On similar note, financial markets in most countries are closed on Monday, but we still have data scheduled from release, including couple of important pieces. The Trade Balance from Japan certainly has the potential to move currencies, especially the Yen. In addition, the Consumer Price Index from China could create a spike in volatility, particularly among the commodity currencies. As always, the Australian Dollar should be most active. I am perfectly content to wait this out and start on Tuesday, with the exception of the JPY, where I might place some sell orders.

Before my hiatus, I discussed a possible sell in the NZD-JPY at around 66.50. Since then, the price rallied but kept returning to this level, making an even more compelling case for shorting this pair. There was a minor breakout on Friday, which I ignored for the reasons mentioned earlier, but now I have a sell at 66.40 looking for at least 100 pips. That said, I would still cancel this trade if conditions remain very thin, meaning very wide spreads. Anything above 10-12 pips suggests lack of participation, the type of environment when whips are possible and even likely.

Another potential trade covered on these pages was a buy in the EUR-CHF. My idea was to go long above 1.2070. The price missed the entry by about two pips and kept falling, eventually testing the 1.20 floor. In response, the SNB promised to defend it with “utmost determination and unlimited Euro buying”. We shall see just how committed they are but I bought the EUR-CHF on Friday at 1.2010. Objective right now is the 1.2070 resistance, risking 30 pips. Realistically, I am prepared to sit on this as long as 2-3 weeks.

Daily chart of the AUD-CAD was suggesting a bearish breakout under 1.0335, which finally materialized. This was not a smooth trade, with the price action less than decisive, but last week it reached 1.0118, just short of my 1.0100 objective. Two more days, which brought a hammer and a doji, convinced me to get out at 1.0224 for 106 pips gain. The main trend remains bearish, but I am done here for now.

Mike K.

Tight ranges going into European session is what I always look for on Friday. During the last couple of weeks, it had not worked out very well, but today the story was different. Currencies moved immediately after the targeted time, with moves, which were sharp in relation to preceding ranges. This translated to quick 30 pips in the GBP-USD and other Dollar pairs, too.

Few days ago, I discussed the EUR-CHF here, looking for another long trade on the 4H chart. By now, the price has enough history to find a possible entry, which is just above 1.2074. It will probably consolidate above the 1.20 floor, hopefully in the 1.240-50 area, before a bullish reversal. This process can easily take several days. On the plus side, risks are small. Yesterday, the Swiss National Bank announced it had zero tolerance for the Franc to appreciate beyond the floor. “The SNB is on watch day and night to ensure the CHF1.20 per Euro level is maintained, and this applies from Monday morning when the market opens in Sydney to Friday night when it closes in New York.” That is a very bold statement and we shall see if they stick to it. Have a great weekend!

Mike K.

Recently, officials from Australia started to complain about strength of the Aussie. No threats of intervention yet, but it was a change in attitude, following months of no comments on the subject. If Mr. Stevens expresses some concerns, the AUD could respond with a selloff. This would be in line with short-term technical picture in some of the AUD pairs. The AUD-CAD, for example, advanced about 170 pips in the last two days and could be ready for a correction (AUD-USD is virtually identical). On this chart, I would like to see a bearish reversal candlestick pattern to provide entry, with objective of 30-40 pips. That would be a case of fundamentals lining up with technicals.

From a longer-term perspective, the AUD-CAD just completed a major correction, falling from 1.0781 to 1.0335. Now we need to see if this is a major reversal or only a big pullback within the uptrend. That will be decided when (if) the price returns to 1.0335. A bearish breakout there will probably send the AUD-CAD towards the parity, or at least 1.01. Of course, this will take some time, so in the meantime I will also look for a potential bearish reversal on 4 H chart, which , so far, does not show anything of value to me.

The Swiss Franc reacted in manner contrary to what most would expect. It got weaker before the SNB meeting, but recovered after the announcement. The central bank confirmed its intentions to defend the 1.20 level and the EUR-CHF promptly pulled back to that general area. I would expect the price to start moving much slower, in tight ranges and quietly form a bottom before another price run up. There is no trade here yet, but I will be on a lookout for one. In addition, opening gaps are always possible and could create opportunities. Have a great trading week!

Mike K.

For this patter to become official, the EUR-AUD must advance above the high of 1.2616. It is not only a resistance here, but crossing this level would also complete the Cup with Handle pattern. At this point, the EUR-AUD would be officially, from a technical perspective, in an uptrend, with a target of around 1.2950 or so.

Rebounding from a steep correction, the CAD-CHF returned to its prior high for the trend at 0.9400. Couple of weeks ago, the price found support at the 50% Fibonacci retracement level or 0.8934. This confirmed the bullish sentiment, in particular when combined with rising volatility, as shown by the ATR.

