The British Pound has been relatively strong over last few days, posting decent gains against the likes of Dollar, Euro and Swiss Franc. Not huge moves, nothing what we saw last year at this time, but enough to generate some headlines. Unfortunately, they came after the fact. Early in the wee financial press was very negative about GBP, stating many reasons. Now, after Pound touched major support against the Euro, pair that gets a lot of coverage, especially in European media, all of a sudden positive comments are appearing.

Today it is reported this rally was based on “speculation that Bank of England will allow its bond-buying program to expire as the economic recovery takes hold”. In other words, ending quantitative easing, or at least limiting the scope of monetary expansion. This, in turn could signal interest rates increase sometime down the road.  Interestingly enough, nothing of this sort was mentioned few days ago. Sentiment was very bearish, many analysts were quoted as saying that Pound had nowhere to go but down. Another example of trying to fit a story to the fact after it happened. On a side note, it could mean that GBP is going to slide a little bit, now that bullish sentiment was created.

No new orders were posted here yesterday in the Rates are appropriate, and all trades discussed this week have been concluded, I think. But I did mention possibility of a a bearish divergence building on the intermediate term chart of AUD-CHF. This would signal potential sell in that cross. One day later the divergence still hasn’t happened.

Price came very close to making a new high for the look-back period, but it was short by few pips. MACD is far behind and the total picture has great characteristics that I look for in MACD divergence trades. With one notable exception- not new price extreme, high in this example. It is possible that other trading platforms generated lofty enough reading to qualify as new high, but not this one. Now that few more candles were created, price seems to be turning around, but it is not the type of high I’d like to see for a divergence trade. So, as is, I’m passing on this opportunity, even though price has a good chance to fall about 0.9400 or a little lower. My criteria are not met.

I also mentioned trading Japanese Yen crosses on short term charts, like this here 5M AUD-JPY. Number of positions were opened shortly after London open, and these were best trades of the day. Nothing truly remarkable about them, only the fact that targets were chosen properly and captured almost all of that first move.

After that Yen became erratic and had few more direction changes over the course of the day. This produced a lot of trades, which were mostly small 5-10 gains with couple of losses. Those two above mentioned transactions were definitely the highlight of the day for me. Week is over, time to rest. Have a great weekend!

Mike K.