This is a busy week when it comes to central banks, with several policy meetings on the calendar. On Tuesday, it is the RBA’s turn to decide interest rate and as always, the Australian Dollar should be volatile. Most analysts expect the bank to take no action, sticking with the current level of 3%. Slightly positive PMI reading from China last week might be the reason, but we can never be sure. After all, the Reserve Bank of Australia created surprises before. Still, chances for a rate cut during 2013 remains high, so the RBA could easily decide to be proactive and do it tonight. The Aussie has been showing weakness lately, which translates into a much bigger selloff if the central bank decides to act. In either case, the event should be interesting and might set the tone in FX Trading over the course of the day.
The British Pound had a bounce on Monday, almost exactly what I had been looking for. Almost, because the entry signal was not as strong as I would have preferred. We had a bullish candlestick pattern during the first hour of trading, but it was of weak quality. With some degree of imagination we can call it a harami and only because its range is contained within the range of the preceding candlestick. The risks however, were so small that the transaction still made sense to me, with entry at 1.5700. After a slow start, the trade reached its objective of 40 pips early during the New York session.
Another pair discussed yesterday was the EUR-CAD, which developed a shooting star on the daily chart. As mentioned before, I did not want to take a longer-term trade using that chart, but focused on financial study of smaller magnitude time frames. On the 1H graph, the entry point was just under the support of 1.3575, so the order was placed at 1.3570. The selloff was swift, meeting my general target of 50-80 pips and I settled for 70 pips gain. Now the low of 1.3491 becomes the new likely entry level for the next trade to the downside.
I will be taking a break for about 10 days, so this blog will be unattended during this period. My trading will also be sporadic, with only one focus – shorting the Yen pairs. As indicated on the above chart of the NZD-JPY, I want to sell it under the latest low of the hourly chart. This is true for all the JPY crosses, as they universally display similar situation. If they make new highs, sell orders will be adjusted to the new latest minor low. Hope everybody has profitable trades during my absence and see you soon!