On April 15th US Treasury is scheduled to present Congress with its biannual report on world currencies. This particular one has been anticipated with some anxiety. Political forces in US are applying pressure on Treasury Secretary Timothy Geithner to openly name China “currency manipulator”. This would open door for possible legal action against Beijing, namely economic sanctions, in order to have Yuan un-peged from the US Dollar, something that has become a little bit of an obsession for some members of Congress. Rightly or not, Chinese inflexible exchange rate policy is seen by them as a source of all economic evil.

Turns out that currency report will not be revealed as planned. Timothy Geithner decided to delay publication of the document. With series of high level meetings scheduled over next few months, he believes “they are best avenue to advance US interests”. Another phrase from his official statement “Our objective is to use the opportunity presented by the G-20 and S&ED meetings with China to make material progress in the coming months”. One could call him pragmatic, while somebody else would say that he chickened out. Others might say he is naive, if he believes yet another promise from Chinese official late last week about “being ready to relax currency regime”. Whatever the reason, currency games are alive and well, and will go on for at least another few months (read “indefinitely”).

I took it easy trading-wise on Monday. Normally after Easter I’d try straddle trading, just like last year. However, situation was different this time around so I skipped it. Most often Good Friday is very boring, creating tight daily ranges. This year, US news caused moves late on Friday, which didn’t fit the pattern for possible trades. I didn’t expect much happening after the open today, but few gaps opened up so one trade was taken – long beast.

Fairly large gap started to close right away, so no trade there. I tried to fade it, with an entry at 144.16. Turned out it was premature, but I eventually upside move came. Unfortunately, it was just short of my objective, with hourly candle closing with a long shadow – sign to get out. Trade produced 34 pips, not as much as expected, yet positive . And that was it, one trade today.

Currently I’m thinking about shorting EUR-JPY. All Yen pairs had very long bullish run and perhaps it is time for some pullback. Need to wait for chart to form some kind of reversal pattern, which would provide entry point. Current situation on hourly graph might a beginning of correctional move. Set up is not complete yet and I need to see what happens next. Price is touching 126.80 or so now, which is close to previous low and almost on 100 SMA. Should price move up from here, this would establish more important support. That could be selling point if the price breaks through it. For that I need to see a little price run up first. Doesn’t have to be big, as long as it is easily recognizable.

Big news on Tuesday is rate decision in Australia. Expectation is for another quarter point increase, especially after RBA comments last week. I’m not placing any new AUD trades before announcement. Already have a couple older ones. It will be interesting to watch how markets react. I think that if increase is only 0.25% not much will happen. On the other hand, if RBA decides to wait, AUD will likely fall hard. But these are simply personal opinions not predictions. Interestingly enough, there is no consensus among polled economists about what central bank will do. Only about 60% of those questioned expect rate hike. We’ll find out soon enough.

Mike K.