Rockin' FX Trading - Jump They Say

Ok, we totally missed the move in GBPUSD. As observed in the post yesterday, a Bearish Engulfing Candle was formed on Wednesday, and prices subsequently traded through support at 1.6200 to hit lows just under 1.6100. Well, you can't have it all. 

On a brighter note, EURGBP staged an impressive rally to put our position back in the money. We're taking this as a mid to long-term position, so we'll only be adjusting our stops on a weekly basis.

And of course EURUSD recovered a good part of Wednesday's losses, confounding anyone who's been looking at recent events which bring fears of the debt crisis to the forefront again. It seems that market expectations for an ECB rate hike in April is topmost in traders' minds right now, nevermind the EU summit or Portugal's woes.

Stock indices also held their strength, with the S&P closing nicely above the 1300 level, and this above all seems to signal an amazing wave of confidence in the markets.

Well, Japan's MOF just released data that showed impressive net foreign buying of Japanese shares last week (almost US$11 billion worth), their biggest net purchase since records began in 2005. And it confirmed that Japanese investors were net buyers of foreign bonds in the same time period,  putting paid to talk of JPY repatriation. 

On top of this news, it was interesting to note that Japan's Finance Minister said that they will only intervene in JPY when movements are excessive, effectively suggesting that they're targeting volatility, not price. 

Putting 2 and 2 together, this sounds an awful lot to me like a green light to buy JPY again. USDJPY lies dead in the water around 81.00 precisely because the market wants a strong JPY but are afraid to sell USDJPY due to intervention fears. But once this fear is removed, we should slowly see a return to USDJPY weakness again. What do you think?

Me, I think we'll sit things out on this last trading day of the week, being neither confident of EUR strength or GBP weakness, and wondering whether profit taking will kick in after a week of buying in the equity markets. 

"Tired I am, rest I must." - Yoda

Peace