over next few days, very typical of holiday periods. This means that news with any degree of surprise could cause sudden spikes or short term reversals much easier than normally. I will keep my trading comparable to last week- much less activity and smaller sizes. Try to use the time to catch up on other work, which tends to pile up easily with me, master procrastinator. But I’ll place few trades, through Wednesday.

Canadian Dollar seems to be slowing down its advance. This here hourly chart suggests possible short term reversal. Possible buy point is at 1.5105, with a modest objective of 75-80 pips. Hard to say what is going to happen at the open, but given proximity of entry level, order is not firm yet. We could have situation like last week with CHF-JPY, when price spiked at the open on widened spread. Should this happen here, plan is to sit is out and enter later.

Another set up that looks somewhat promising, is a potential buy in AUD-NZD. Entry could be at 1.2550, with expectation for 1.2600-1.2610. One should however consider that cross has tendencies to remain consolidations longer than most others. Combined with sedated trading atmosphere, chances are higher than normal for the breakout to retrace into the base. Even with these limitations, though, I like the set up. For now.  As always at this time, opening gaps are possible, providing additional opportunities. But in general my theme is to close the year easy.

Mike K.