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  • ECB set for rate cut as inflation falls sharply

    From reuters.com

    The European Central Bank is expected to cut its main interest rate for the first time in 10 months on Thursday, driven to act by an economy wallowing in recession and freed to do so by sharply falling inflation. Economic data over the past weeks since ECB President Mario Draghi said the bank stood ready to act if necessary has shown growth prospects darkening. Unemployment hit a record high in April. Inflation had its biggest monthly drop in more than four years, to 1.2 percent, well below the bank's target of 2 percent or slightly below. The numbers point to a rate cut as the most likely outcome of the policy ... (full story)

What will be the effect of EUR/USD and commodities on Rate cut???
how does this affect EUR/USD ?
Well the price action doesn' show any rate cut for today but it is a " must see"
Can I turn that around and ask you what you think? Why not have a think about it and come back with a couple of paragraphs of your own reasoning? Go on take the step.

Quoting waheed.sdq
What will be the effect of EUR/USD and commodities on Rate cut???
  •  Guest
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Oh my God! I camnot imagine the exsistance of any gorex trader
Who does not know theassive effecr.
When a country make cut to its currency interest
its' currency go doooooown as invesetors look for
buying a currency with the higher interest. So
today is a big sale one
Quoting Squeeze
Can I turn that around and ask you what you think? Why not have a think about it and come back with a couple of paragraphs of your own reasoning? Go on take the step.

Just went through your past comments you have made... it seems u r in a wrong field u should be in a boxing ring punching everyone.. if someone is a newbie he or she has the right to learn and ask the experience traders about the market reactions.. m sure you too would have started from some wer..
Briefly, a rate cut causes a currency to get weaker because investors with huge amount of money looking for a country more profitable, ie, with higher interest rates for fixed income, but, in the current situation, ECB will probably decrease the rate to improve economy, then it is a good sign and can generate a demand for the euro currency.
But remember that the last time the ECB cut interest rates on July 5 the currency fell 100 pips in a day, and continued to fall until the end of the month.
Low rate = sort EUR, Buy Gold, Sliver. Then go hell )
EU down
prefer Short gold.. go hell =.=
I'm simply asking the poster to think for him or herself before being side tracked by the (mostly wrong) opinion on this section.

Quoting kishupatel
Just went through your past comments you have made... it seems u r in a wrong field u should be in a boxing ring punching everyone.. if someone is a newbie he or she has the right to learn and ask the experience traders about the market reactions.. m sure you too would have started from some wer..
A good sign and indication might be to look at the last time they cut the rate, analyse the sell off and look at the other impacts to see if the rally was just on the rate cut or a combination (As it normally is a sentiment driven move at the start)
I trade Gold and it reacts to this news as people look for a safer heaven but in these times the gold price may look to go south for a test of the recent lows in the short term.
Looking on the EURUSD front I would see the news of a cut as a sell off, but as a thing to think about simply use your lines and trade to them and from them as it will be sure to rally in stages if history repeats itself (as it normally does...) no guarantee though so if they dont cut the rate then strength in the currency could be quick on the upside with a swift pull back through the day. (Just my thoughts and opinions here)
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Quoting Squeeze
I'm simply asking the poster to think for him or herself before being side tracked by the (mostly wrong) opinion on this section.
don't think, follow. Market does all the thinking for you.
personally i selling EUR/USD right now, just based my own technical. but i not gonna believe any news until ECB it self give official statement.
take what you can take, before market take it back
Quoting ssshhhh
Briefly, a rate cut causes a currency to get weaker because investors with huge amount of money looking for a country more profitable, ie, with higher interest rates for fixed income, but, in the current situation, ECB will probably decrease the rate to improve economy, then it is a good sign and can generate a demand for the euro currency.
But remember that the last time the ECB cut interest rates on July 5 the currency fell 100 pips in a day, and continued to fall until the end of the month.
That is not the correct view in economics - but of course you will need an IS - LM model to even begin to unravel what a rate cut/rise would imply for a given economy and that means bringing on very detailed data into focus.

What I think is more appropriate is to encourage people to try to school themselves in these highly technical areas to make sense for themselves what is going on with the macroeconomies they wish to read. The problem is most traders including you (in this case) want to reduce complex decisions to trading heuristics. But that is not the way it plays. What takes over a course year at masters level to understand cannot be couched in the terms you just used. Sure I know you want to help - but you appear ignorant of the dynamics yourself and then again you over simplified the issues (so you may hurt rather than help).

If you know what I know you would take my advice, i.e. try to school yourself in that technical area and encourage others to do the same.What is strange though is how you expect an economic area that has at once austerity (tight fiscal policy) on going to cut rate (loose monetary policy). Would be silly to do that - but of course few of us (me inclusive) have enough details to actually debate the merits of whatever policy draghi comes up with - simply because we do not have access to the details or data he uses to model the situation.

Safer to say then - that historically rate cuts have been associated with a fall in currency which has had its rates cut and the opposite is true historically when expectation of a rate cut is not fulfilled (that is on the average). This is what "technical analysis" teaches everyone that joins to trade the forex and far more honest than this attempt at teaching what is clearly beyond the ability of most so-called instructors to teach. BTW this goes to show that fundamental analysis in trading is absolute rubbish.

Cheers RIP thanks in advance.

