What the heck happened to the EUR this AM? | Forex Factory

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What the heck happened to the EUR this AM?

  • #1
  • First Post: Oct 5, 2006 8:52am Oct 5, 2006 8:52am
Being a relative newb here, I'd like someone to offer an explanation as to why the rate increase announcement triggered a massive selloff? Why did the Cable drop as well?

Thanks in advance. I'm just trying to learn FA and right now it's befuddling me. I thought that rate increases HELPED the currency?
  • #2
  • Oct 5, 2006 9:02am Oct 5, 2006 9:02am
Quoting DePastino
Being a relative newb here, I'd like someone to offer an explanation as to why the rate increase announcement triggered a massive selloff? Why did the Cable drop as well?

Thanks in advance. I'm just trying to learn FA and right now it's befuddling me. I thought that rate increases HELPED the currency?
Excluding technical analysis which I use, I think everyone was expecting a possible rate hike in November, but now it looks like December. Also the unemployment from the US was much better than expected. This is usually a $ buy.
  • #3
  • Oct 5, 2006 9:03am Oct 5, 2006 9:03am
Quoting DePastino
Being a relative newb here, I'd like someone to offer an explanation as to why the rate increase announcement triggered a massive selloff? Why did the Cable drop as well?

Thanks in advance. I'm just trying to learn FA and right now it's befuddling me. I thought that rate increases HELPED the currency?
The rate increase was already priced in. The comments Trichet later made traders disappointed. He declined to comment on rate increases after 2006 and didn't use the keywords "strong vigilance" which announce that a new rate increase is around the corner.


Concerning the GBP - EUR and the cable are strongly positively correlated.


cu,
k.
  • #4
  • Oct 5, 2006 9:19am Oct 5, 2006 9:19am
Quoting llambert3
Excluding technical analysis which I use, I think everyone was expecting a possible rate hike in November, but now it looks like December. Also the unemployment from the US was much better than expected. This is usually a $ buy.
Thanks, for the replies. I saw the jobless claims numbers, but all I've been hearing this week is how bleak the U.S. economy outlook is, so the dollar's spike up had me a bit confused.

I've heard others say that the EUR rate increase had already been factored in, but I just didn't see so sharp a drop coming as a result of "positive" news.

Is there anywhere I can go to read up on this stuff? My economics is a little rusty and I'm curious as to what FA factors weigh more heavily in regards to affecting price action.
  • #5
  • Oct 5, 2006 9:25am Oct 5, 2006 9:25am
I actually made 25 pips on the drop, put a sell in last nite before bed,set TP to 1.2675 and triggered today.
  • #6
  • Oct 5, 2006 9:25am Oct 5, 2006 9:25am
Quoting DePastino
Thanks, for the replies. I saw the jobless claims numbers, but all I've been hearing this week is how bleak the U.S. economy outlook is, so the dollar's spike up had me a bit confused.

I've heard others say that the EUR rate increase had already been factored in, but I just didn't see so sharp a drop coming as a result of "positive" news.

Is there anywhere I can go to read up on this stuff? My economics is a little rusty and I'm curious as to what FA factors weigh more heavily in regards to affecting price action.
Well, I don't know much either. Just use the commentator messages on my platform, other trader's here and you can click on "READ" from the forex calendar on this site to give you some idea.
  • #7
  • Oct 5, 2006 9:26am Oct 5, 2006 9:26am
The BOE stuck with their current rate. Not everything to do with their correlation in this case.

Quoting Kane Rai
The rate increase was already priced in. The comments Trichet later made traders disappointed. He declined to comment on rate increases after 2006 and didn't use the keywords "strong vigilance" which announce that a new rate increase is around the corner.


Concerning the GBP - EUR and the cable are strongly positively correlated.


cu,
k.
  • #8
  • Oct 5, 2006 9:28am Oct 5, 2006 9:28am
BAD DAY .. NOT AS EXPECTED
  • #9
  • Oct 5, 2006 9:37am Oct 5, 2006 9:37am
Quoting coolhell
BAD DAY .. NOT AS EXPECTED
May I ask what you expected? I had a EUR/USD long position open and was very surprised to say the least.
  • #10
  • Oct 5, 2006 9:43am Oct 5, 2006 9:43am
So nothing's going to plan and it is all of a sudden all quite on the western front.......something's going to happen but what?
Eish! If you don't fly with the eagles you'll scratch with the turkeys
  • #11
  • Oct 5, 2006 9:44am Oct 5, 2006 9:44am
Quoting Kane Rai
Concerning the GBP - EUR and the cable are strongly positively correlated.
Correlated sure. But the GBP dropped farther and faster. I didn't see it coming, though I suppose some did. What was the thinking behind it though? Cable looked very strong on Monday morning, then seemed to hit a wall.
  • #12
  • Oct 5, 2006 9:47am Oct 5, 2006 9:47am
Quoting africanpip
So nothing's going to plan and it is all of a sudden all quite on the western front.......something's going to happen but what?
Well, if the NFP tomorrow is better than expected, the drop might continue.

