The tail end of the week was overshadowed by the G20 meeting taking place in Moscow. Currency traders expected to group to discuss easing operations by several nations and perhaps condemn them. Japan was the most likely target of such move, because recently this country has been taking the most aggressive steps to stimulate domestic economy. Some pressure was reported from Russia, complaining about “competitve devaluation of currencies”, as well from Germany. At the same time, though, most of the other G20 memebers are also engaing in one form of stimulus or another, so it would be unlikely of them to come up with a valid, and formal, accusation of Japan.
The final and official statement from the summit will not released until Saturday, but leaks from the conference suggest there will be not mention of exchange rates. Not much different from the G7 meeting few days ago, which conveniently left this issue unattended. In other words, much ado about nothing and it is business as usual. Certainly, markets perceived it that way, because the Yen weakened again with all its crosses staging large bounces. Still, we must wait for the final word and depending on details, the opening could be volatile on Sunday.
Few days ago I discussed the NZD-JPY, or more to the point, shorting this pair. It was a dual scenario of selling either the bearish MACD divergence on the 4H chart or a downside breakout below the latest low. As it happened, the divergence developed first. The price made a new high 79.62, while the MACD lagged behind. At this point, I needed a bearish candlestick pattern, which formed quickly, setting up the short at 79.16.
The NZD-JPY started to drop quickly, easily reaching 78.44. From there, however, the action became choppy, with sharp rebounds. It was short of my objective of 100 pips, but this support became solid. When it the third attempt failed to crack it, I decided to pull the plug on this trade at 78.68, or 48 pips. Good exit. Few hours later, the NZD-JPY bounced considerably, back to my original entry level. The low of 78.44 is the level to watch more downside – I do not believe the correction is over.
Another trade covered here turned out to be disappointing. Its only redeeming quality was it produced marginal gain. I was looking for a breakout from a tight range in the USD-CHF, using its hourly chart. The buy order was initiated at 0.9217, but the move fizzled out soon after. Instead of continuing higher, the price simply settled into another consolidation. Even the uptick in volatility in other currencies, after the G20 statement failed to move this pair. I got out of this trade few hours before closing, unwilling to carry it into the weekend.
Mike K.