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Markets Waiting For Central Banks.

Interesting trend currencies have been setting lately - volatile Fridays are followed by very quiet Mondays. Markets seem to be slow coming back to life after weekends and today was no exception. Very small moves in most currency pairs, prices formed tight short-term congestion zones. Under most circumstances, one could expect previous trends, from last week, to continue, for a day or two. However, central banks may have something to say about it.

There are 4 interest rates meetings by central banks this weeks, starting with the RBA in just a few hours. Later on in the week it will be time for the RBNZ, followed by the Bank of England and the ECB. No changes from current levels are expected, but reactions after the announcements are often surprising. Also, they tend to set the tone for the rest of the day, both in direction and volatility. My guess is that major market participants expect a busy week ahead and were cautious on Monday, not wanting to position themselves before central banks speak.

After the opening I was watching the Euro pairs, with the EUR-CAD featured in the last post. My plan was to short it on a bearish reversal candle on hourly chart. I had to wait for a long time, the movements were not convincing at all, but finally, after Europe opened, there was a definite reversal pattern and the trade was initiated at 1.4327. In the end I settled for 21 pips gain, far short of the 50 or so targeted. Currently, I do not plan any new trades on the time frames of interest - joining the waiting crowd. Perhaps trends develop after the RBA rate decision, at which point I might join in.

Mike K.


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