Currencies closed last week on some strong moves. Yen appreciated to while “the other Dollars” lost ground. It will be interesting to see what comments officials will make as the week starts. Especially in Japan. Let’s remember that the new finance minister, Naoto Kan, expressed concern with levels at which JPY was trading. While he withdrew his statement later, it is obvious that this matter is important. JPY gained ground since that time, so the subject is even more touchy. Especially when markets open on Sunday, when Japanese news tend to dominate the wires.

I am not planning any new trades in Yen right now, but will watch the opening in search of gaps. Should their be any statements from Japan, real or imagined, start of the trading could volatile, creating gaps, leading to opportunities. Also, continuation of trends from Friday is possible, which might reverse 5-6 hours later. Given what happened to AUD, NZD and CAD, all crosses of these currencies are also on watch for interesting opening . This includes Pound-Loonie pair, which I’ve been tracking lately.

This is a little touchy, though. My current buy order at 1.7105 is very close to level at which price closed on Friday. If the price gaps up, it could jump above the order and I try to avoid trading in this situation. For right now trade is suspended until opening is clear. Of course, it is possible that trade would be missed, but it is a risk that I’m willing to take in the interest of clarity. Some people equate missing opportunity to loosing money. I don’t. There will be other opportunities, so overlooked trade is not a big deal for me. Failed trade is worse so as long as the set up is not clear, I’m waiting.

Weakness in commodity currencies could be a start of a longer term up trend. It hasn’t been confirmed yet by technical picture, early signs are encouraging for those who would like to short AUD, NZD or CAD. For example, weekly chart of Euro-Kiwi has created bullish reversal pattern. Buying this pair at the open with an objective of 2.1200 might not be a bad idea. Risk is well defined at just under the low of this last candle, or about 650 pips. I’m not going to take it, but will be looking for trades in this direction using shorter term charts, like 4 H or so. I’m bringing this up, because it doesn’t happen very often when weekly charts create decent set ups. For now I’m watching this with interest.

Another pair I’ve been following is EUR-GBP. Right now I think it is in a correction within longer down trend. It has a little more upside to go before new short trades can take place. Price could move as high as 0.8850 before running into resistance. That’s where I want to look for new sell set ups, IF price develops in this fashion. So, for now, I’m waiting.

Why am I not trying go long here if I think that the market should move higher? This chart doesn’t provide a good stop for a relatively small gain, which might or might not happen. Much more comfortable waiting for the price fit into my line of thinking, before initiating a trade. So, no new trades for now. Activity will depend on opening gaps and focus on shorter duration trades. After a full day of price history should have a better idea about what to expect for the rest of the week.

Mike K.