Waiting For News From Luxembourg |
Currencies are bound to remain sensitive to developments in Europe, at least early in the week or until something bigger grabs the headlines. Again, focus is on Greece. Newly appointed finance minister, Evangelos Venizelos is due to attend talks with other European Union finance ministers in Luxembourg for a two-day meeting on Europe’s economic outlook. It is almost guaranteed that the meeting will produce some kind of agreement; however, the devil will be in details. This will create uncertain trading conditions and currencies are likely to respond in an unpredictable manner.
On a related note, over the weekend reports emerged about UK banks pulling out from the Eurozone interbank lending market. Large institutions like Barclay and Standard Chartered are cutting their exposure to the PIIGS countries. To date these banks have pulled hundreds of millions, perhaps even several billions of Pounds from the continent. If more banks follow, this may severely restrict liquidity when it is needed most – the next time bad news hit the wires. For now, though, meeting in Luxembourg is the focus.
For the past couple of weeks I have been watching CHF pairs for signs of possible bottom. In case of the GBP-CHF, the price formed a harami, a weak reversal pattern. There was no confirmation to this formation, at least not convincing enough to warrant a trade based on this chart. Shorter-term charts of the CHF pairs offer better opportunities now, as mentioned using USD-CHF few days ago. While I still follow weekly graphs of the Swiss Franc, at this point the chances for a sharp price correction /bounce have greatly diminished.
On shorter-term basis, I like the AUD-NZD. This pair had a run up to about 1.3160, but it is pulling back now. I want to go short at 1.3038, targeting 80 pips. The 1.3160 level, though, represents important resistance for this pair, so a breakout above it is a buy. Large magnitude charts are starting to look increasingly bullish, but I think one more dip will come first, hence the sell order.
On Friday, the Dollar got weaker during the European session, but the action did not carry over into the US session. Therefore, even though most currencies closed higher against the USD, the price behavior was not what I look for when setting up short-term reversal trades after the weekend. The lone exception might be the GBP-USD, which actually closed near the high for the day, on a late price run up. The plan is to sell it on a candlestick reversal pattern within the first few hours of trading, using the hourly chart as a guide. Most likely objective for this trade will be modest, 40-50 pips.
Mike K.
About the author: Mike Kulej
 |