PS:Anyone can look up IS-LM modeling on the web and other issues such as macroeconomic policy making to start getting a grasp of the points I am making.
I dont think ECB will cut rate now, there is no such preparation going on for that otherwise traders would know that. But if it cuts definitely there will be a huge sell of in euro against all its counter currencies. SO watch-out.
Greatness Is Only Achieved By Working Hard... Depends How Bad You Want It!!
Plenty of pressure from Merkel to raise rates so the default position could be no change. Merkel is under intense pressure from frugal savers in Germany to raise rates.

Quoting shahtijani
I dont think ECB will cut rate now, there is no such preparation going on for that otherwise traders would know that. But if it cuts definitely there will be a huge sell of in euro against all its counter currencies. SO watch-out.
BTW: The market from my reading of the fractal dynamics (chaos) does not agree that there is in fact a rate cut ahead. It is well positioned to rise strongly. However, if for any reason draghi were to cut rates (and I would be surprised) there is room to fall instantaneously to the 1.30400 handle (the market therefore accommodates reality). Rate cuts are no doubt of interest to all not just traders as by definition those rates are the price of the the currencies we trade on a relative scale. Whether they have trend changing propensities is another matter since other issues (as well as the state of the counterpart economy) plus some more direct demand and supply variables come into play - this further shows that fundametals is the same as using the entrails of dead animals to forecast the future course of price or simply put no better than VOODOO.
Quoting Loadedgun
Safer to say then - that historically rate cuts have been associated with a fall in currency
First of all, I said, briefly.
Second, this quote agree on what I said...

I think your "school yourself 'gave to you a weak approach. If you had a good approach you would have argued about the topic and not on the person.

Many paragraphs and the same thing.

Cheers to you too.
It is true to say that rate cuts historically have produced drop in currency value but the occurrence of rate cuts have been very very less. Today also it seems that ECB will not cut rates and they will stay same.
Greatness Is Only Achieved By Working Hard... Depends How Bad You Want It!!
Quoting Guest
don't think, follow. Market does all the thinking for you.
Great advice and my sentiments exactly - find a way to follow just in time (JIT).

Cheers
today euro goes down no matter what.
be aware of HFT's
Yes technically it has double top and there are other technical confirmations also however i will still stay out because of too much fundamental events. And may be i strike one or two news trades .
Greatness Is Only Achieved By Working Hard... Depends How Bad You Want It!!
Nicely Done :-)

Quoting Loadedgun
The market from my reading of the fractal dynamics (chaos) does not agree that there is in fact a rate cut ahead. However, if for any reason draghi were to cut rates (and I would be surprised) there is room to fall instantaneously to the 1.30400 handle (the market therefore accommodates reality), this further shows that fundamentals is the same as using the entrails of dead animals to forecast the future course of price or simply put no better than VOODOO.
Nice try, but no, this was a rate cut.
Quoting Squeeze
Nicely Done :-)
Allowance made for the drop correct to the pip (unless you use a funny broker). Like I said from time to time you get that kind of action. Important thing is whichever way up or down chaos makes you the the 69 trader since that is what it is a 69 market. Well thanks for the compliment - hope you made some money too - RIP. Thanks in advance.
Quoting ssshhhh
Nice try, but no, this was a rate cut.
Well got to agree I was out of class when they taught shutting my mouth about calling what a central bank might put out as policy. Regardless, fact remains there was no way to tell (for me) but I did trade it to a handsome result. Cheers

BTW: Which proves the point - fundamental analysis is crap.

RIP.
good day...tomorrow should be even better
Quoting Fx Hiflyer
good day...tomorrow should be even better
One can only hope - that it is not a the good the bad and the ugly sequence - first for whatever reason the Euro is not following the script so far (strange) despite the FOMC (the good) ECB understandably the bad - (though some say it is a delayed good) and potentially the ugly (NFP).

What would be annoying would be a flat market on the day (the really ugly)
Quoting Loadedgun
One can only hope - that it is not a the good the bad and the ugly sequence - first for whatever reason the Euro is not following the script so far (strange) despite the FOMC (the good) ECB understandably the bad - (though some say it is a delayed good) and potentially the ugly (NFP).

What would be annoying would be a flat market on the day (the really ugly)

hahaha...should be a good watch anyway (soundtrack playing in my ears)..............even if it is not following the script ..will it matter ?...because it will give a new script soon enough
Quoting Fx Hiflyer
hahaha...should be a good watch anyway (soundtrack playing in my ears)..............even if it is not following the script ..will it matter ?...because it will give a new script soon enough
You are the man - you read my mind exactly and it is the whole point - there is a time when it is clear and a time when it is not so clear. We trade the former but overall do not forget we still keep the forecast as the direction until fractal structures change to suggest otherwise. Building up nicely from my reading toward close last nite (i.e. no changes to medium-term forecast at this point) - price is a tricky bastard you got to know chaos to trade it.

I keep telling them - fundamentals is crap. Cheers mate.

BTW: For anyone else chancing on this I do not think technicals is crap but it is taught and couched by people ignorant of the basis of what they teach (chaos) and thus imprecise. This means while a lot of it is good sense - the approach per se does not eliminate fear and cause traders a lot of grief as a result. The place to start is chaos the tools to use are some of the principles in technicals.
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