Would it be too much of an understatement to say the last 18 hrs have been interesting? I think it would be. EUR/JPY clipped us for 20 points last night amid heavy Yen selling following dovish comments from Bank of Japan's Haru. He commented that easy monetary conditions are needed to sustain economic growth. In other words, the BOJ is not jumping out of their seats to raise rates, which hurts the local currency so Yen is sold, Euros are bought, and EUR/JPY rates climbs. And that was easy part of last night.

The real fun last night was managing our 1.3015 short EUR/USD position. A 7:00 a.m. EST, the Bank of England made no action with their rates after the surprise 25 bps hike, which sent Sterling barreling towards 1.9570 trendline support, and EUR/GPB an incredible 0.80% higher. There was no press conference following the no action, which leaves us to speculate for ourselves what their future intentions may be. Then came the ECB announcement at 7:45 a.m.EST. Up until this point, the market never went more than 12 points against us before collapsing in London to double test the 1.2974 low. We were up as much as 41 points in the trade before ECB President Trichet took center stage with his talons out. Trichet made comments about “strong vigilance” of inflation and all but assured a March rate hike, and then quite possibly another in June. With such hawkish text, I pulled stops to breakeven and was knocked out of EUR/USD at a scratch. What's surprising to me is the lack of EUR/USD follow through above 1.3050. I think it all goes back to the crosses leading the market as we have been talking about for several days. Very weak Swiss pricing data marked EUR/CHF 0.60% higher since 5:00 p.m. EST yesterday, while USD/CHF is only 0.46% better since yesterday. EUR/USD is up 0.18% while Sterling is 0.65% lower, and yep you guessed it, the biggest mover on the board is EUR/GBP at 0.85% greener since the New York close. The same goes for USD/JPY, EUR/USD, and the cross.

The fact that all of the Euro crosses are so strong on the day and EUR/USD could not break through 1.3050 resistance tells us the Dollar is not as weak as some think it to be. Technically speaking, there is a traffic jam of pivot point resistance just above us in the following order: Daily R1 1.3033, Weekly R1 1.3050, Daily R2 1.3056, and Monthly Pivot 1.3064. It would not prudent to revenge trade the market in here. There is so much data injected into this market in the last 48 hours, we need to be patient, allow it to be absorbed, and then capture the resulting resolution.

A quick word about money management in here. We took two very good shots at EUR/JPY and EUR/USD at very critical market junctures. Ultimately, we wound up being wrong, but we were wrong for two, twenty-point stops. Twenty points is nothing, especially since we put ourselves in the position to make 100 in each. We are knocking on the door of a big one. We are not breaking the door down to steal the big one, we are knocking and patiently waiting for that big one to answer the door. So until that big one comes, we need to contain our risk and keep our stops to a normal size as to ensure we are still standing on the porch when that big figure trade answers the door.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

Disclaimer
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.