Another G7 meeting came and went, bringing nothing new to the subject of competitive devaluation of currencies. Central bank governors and finance ministers of participating countries restated their commitment to free-floating currency rates. That was a little surprising, considering that just few days ago US Treasury officials had been accusing Japan of trying to manipulate the Yen through its aggressive quantitative easing policies.
Even though the USD-JPY rose sharply to almost 102 on Friday, Japan avoided an official rebuke at the meeting. In fact, there was an agreement, which all member states are living up to their prior commitments. Interesting, since every major central bank is actively lowering interest rates, engaging in strong asset purchasing programs or even outright intervention (RBNZ comes to mind). In other words, everything is great and nobody is engaging in anticompetitive practices. It is officially back to business of quantitative easing, or money printing.
All of the JPY crosses experienced considerable rallies and some of them are perhaps ready for a short-term correction. Not reversals, but pullbacks, especially when using hourly charts. In case of the EUR-JPY, the price closed for the week just off the high level, shy of the 132 mark. I will be looking for a bearish candlestick pattern on this chart, signaling a short entry with 40-50 pips objective. Ideally, the EUR-JPY should make a new high soon after the open, but that is not critical only helpful.
For a change of pace, here is the AUD-NZD, or more to the point, its 4H chart. This pair has been in a well-defined downtrend, falling to as low as 1.1954. Recently, though, it started to show signs of reversal, or at least a consolidation. So far, it is not clear, but if the AUD-NZD is indeed going to reverse, I want to be ready with buy order at 1.2175. Objective for this trade, if develops, will be 150 pips. Of course, on this scale, the situation can easily take 2-3 weeks to conclude, so patience is necessary. Meanwhile in early trading, I will look for opportunities in form of opening gaps. Have a great trading week!