Currencies had very interesting trading day, with frequent turns and twist. Not a big surprise, really, after fairly strong and directional week. Unless something happens in the last few hours of trading, this will leaves plenty of question marks going into the weekend. The Euro still gets plenty of attention, after the pledge of support for Greece from European Union leaders. People don’t seem to agree if this action is good for EUR, or bad. On one hand it should create some stability, with assurances that Greek government won’t default on its bonds. On the flip side, this action sets a precedent for the future. Should any other country find itself in similar situation, EU will be obligated to act again. How can somebody justify that Greece is more important than, say, Spain? That would be detrimental for Euro, at least as it is seen today.

Personally I don’t know how positive, or negative this “should be” for EUR. Markets will sort it out in due time, regardless of any opinion I might have. But all this uncertainty spilled over into just about all currency pairs today, including JPY crosses. Yesterday I started to look for reversals on hourly charts of Yen. Seems that these graphs are indeed trying to change direction, or at least are building topping patterns today. With NZD-JPY making the least of upward progress of the pairs discussed here this week, I focused my attention there. See the chart in last post.

Yesterday potential entry level was known yet, I was simply theorizing how reversal could have unfolded. But Kiwi-Yen behaved pretty much as expected, creating well defined support at just above 62.40, level that I used for short entry. Objective was small, in line with the magnitude of preceding price swings. One can see another support at 61.85 and 100SMA before. I settled for 40 pips objective.

That’s pretty much what happened, price fell to just under 62.00, meeting my target. After that Yen pairs happily returned to painting peaks and valleys. Very similar action was registered in CAD-JPY and AUD-JPY, with both of them taking out most recent lows, first step to reversal confirmation. Trade pictured above was the only one I took, a test if you will. Once the markets close for the week, I’ll go over the charts and decide what to do next week, but it appears that lows established today should be good entry points for more sells, if they are broken. I’m fairly confident that will not happen today, but with 5 hours of trading still left, one never knows. At any rate, chances are these crosses started to tun around. More about it before markets open on Sunday.

Mike K.