For the lack of any market moving news and events, attention turned to what the FED might or might not do next week. There was plenty of talk all over the media about possible tapering of the stimulus during the policy meeting next week. All this talk was based on a remark by James Bullard, something along the line that “chances of slowing the bond-buying program have risen”. Hardly a definitive statement or even a strong suggestion about a scope and timing of this action. Still, that was enough for the pundits to keep talking about all day, insinuating how good that should be for the USD, which is likely to stronger. Markets, though, seemed to ignore it, as the Dollar lost some ground again versus most of the majors, even if not by much. In spite of bold headlines, volatility was low, as if market participants were waiting for news from the FED rather than wild guesses of “experts”.
In the last post I discussed shorting the EUR-USD during early trading on Monday, based on the 1H chart. I was looking for a strong bearish reversal candlestick pattern and eventually a good size shooting star did form. The trade was entered at 1.3719, targeting about 40 pips. Unfortunately, this pair kept on moving higher and this position did not work out as planned. On the positive note, the risk was small and in the end, the loss was only 15 pips.
It is time to bring up the GBP-JPY chart again. Here the price has been moving higher in the past few days, creating a divergence with the MACD indicator on the intermediate-term chart. I am considering a trade on the short side if a convincing bearish candlestick develops. There is a relatively short window of opportunity for this to happen. If this set up does not develop in the next 24 hours or so, the MACD reading is likely to exceed its previous high, thus invalidating the divergence. Should the trade materialize, my objective will be about 200 pips.
Mike K.