Now the CAD must close above the 0.94 handle, in order to continue its rise. The ADX is rising, supporting a trend gaining momentum, and the price is above all important support levels. However, breaking key levels is not always easy, so we must on careful of potential fake breakout. The CAD-CHF is likely to attempt a move soon, perhaps even today.

All of the Japanese Yen pairs have been advancing strongly for several months now and the NZD-JPY is no exception. Here the price gained over 1100 pips, reaching as high as 68.32. At this point, however, this pair went through its first significant correction of the uptrend and dropped to 65.31, before recovering to the 68.33 on Wednesday.

For the rally to continue, the NZD-JPY must close above this level on daily basis, which could prove difficult. The RSI developed a divergence, suggesting that the trend is not as strong. Another indicator, the ADX is in concurrence, having gone flat and not rising any longer. All this points towards a continuation period in the NZD-JPY, even if the general sentiment is still bullish.

Mike K.

We have to wait until tomorrow to see what steps, if any, the SNB will take, but following today’s development clearly many traders expect some action. As things stand now, the interim chief Thomas Jordan could be officially nominated the chairman next month. Perhaps it is important that he shows some resolve in this matter. The focus is on the 1.20 floor in the EUR-CHF, which has been threatened lately. This changed today, as markets took the possibility of further weakening seriously and bought this pair heavily, sending it above 1.21.

Earlier this week I suggested a long trade in the EUR-CHF, with entry at 1.2064. Trading ranges here were so tight, that a breakout soon was very likely. I was looking at the latest minor high as the entry level, with the objective at 1.2100. The trade worked out as planned, bringing 36 pips. Now I am going to wait and see what happens after the announcement tomorrow, before making more trades in this pair, or other CHF crosses for that matter.

The GBP-NZD may be finally reversing its long-term downtrend. I had a good trade in this pair last week and not another potential buy is emerging. The price is rising fast, trying to reach the high of 1.9485. In a perfect world, I would like to see another pullback from that level before the eventual breakout happens. Meanwhile, I have buy order at 1.9505, with a target of 300 pips. Since this is the intermediate term chart, this trade can easily take days or eve a couple of weeks.

Mike K.

That leaves the Swiss National Bank. In Switzerland, financial authorities are under intense pressure to weaken the Franc. Recently, though, the CHF became stronger across the board, except the EUR-CHF where it is stuck at just above 1.20. It is the “floor”, which the SNB promised to defend. The central bank is likely to threaten additional actions in order to keep the EUR-CHF above this level. It remains to be seen exactly what the bank might do, but chances are the SNB will act before the other CB’s do.

While on the subject of the EUR-CHF, we can see that it stopped making lower lows. In fact, it the price is drifting slightly higher, suggesting a possible bullish move ahead. The price has been trying to turn north for some time, without much luck. It could happen soon, with the volatility here pathetically low (the ATR on 4H chart about five pips)! I am interested in buying it at 1.2064, with objective of 1.2100. The target is small, but so are the risks, thus making it a trade with some merits.

During hours following the opening, I will look for a possible short-term reversal in the GBP-USD. Friday brought a strong selloff in this pair, closing near the low for the day. A rebound in early hours is likely, triggered by a bullish candlestick pattern on the hourly chart. Objective will be in the 40-50 pips range, depending on details once the set up is formed. In addition, gaps are always possible, something I am always looking for. Have a great trading week!

Mike K.

The rally in the EUR-CAD, which lifted it from 1.2875 to 1.3479, hit an obstacle last week. It came as a combination of things, which included the 100 SMA, previous resistance level and overextended price. Bollinger bands, with the price clearly above, demonstrated that particular aspect. A bearish candlestick pattern, the dark cloud cover, marked the turning point.

By now, the EUR-CAD retreated to 1.3025, where it found an earlier established support. The price movement is likely to slow down now, trapping this pair in a consolidation, also defined before the latest advance. We should expect smaller price swings, within the 1.3025-1.3241 range. Eventual breakout will probably determine the next direction of the EUR-CAD.

AUD-JPY.

Among the best performing currency pairs in 2012, the AUD-JPY, the AUD-JPY has shown significant gains. Last week it reached as high as 87.99, where it encountered a strong resistance. Together with severely oversold RSI indicator, that proved too difficult to cross, at least for now. The price developed a reversal pattern and turned south, touching 84.80 in early Wednesday trading.

While this correction appears sharp, it is of normal proportions, considering the size of the preceding rally. In fact, it might not be much larger. It depends what happens at the next supported level, or the 84 area. We should watch carefully, because the AUD-JPY could resume the uptrend from there. Otherwise, the price will head for the 81 handle, where the main trendline is waiting.

GBP-NZD.

