Currencies in Consolidation |
What a quiet Wednesday, a second day of consolidation following big moves from Monday (my late Monday). The Japanese Yen became stronger, moving as much as few hundred pips in some pairs in one day. That was followed by a tight range on Tuesday and an even tighter one on Wednesday. Not very surprising, really, the Yen, as well as the Dollar, have been selling off for a few weeks, ever since the G7 intervention. For the JPY that meant over 1000 pips moves in crosses, so a correction is not out of place.
Is the correction over or are the Yen pairs going to drop more? There is a good article on this very subject on the Forex Blog,by Adam Kritzer, where he discusses number of fundamental factors. From my point of view, it has not been decided yet. Charts of JPY pairs show consolidations, possibly pointing to another round of sell offs, meaning stronger Yen. But that is stretching it a little, because two consecutive contracting days mean indecision, something that I will try to capitalize on.
In case of the AUD-JPY I am looking at the latest part of this congestion, contained between 88.55 and 87.70. There is a high probability that the market will move outside of this zone on Thursday. Initially I will be looking for 60 pips, either way and then review the situation for a possible second trade in the same direction. Technically, I would prefer to see an upside breakout, because of the multiple resistance and the approaching 100 SMA. If these obstacles are broken, a fast move should follow, but I will let market show which way to trade.
About a week ago I covered a possible sell in the NZD-CHF, with the entry at 0.7043. Few days went buy and the Kiwi just kept moving up, slowly, but surely, making a new high for the move. My entry had to be adjusted to under the latest low, or 0.7065. Eventually the move materialized and it was very quick. After a week of waiting, the trade lasted 9 hours, with all profits made in about 1 hour, 50 pips. Now we have to wait and see what the AUD-JPY does, hopefully not another week:)
Mike K.
About the author: Mike Kulej
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