Tomorrow, on Tuesday, the new chief of the Euro bailout fund will be named. Meanwhile, the fund itself is being set up, with up to EUR 750 billion in the purse. The bulk of the money is to be available by the end of the month, as soon as individual countries formalize debt guarantees. For right now, EUR 60 billion is available immediately, should a need arise and additional 250 billion Euro will be provided by the IMF. Germany, which will contribute the largest chunk of the fund, is pressing other countries for large budget cuts. In theory, this would reduce chances for anybody needing the bailout. Leading by example, Germany announced own cuts, which include eliminating up to 15,000 government jobs through 2014.

Hard to say if that calmed the markets, but things did settled down when Europe opened and into the US session. At least the currencies. The Asian part of the day proved to be the most volatile today, and, frankly, it shouldn’t be a surprise. With large moves on Wall Street before the weekend, Far East markets were simply “catching up” after Friday. This was demonstrated by the continuation moves in some currencies, primarily the Yen pairs. As soon as market opened, they turned lower with fairly large moves. Few hours into that, it was time to start looking for  reversal trades.

The last post covered AUD-JPY, so I stay with it here. I didn’t sell it out of the gate, as a matter of fact CAD-JPY was the only one of these pairs that I shorted early, and a small position, too. Once it was obvious that we had trade continuation, the reversal was my focus. When they started to show some upside tendencies, I went long, which was at 73.95 for AUD-JPY. This entry was a little premature, since I should have waited until that hourly bar was closed, but what the hell.

Nice upside move followed, and trade was exited shortly before NY  opened for business at 75.25, or +130 pips. Good result. The Yen pairs had another sell off later on, but no more trades for me. Perhaps tomorrow and/or the day after. We shall see…

Many currency crosses look interesting right now, but I’m going to stay with the Yen on these pages, even if it is boring. Should this trend remain, all of them should move together, more or less. Since I’m not sure if this blog will be updated tomorrow, here is a look at an intermediate term chart of CAD-JPY. Plan is to go short at 85.10 and try to catch 200 or so pips. Shorter term charts are a play, also, but this one is what I’ll return to during the next update.

Mike K.