What difference one day makes. On Monday, the commodity currencies have been high fliers, advancing nicely, especially in relation to the US Dollar. Today they reversed, giving back all previous gains, and perhaps even setting the stage for much bigger adverse moves in near future. The minutes of latest RBA meeting, released earlier in the day, did not bring any surprises, causing only minor reactions from the currencies. With no other significant news scheduled before the European session and holiday in Japan, it looked like a quiet day ahead.
Things changed shortly after, when BHP Billiton, the world's biggest miner, raised concerns about the possibility of a sharp slowdown in demand from China, its top metals consumer. No hard numbers were released, but all of a sudden, everybody remembered that earlier this month China cut its 2012 growth target to an eight-year low of 7.5%. That was enough to send the Australian Dollar, and the other commodity currencies sharply lower. We still have few hours of trading left, and it will be interesting to see if there is another price swing down.
On Sunday, I discussed a possible trade in the AUD-CAD, looking for a short-term bearish reversal using the hourly chart. I sold it at 1.0504, following first hourly bearish candlestick. The price movement here was relatively slow, but eventually the trade brought a profit of 30 pips. I could have held out for another 10 pips, but in my mind the trade had already been taking too long, so pocketing gains was the right thing to do. BTW, another short trade in this pair in this pair, using the daily chart is still possible.
From a shorter-term perspective, I am looking for a trade in the GBP-JPY. On the 15 M charts, the price appears to be forming a bearish reversal, with the latest low at 132.24. I want to sell it at 132.20 with 60 pips objective. If I am right, this could happen relatively fast, as it often does in this pair.