Aussie takes hit, Yen reaps the spoils

The Aussie is sold as RBA keeps rates unchanged. The Yen gains as a result.

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Earlier today the Reserve Bank of Australia (RBA) announced that it will keep interest rates on hold. This has left the door open for an easing should the economy weaken materially. As a result, commodity currencies fell broadly on Tuesday.

The RBA decision has been seen as generally in line with expectations however, when the yield on the two-year bonds dipped, the Aussie came under some pressure.

This marked the second day of falls for both the Aussie and the Kiwi. Both were hit on Monday after China announced its lowest annual growth target in eight years. This then gave a broad boost to the Yen, including against the U.S. Dollar.

Many analysts note though, that there are many investors waiting in the wings to scoop up the Greenback on any dips, as they expect it to resume its rally on the Yen.

The Aussie fell around 0.4% to $1.0621. Should it drop below its February 23rd low of $1.0597, that would take it to the lowest level in about a month. The Aussie also shed 0.6 percent against the Yen, and earlier today was fetching 86.37 Yen.

This drop then also played out with the Yen strengthening against the Dollar. The Greenback had retreated after failing to break above a nine-month high of 81.86 Yen.

The general consensus amongst analysts, remains that the Dollar uptrend against the Yen will remain largely unchanged. A few major upcoming events, including U.S. jobs data expected to be released on Friday, has meant that traders are temporarily taking gains on its massive rally for the moment.

Since late January, the Greenback has edged up by close to 7 percent on the Yen assisted, to a large degree, by a surprise Bank of Japan easing and Japan’s trading deficit.

The Euro has recovered from a two-week low against the Dollar as it rose also against the Aussie and the Kiwi.

Earlier today the Euro stood at $1.3202 and fetched A$1.2422 and NZ$1.6195.

The Euro was also buoyed by some good news on the European front, when major Greek bondholders confirmed their support for a deal that will more than halve the value of their holdings.

Greece and its creditors are in the final stages of talks ahead of a Thursday deadline, which could see the cancellation of more than 100 billion Euros ($132 billion) of its private sector debts.

The overall picture of the markets seems to be pretty much the same. With the major central banks focused on liquidity injections and very low rates in the U.S. and Europe, there is still a lot focus on the higher yielding assets.

Many analysts now are of the opinion that markets are reaching a point where, in the short term, they no longer expect further stimulus from major central banks. This could make the more risky assets more susceptible to waves of correction.

All the best!
Andrian Jones

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EXOTIC TRADING

Euro Continues To Weaken Versus Yen

The Euro weakened against the Japanese Yen with many investors nervous about Greece’s bond swap. This may result in the single currency being under pressure this week.

Meanwhile, the Yen and Dollar strengthened against most of the major currencies as stocks fell around the world.

News Watch For EURJPY

There are no High Impact news releases scheduled for the EURJPY pair today but keep a look out for news and reaction surrounding the Greek bond swap and potential BOJ monetary easing policies.

EURJPY Analysis

Yesterday we had a signal to enter a sell trade so lets see how it played out. Take a look at the chart below:


The entry signal was confirmed when price closed below the 107.650 level. I entered at the open of the new candle. As price moved 20 pips in my favor I closed out half the position and moved my stop loss to breakeven.

We were taken out at breakeven shortly afterwards as price reversed and made its way back up to the upper bearish channel trendline. We managed to bank some profit on this trade and avoid any drawdown as price reversed.

At the moment, there is the possibility of entering a sell trade as price breaks below the 106.600 level.

Should the current candle close below the 106.600 level we may look to enter a sell trade and target the 105.700 level as a potential exit area.

The lower bearish channel trendline may also serve as a potential exit.

We’ll have to wait and see how it plays out.

All the best!
Wesley

Senior Trader for World Class Trading Stars

*****

We saw a nice pull back yesterday and then over night resumed our direction down towards the lower trend line. At the moment however, we’re sitting on yesterdays target and at the moment it’s not doing too much. I’d like to see some sort of movement either a bounce off of the present trend line and another move down or for price to just continue to fall.


We do have some regular bullish Divergence at the moment setting up so this is something to keep an eye on.

In the news today we’ve got clear sailing until tonight at 7:01pm EST when the BRC Shop Price Index comes out for the GBP.

Have a great day and safe trading!
Joshua Schultz
Senior Trader For Forex Master Method

*****


Tuesday 6th Mar 12

EUR/USD

Two Bar Reversal

Have a look at the chart above. It’s a two bar reversal pattern on the weekly chart of EUR/USD. It’s not the best example I have ever seen because it should appear at the end of a trend, and the weekly retracement just qualifies.

Here a few rules for the two bar reversal pattern:

  • It should appear at the end of a trend
  • Both bars should be a reasonable size. In other words they should not be the smallest bars relative to the bars before them
  • The open and close of both bars should be near the high and low of the bars.
  • Both bars should be roughly the same size
  • With a bearish two bar reversal, the low should be near the open and the close should be near the high. The second bar should have a high near the open and a low near the close, basically exactly the opposite of the bar before it. The opposite is true for a bullish two bar reversal pattern.

In this case the break happened at 1.3176 and the next target on the down side is 1.2972.

Mark McRae

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