About a week ago there was renewed discussion about value of Chinese Yuan. Officials said they would un-peg it from dollar when economic situation is more certain. Today Premier Wen Jiabao had even more choice comments about currency. According to him, CNY is “fairly valued” and China will not bow to any external pressure pushing for revaluation of currency, never mind allowing it to float freely. Also, those who would like to see different exchange rate (USA, EU) are “protectionists”.

He also managed to blast US for allowing the Dollar to depreciate, on purpose. He may very well have a good point there, but in this case, why peg own currency to one that is getting devalued and being washed down with excessive debt? If they find it beneficial, why not peg the Yuan to even worth performing asset, like the currency of Zimbabwe? Chinese balance sheet would really look great then, measured not in trillions USD but goggles of ZWD.

Since CNY can’t really be traded, most of us don’t have to worry too much about this cat and mouse game. Better to focus on something that can actually be bought and sold with ease. British Pound comes to mind. After prolonged sell off, GBP maneged to stage reversal of sorts, which brought few good trades late last week. As of right now, we don’t know if the trend has turned, or not yet, but given the size of preceding fall, current corrective behavior should go on a little longer. My intentions are to keep buying Pound pairs.

After couple of smaller trades in GBP-AUD, I’m looking at a weekly chart of this cross. Price created a hammer, with a very long wick. This is a relatively rare development and it comes after a prolonged move down. Chances are good for sizable correction, if not an all out reversal. Fibonacci retracement 0.62 would be at about 1.7500 level, making a buy here a decent proposition. Going long at current levels could produce 900 pips gain, while risking about 400. I want to buy it, once any opening gaps are sorted out.

Pound-Swissy also looks interesting, but on a much smaller time scale. This hourly chart indicates possible buy a 1.6130, with a 100 pips objective. GBP-CAD also seems like a good long candidate, but since it is so close to breakout level, opening will decide how to play it.

Another pair I find promising right now is EUR-CAD on 4H chart, which is in a process of building possible bottom. It would be nice to see price run up to above 1.4100, pull back and then break through resistance. This could create numerous buying opportunities, using both 4H and hourly chart. As always on Sunday, I’m searching for gaps in all JPY pairs as well as commodity currencies. Overall, it should be a busy week and, hopefully, profitable.

Mike K.