Finally, after a prolonged slowdown, the GBP-NZD started to increase in volatility. The price moved higher, taking cue from multiple divergences with technical indicators. On Monday, in one swift jump, the GBP-NZD broke the minor resistance at 1.9130. It continued to advance on Tuesday, reaching 1.9483, almost the implied resistance of the 1.95 level.

Here things get tricky for this rally. The price developed a large shooting star, which is a bearish candlestick reversal pattern, probably marking the extent of this run up. For a full-blown reversal, we need to see another large bearish candlestick on Wednesday, now in early stages of formation. The short-term direction of the GBP-NZD depends on how the price will close today.

CHF-JPY.

In line with most other Japanese yen pairs, the CHF-JPY hit an important high last week. Its impressive advance pushed the price to 90.23, a resistance level from an earlier high. There the rally lost momentum, and the CHF-JPY started to pull back. In early Wednesday trading, this correction touched as low as 87.67.

So far, the price has not reached any established support levels. Because of that, we can use the Fibonacci retracement levels for some possibilities. The 38% is at 87.00, while the 50% is at 85.70. If the CHF-JPY is going to retain the general bullish sentiment, one of these levels should become a support. If not, this correction could turn into a bearish reversal, but we need to see more price development.

Mike K.

Of course, nothing is ever guaranteed when it comes to money dealings. Earlier this week I discussed a trade in the EUR-CHF. It was a buy, entered late last week at 1.2044, with about 50 pips objective. While I did not expect a speedy resolution, the snail pace of price movement is discouraging. Basically, the EUR-CHF is frozen, reminding me of what happened in the USD-JPY not that long ago, so I decided to get out. At 1.2059, the trade made 15 pips, not much, but at least it is positive.

Thursday was relatively quiet, following large moves yesterday, which leads me to believe that Friday will be very active. I will focus on short-term trading at the start of the London session, something that has been discussed here many times before. The best candidates are the majors, with likely objectives of 20-40 pips, depending on particulars. BTW, here is useful guide to Spread Betting, for traders outside the USA.

Mike K.

The G-20 club is trying to line up a deal in April on a second global rescue package worth nearly $2 trillion. It is intended to stop the Eurozone sovereign debt crisis from spreading, threatening what some see as global recovery under way. At first, Europe must agree to merge its temporary and permanent bailout vehicles. That would create a $1 trillion fund and enable other G20 countries to meet the IMF’s request for $500-$600 billion in new resources, on top of its current $358 billion in funds. Combined, this would total around $1.95 trillion in resources. Germany is the key player to combining the two European funds, something they have been long opposed to do. Now country officials say that Germany will make a decision on the matter sometime in March. Once that happens, the Group of 20 members will be obligated to put additional money into the International Monetary Fund. Unless they find a new reason to not to do it…

The Japanese Yen was among the biggest stories in the Forex market last week. It is finally falling against the US Dollar, something that has been happening in relation to other currencies for some time now. Last week brought acceleration in these trends, with the AUD-JPY advancing to 86.85. Because the price closed at the daily extreme on Friday, I will be looking for a short-term reversal here, using the hourly chart. My sell signal should be a bearish reversal candlestick, with objective of at least 50 pips. Details will have to be worked out once the trading gets under way. Virtually all of JPY pairs are similar, so all of them are possible candidates for this trade.

Another currency that made waves recently is the Swiss Franc. It appears the Swissy is regaining its status as a safe haven, the only one around, registering strong gains. Even the Euro, in spite of own rally, was not immune and fell to about 1.2040 versus the Franc. This creates a major headache for the SNB, now faced with a prospect of making good on its promise of defending the 1.2000 floor. I bought the EUR-CHF shortly before Friday closing, expecting the support to hold. Objective is 50 pips, but the position is of very small size as is normal for “gut feeling” trades. Have a great trading week!

Mike K.

While many in Switzerland support these meassures, some are warning about unintended consequences, saying that Franc limit against the Euro may cause the country’s economy to overheat if authorities are not vigilant to its effects. For example, property prices have increased in Switzerland, aided by near zero rates and demand from foreigners looking for employment. This could be mitigated to some degree by increasing the benchmark rate in order to prevent a property bubble. However, such move would put upward pressure on the Swiss Franc and jeopardize the 1.20 EUR-CHF limit introduced in September to fight deflation. Clearly, the SNB will have to walk a fine line.

The EUR-CHF is in a precarious position, having just left its prolonged trading range. At present, there is no real support on the daily chart, other than the psychological importance of the 1.20 level, backed up by the SNB’s threat. If the central bank does not act, or only delays its involvement, the price can easily slip to 1.16 in short order. While this is playing out, I will focus on short-term trading on Friday, mostly in the USD pairs at the start on the London session. They show good volatility and could offer decent opportunities.

Mike K.