Rating agencies seem unconcerned with the criticism they received from European leadership over their willingness to downgrade sovereign debt. Today they did again and Greece was the target. Again. This time it was Moody’s Investors Service who downgraded Greece’s government bond ratings. The cut was steep, by four grades from A3 to Ba1, which placed Greek national obligations in official “junk” status. Evidently Moody’s is no convinced that Athens can repay loans, even with help from EU and IMF. Of course one has to understand that the “bailout” is simply swapping existing debt for new one, just on better terms, and not wipe the books clean. Greece will still be obligated to repay those founds and the rating agency simply doesn’t believe it possible.

Interestingly enough, this didn’t have major effect on the Euro, which recorded a strong day. Markets have probably written Greece off as a lost cause, so no matter what happens there, it is not much news any more. The outcome will be different though, should other countries find themselves in similar situation. Today however, EUR shook it off and rose. Just like the Pound, which also had a good day. Speculations abound that the Bank of England will start raising interest soon because of faster than expected economic growth. Also, the Office for Budget Responsibility said the deficit will narrow to 71 billion pounds by April 2015, from 155 billion pounds this fiscal year. We have keep in perspective, though, that UK has been on the “warning” list from the rating agency and should new round of sovereign debt panic erupt, chances are that Britain could be next victim.

It was not easy to chose what to trade yesterday, so focus was on market opening, looking for clues there. There were quite a few gaps, nothing extreme, but just large enough to formulate a plan. Since prices kept moving in the direction of gaps, reversals to the gaps became a possibility. Most promising were the Yen pairs, so that’s what I tried, choosing CAD-JPY , trying to sell it on reversals.

The first trade came short of the target by few pips and was closed for a few pips gain. Had to wait a long time for next possible reversal to form, but it finally happened. That trade turned out better, bringing 30 pips and the price continued lower still. I didn’t stay with it and settled for the small gains.

We’ll see if the good fortunes for the the Pound stretch a little longer. The GBP-CAD made some gains today and it seems to running into resistance. I’d like to see a pullback from here and posiible enter a long on the next move up, if it happens. The exact details will have be worked out later, but the objective is small, for this time frame, only to about 1.5400. Since this is an intermediate term chart, we are looking at maybe a couple of days maybe longer. Hopefully not.

Another one of the Yen crosses, AUD-JPY, is possibly heading lower. So far hourly chart is simply pulling back, without any one of reversal patterns that I use. Support is forming 78.40 or so, with next one at the gap area or 78.00, give or take a few pips. Can’t really use hourly chart here, the stop would be too big. So this will have to zoomed to 15M chart and take it from there. If the gap is reached, I’ll try to sell it again under that. Same is true for all Yen pairs, only details will vary.

Mike K.