Very early today, two central banks held their respective regularly scheduled policy meetings – the Bank of Japan and the reserve Bank of Australia. Not much was expected from the BoJ decision, but they managed to surprise the market. The central bank set its overnight call rate target to a range of zero to 0.1 percent, returning to zero rates for the first time in more than four years. The rate cut, if we can call it that, is symbolic, but other steps might not be. The central bank will offer another 30 trillion yen ($359 billion) through its loan program and purchase up to $60 billion of government bonds and other assets. In other words, quantitative easing, act 2 (or 3). Now question comes up – will other countries follow Japan’s lead and engage in more aggressive QE? Very likely.
The RBA also shook the markets to some degree, at least the Australian Dollar. It was expected that the central bank would raise the rates to 4.75%. Instead, the rate remained unchanged at 4.50%. Response was swift – the AUD-USD dropped immediately. Some commentators were quick that the sell off came in response to the “official statement”. I am sorry to say, but that is complete rubbish. The bulk of the drop, 80 pips, happened in less then 1 minute from news release. Not enough time to read the statement, or even to listen to it, never mind any decision making. The unchanged rate was the key which brought forth the sell off. Things settled down later during the day and the Aussie recovered all of these losses.
My last post on Sunday was devoted to EUR-USD. I was looking for a short term sell opportunity in early trading. While not precisely what I wanted to see, this pair indeed sold off. Opening had a small upside gap, followed by a reversal. I had a trade there for 37 pips. After that the EUR-USD made a small run up, which failed to make a new high. This created the 1-2-3, or “end of the trend” set up, described few posts back. I took that trade with an entry at 1.3742 and made 32 pips gain. Incidentally, today this pair recovered all the lost ground and made new high for the move.
Interactions between currencies have become rather erratic over last few days. Charts are not very clear and even confusing. A day of strength is followed by a day of weakness. This seems to be the case just about everywhere I look. Here, on the chart of CAD-JPY, a breakout above the 82.20 resistance could be promising for a move of 120-130 pips in magnitude. However, pull backs might be deep and, given the time scale involved, I do not expect quick resolution.
Another interesting pair right now is the EUR-CHF. It made a new high at 1.3467, but is at a limbo right now. The price went through a correction, touching the 50% Fibonacci retracement of the latest up swing and bounced back a little bit. This established a new range, between the high and low of 1.3265. I am considering getting on a breakout in either direction, although would prefer to see another “touch” at the resistance or the support before a bigger move happens. So, these are not firm orders, only ideas at the moment. Need to see a little more price development.
Mike K.
[...] Another interesting pair right now is the EUR-CHF. It made a new high at 1.3467, but is at a limbo right now. The price went through a correction, touching the 50% Fibonacci retracement of the latest up swing and bounced back a little … View full post on EUR/CHF – Google Blog Search [...]
[...] Central banks surprise | fxmadness.com Another interesting pair right now is the EUR-CHF. It made a new high at 1.3467, but is at a limbo right now. The price went through a correction, touching the 50% Fibonacci retracement of the latest up swing and bounced back a little … View full post on EUR/CHF – Google Blog Search [...]
[...] Australian employment report was published early in the day. Much like the interest rate decision few days ago, the labor data received plenty of attention and a strong market response. Since the new jobs [...]
[...] Australian employment report was published early in the day. Much like the interest rate decision few days ago, the labor data received plenty of attention and a strong market response. Since the new jobs [...]
[...] The Australian employment report was published early in the day. Much like the interest rate decision few days ago, the labor data received plenty of attention and a strong market response. Since the [...]
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[...] RBA is meeting later on today, or early Tuesday (depending on where in the world one lives). Recent news releases form by the RBA have created volatility, and this one could be no [...]
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