If it's worse though, might we expect a EUR rally?
  • #13
  • Oct 5, 2006 9:53am Oct 5, 2006 9:53am
Well what's been happening lately is a gradual build up to an announcement and then a shock. Which way is going to build? Will the trend then continue again?
Eish! If you don't fly with the eagles you'll scratch with the turkeys
  • #14
  • Oct 5, 2006 10:08am Oct 5, 2006 10:08am
Quoting africanpip
Well what's been happening lately is a gradual build up to an announcement and then a shock. Which way is going to build? Will the trend then continue again?
I'm sorry, but you're being a bit too ambiguous for me. I'm a little slow on the uptake.

I thought perhaps that the EUR/USD would retrace back to 2800 and beyond before coming back to Earth. I came to this conclusion based on technical AND fundamental indicators, but clearly I miscalculated.

I'm just trying to understand all this better. Any assistance is appreciated. Most FA resources speak in generalities, but I think it would help me to discuss specific moves and the actual events that triggered them.

Thanks again to any who reply.
  • #15
  • Oct 5, 2006 10:56am Oct 5, 2006 10:56am
OK lets give it a bash........GBD/USD

I am new to this so bear with me. According to Mouteki (which I have been trying lately) the chart shows Long and short signals, it looked long just before the breakout, in fact I was in already but technically some confusion I assume, so we then look at the fundamental analysis for further direction and shortly before all the announcements Fundies were saying go long on GBP and EUR. increase interest rate = stronger currency (in theory) but it looks like the rate increase was already priced into the market before the announcement thereby nullifying the news trade.

Well thats basically how I interpret it. Help me out as well if am way off.
Attached Image
Eish! If you don't fly with the eagles you'll scratch with the turkeys
  • #16
  • Oct 5, 2006 11:24am Oct 5, 2006 11:24am
Quoting africanpip
I am new to this so bear with me. According to Mouteki (which I have been trying lately) the chart shows Long and short signals, it looked long just before the breakout, in fact I was in already but technically some confusion I assume, so we then look at the fundamental analysis for further direction and shortly before all the announcements Fundies were saying go long on GBP and EUR. increase interest rate = stronger currency (in theory) but it looks like the rate increase was already priced into the market before the announcement thereby nullifying the news trade.
Well, as I said, I had heard that the rate increase had already been accounted for in price action. I just anticipated a lateral move or 10-20 pip max dip at worst as a result of a stronger than expected unemployment number. I sure as heck didn't see that huge drop. I work with pretty big stop losses, so I can absorb a pretty big blow if it's coming. But I just hate that I missed out on such a big move.

Perhaps someone who shorted the EUR or the GBP can shed some light on what they were seeing during that sideways stretch?
  • #17
  • Oct 5, 2006 11:39am Oct 5, 2006 11:39am
Yep...And if they can't shed any light on the matter because it was purely speculative then they need a kick in the pants because I am trying damn hard to analyse this stuff more or less scientifically.
Eish! If you don't fly with the eagles you'll scratch with the turkeys
  • #18
  • Oct 5, 2006 11:45am Oct 5, 2006 11:45am
Quoting africanpip
Yep...And if they can't shed any light on the matter because it was purely speculative then they need a kick in the pants because I am trying damn hard to analyse this stuff more or less scientifically.
Well, I've a feeling that no matter how well thought out your entries are, stuff like this is still going to happen in this biz.

But that doesn't mean that I don't want to hear the logic behind shorting the pair before the rate increase announcement.
  • #19
  • Oct 5, 2006 4:14pm Oct 5, 2006 4:14pm
Quoting Kane Rai
The rate increase was already priced in. The comments Trichet later made traders disappointed. He declined to comment on rate increases after 2006 and didn't use the keywords "strong vigilance" which announce that a new rate increase is around the corner.


Concerning the GBP - EUR and the cable are strongly positively correlated.


cu,
k.
This guy is absolutely right, the price hike was already factored in. All the big players have their shorts in and ready for the EURO to drop to 1.2630

All day I kept shorting the EURO on tiny rallies back to 1.2700 hundred range. I did take one buy at 1.2677 simply b/c the price was near a 30 minute trend line.

Tomorrow if the Non-Farm Payroll comes out a bit weak, the market will spike up somewhere near 1.2720 then continue it's downward movement. The US Non-Farm already looks positive for the US, but again a weak positive number could spike the Eruo just a bit, after that the Euro will continue it's fall.

I don't expect much more than consolidation after the Non-Farm Payrolls to close out the trading week.
  • #20
  • Oct 6, 2006 8:07pm Oct 6, 2006 8:07pm
Quoting TheRumpledOne
If you ever trade the EURUSD long, then you are just waiting to be FLEECED!

It happens to every trader LONG EURUSD everyday at 5PM EST.

Don't let IGNORANCE cost you!

I love this market..... just like I called it, spiked to near 1.2720 then continued it's fall off of the Non-Farm data.
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