Two Positions Taken - Jan. 15/08

Posted on January 15th, 2008 by Yours Truly under Forex

CAD/JPY

Rational is that there will be more subprime write offs within the next couple of days as earnings reports are out as reported yesterday that Citigroup could write down as much as 24 billion US dollars in losses on subprime mortgage-backed investments and eliminated up to 24,000 jobs.
Speculation that the Fed could implement an emergency 50 basis points inter-meeting interest rate cut and Goldman Sachs said the economy may already be in a recession.
With all these worries and fear occurring on the macro level, this will only improve the status of the Yen as this pair overall has been pointing downwards ever since early November when the first news of the subprime shenanigans occurred. The pair has broken out of its bottom support level as per the Demark Trendlines and see looks bluesky until the 103.00-104.00 region.

AUD/USD

The Australian currency gained yesterday after it was announced that average weekly job ads in Australia reached a record high last month and that the TD Securities-Melbourne Institute monthly inflation gauge accelerated, providing further evidence that the economy is growing at a fast clip. This may prompt the central bank to raise rates next month which will make the Aussie pairs more favourable due to yield differences.
In conjunction with the weakness in the US Dollar, this seems like a no brainer pair for he time being.
The only risk I see pertains to that gap that occurred in early November wherein a gap existed .9085-.9100 regions which can act as heavy resistance. The pair has broken out of its 1HR and Daily Demark Trendlines are heading towards that 0.9400 region provided that there isn’t much resistance at the gap area.