Here we go again: China announced that is postponing the revaluation of its currency, the Yuan. After about two years of being pegged to the Dollar, Chinese officials have been signaling “readiness’ to relax the currency regime. Unfortunately, every time they were prepared to do it, some other issue crept up and the action had to be postponed. This time around it is the Euro crisis which is an obstacle to unpegging. After all, the common currency already dropped about 15%, which “is already too great a burden” for China. Ah, will the calamities never stop for that country?
This comes on the eve of high level talks in Shanghai and Beijing with the Secretary of State, Mrs Clinton. She is at the Shanghai World Fair, dispensing handshakes and teddy bears, with “Made in China” labels. Her sidekick, the ever confident Geithner, was quoted saying “It’s enormously in their interest to move, over time, to let the exchange rate reflect market forces, and I’m confident that they will do what’s in their interest”. Of course they will. They’ve been doing it for a long time – what is in their interest. So, what happened to the pledge of getting tough with China over the exchange rates? Apparently it was replaced by Geithner’s “confidence”.
Following a sharp sell off last couple of weeks, the Yen pairs stabilized to some degree on Friday, including the AUD-JPY. It will be interesting to see what happens next. In my opinion, we should see a corrective move up. This could be true for all JPY crosses, but I’ll use the Aussie-Yen as an example. On a weekly chart, price dipped under 72.00, almost reaching support from July last year. I still want to sell under last low, only when will the move resume?
As mentioned earlier, I expect a rally of some magnitude here, probably to one of the FIB retracement levels. How long could this last? Anybody’s guess, really. For what we know another piece of surprising news might break out this afternoon and the whole thing could plummet again. More realistically, though, maybe a week, maybe a month? Currencies are very event and sentiment driven right now, so one has to pay attention to news, especially developing news, not just economic releases. This is one of the reasons I’m reluctant to take longer term trades in these pairs now. Even if right on direction and in the profit, a trade can turn sour in a day on an adverse move of 300-400 pips or more, as seen recently.
It would seem reasonable to be buying smaller swings on hourly charts, with tight stops under latest low. But before placing new trades I want to see the opening. Should we have gaps, they could set tone for early week trading. After that additional price history will develop on charts, and it might be easier to find new set ups.. So, the long term down, intermediate probably up and the most immediate price swings will be decided after the open. So far the early, pre-open quotes indicate weaker Yen.
Mike K.
Any trades so far, Mike? No new highs, no gaps, prices are slightly falling…
No, nothing in Yen pairs. I’m waiting for movement. If prices remain within the range from late last week, I might try even smaller time frame trades later, but not just yet.
Thanks!
Yeah, Geithner is confident and in the meantime China is playing games with us. What a joke. If we simply slapped tariffs on everything that’s made over there, I’m sure they’d adjust Yuan immediately. Instead our people are there kissing ass…
Well, I’m not sure if that is exactly the answer. But yes, they are playing games and will do so for as long as they can get away with it.
[...] with about over 200 pips daily range. Just not very dramatic after recent much bigger moves. Same for the Yen pairs. AUD-JPY, for example seemed to have been just spinning the wheels, but last few hours this cross [...]
[...] about over 200 pips daily range. Just not very dramatic after recent much bigger moves. Same for the Yen pairs. AUD-JPY, for example seemed to have been just spinning the wheels, but last few hours [...]
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[...] towards China’s policy of having Yuan pegged to the Dollar. For once he had to skip his “I’m confident” tune and actually said something critical of Beijing practices. It took some serious prodding and rather [...]
[...] behavior towards China’s policy of having Yuan pegged to the Dollar. For once he had to skip his “I’m confident” tune and actually said something critical of Beijing practices. It took some serious prodding and rather [...]
[...] So here we have it: the big Forex news over the weekend was the announcement by China to end the 2 year old peg of Yuan to the US Dollar. The statement comes before the meeting of G-20 heads of states, where the currency issue will likely be brought up. Perhaps not as forcefully as it should, but it will. Now, we don’t know when the peg will end and, in history is any guide, after the meeting China will come up with a reason to prolong it for as long as possible. Just as they’ve done so many times in the past… [...]
[...] So here we have it: the big Forex news over the weekend was the announcement by China to end the 2 year old peg of Yuan to the US Dollar. The statement comes before the meeting of G-20 heads of states, where the currency issue will likely be brought up. Perhaps not as forcefully as it should, but it will. Now, we don’t know when the peg will end and, in history is any guide, after the meeting China will come up with a reason to prolong it for as long as possible. Just as they’ve done so many times in the past… [...]
[...] So here we have it: the big Forex news over the weekend was the announcement by China to end the 2 year old peg of Yuan to the US Dollar. The statement comes before the meeting of G-20 heads of states, where the currency issue will likely be brought up. Perhaps not as forcefully as it should, but it will. Now, we don’t know when the peg will end and, in history is any guide, after the meeting China will come up with a reason to prolong it for as long as possible. Just as they’ve done so many times in the past… [...]
[...] be brought up. Perhaps not as forcefully as it should, but it will. Now, we don’t know when the peg will end and, in history is any guide, after the meeting China will come up with a reason to prolong it for as long as possible. Just as they’ve done so many times in the past… [...]