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January 12th, 2013 at 5:13 am

Yen in Persistent Weakness.

Friday brought continuation of earlier trends, with surprising strength. Particularly affected was the Japanese Yen, sliding sharply again during the New York session. The day started with some corrective moves and small-scale consolidations, largely expected following explosive price swings on Thursday. However, some currencies became volatile once after the release of the US Trade Balance for November. At $48.7 billion, the deficit was significantly above the forecast of $41.3 billion. The Euro became the biggest gainer, rallying versus most of its counterparts for the rest of the day. In case of the EUR-JPY that translated to a push above 119.00. I expected to see a daylong consolidation, perhaps a new high for the rally by a few pips, but certainly not another 100 pips gain.

In the last post I discussed shorting the EUR-JPY in early trading, looking for a correction in the range of 50-80 pips. I managed two quick trades, which combined brought 53 pips. From the perspective of several hours, it was a good sequence, capturing almost the entire pullback. However, at the time I thought we would see even more downside. Unfortunately, after the second trade was concluded, the price drifted sideways for a long time, eventually turning higher in the afternoon. Still, I think that the upside potential is limited and the EUR-JPY, with the other Yen pairs in tow, should undergo a larger pullback soon. I will resume this topic after the weekend.

Another trade typical for Friday was in the GBP-USD. At prior the start of the London session, this pair created a range of about 25 pips and I looked for the first move out of this zone. The size of this consolidation suggested objective of around 20 pips, and it was reached in a speedy manner once the short was initiated. This is exactly the situation I sought and the outcome was as anticipated. Have a great weekend!

Mike K.

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