Currencies had busy Friday and it is possible that increased activity could carry over to opening hours. The G-20 meeting is underway, creating quite impressive headlines. Of course, we should remember that there is a long way from bombastic statements of politicians to actual implementation of promised steps. It seems that as time goes on, whatever starts as decisive action, or a promise of one, becomes smaller and smaller. In the end, a band-aid is applied where a tourniquet is needed and markets are again scratching their collective heads.
The G-20 club is trying to line up a deal in April on a second global rescue package worth nearly $2 trillion. It is intended to stop the Eurozone sovereign debt crisis from spreading, threatening what some see as global recovery under way. At first, Europe must agree to merge its temporary and permanent bailout vehicles. That would create a $1 trillion fund and enable other G20 countries to meet the IMF's request for $500-$600 billion in new resources, on top of its current $358 billion in funds. Combined, this would total around $1.95 trillion in resources. Germany is the key player to combining the two European funds, something they have been long opposed to do. Now country officials say that Germany will make a decision on the matter sometime in March. Once that happens, the Group of 20 members will be obligated to put additional money into the International Monetary Fund. Unless they find a new reason to not to do it…
[Related -Thoughts on MetLife and AIG]
[Related -A 2016 Recession Would Be Different]
The Japanese Yen was among the biggest stories in the Forex market last week. It is finally falling against the US Dollar, something that has been happening in relation to other currencies for some time now. Last week brought acceleration in these trends, with the AUD-JPY advancing to 86.85. Because the price closed at the daily extreme on Friday, I will be looking for a short-term reversal here, using the hourly chart. My sell signal should be a bearish reversal candlestick, with objective of at least 50 pips. Details will have to be worked out once the trading gets under way. Virtually all of JPY pairs are similar, so all of them are possible candidates for this trade.
Another currency that made waves recently is the Swiss Franc. It appears the Swissy is regaining its status as a safe haven, the only one around, registering strong gains. Even the Euro, in spite of own rally, was not immune and fell to about 1.2040 versus the Franc. This creates a major headache for the SNB, now faced with a prospect of making good on its promise of defending the 1.2000 floor. I bought the EUR-CHF shortly before Friday closing, expecting the support to hold. Objective is 50 pips, but the position is of very small size as is normal for "gut feeling" trades. Have a great trading week!