Now that the Labor Day is over, the trading can resume. Turned that the action was not as dead as had been expected, but most of it revolved around the Pound. Both GBP-USD and GBP-JPY registered well over 100 pips in daily range. However, that was about it and most other pairs experienced very little movement. For example, the USD-JPY moved all of 45 pips today, the EUR-USD about 50. Very typical for a holiday and, in most cases, a calm before the storm…

I did not even bother to trade. After watching the opening and finding nothing to trade, I took it easy for the rest of the day and focused more on what to do on Tuesday. And it is easy choice – try to take advantage of slow Monday. More often than not, days like today are followed by fairly large, directional moves. Not always, of course, but often enough to give it a shot. I do by placing simple straddles, covered here many times before.

The EUR-JPY had a daily range of 70 pips today, really small for this pair. Also, the price behavior today, the way it moved, is very suitable for placing a buy and sell order about 5 pips above and below day’s extremes. Here the objective is simple – 100 pips either way. One could try to hold it all day long, hoping for a full day’s action in either direction, but with so much uncertainty surrounding the Yen, 100 pips seems right and maybe even will have to be watched closely, if things go my way.

Another pair that looks good for this kind of set up, is the AUD-USD (AUD-JPY, too). However, this comes with a big caveat – the RBA policy meeting and rate decision in a few hours. The expectation is for the rates to remain unchanged, and 0.25% rate hike is another possibility. I would prefer to see this levels untouched before the announcement. The good thing about recent RBA news releases was that the markets simply moved one way immediately after, without any price “whips”. This means that the trades can be entered in the direction of the move, once it is established. IF the recent pattern holds.

Mike K.