Everyone knew he was going to raise rates and the statement was quite hawkish but no more so than expected so after it went up briefly it came back down. The smart players could see the uptrend was over and just wanted to close their long positions.
DislikedEveryone knew he was going to raise rates and the statement was quite hawkish but no more so than expected so after it went up briefly it came back down. The smart players could see the uptrend was over and just wanted to close their long positions.Ignored
DislikedRaising rates is certainly not good for the economy but it is good for the currency. The rate hike was already priced in so didn't move the market at all. What did move the market was the Trichet press conference. The market was also waiting for the NFP and was long Euros so there was always going to be a sell off regardless of what Trichet said.Ignored
DislikedYou have to pay attention to Trichet's words over the past year. Whenever he uses the phrase "continue to monitor very closesly all price developments" it means interest rates rise in 2 months time. "Vigilance" of course means interest rates will rise next month.
Just about every technical indicator is screaming sell e.g. RSI has broken below 70 on the daily chart.Ignored
Dislikedi was just about to say...strong down trend here...
by the way, when Trichet gave the conference, why is everyone selling the EUR when he just raised rates?Ignored
Dislikedwith the recent data, can you explain the statement "worried about the risk of upside inflation"? with numbers that are bad as it is, what upside inflation is there?Ignored
DislikedTrader 1580-with the recent data, can you explain the statement "worried about the risk of upside inflation"? with numbers that are bad as it is, what upside inflation is there?
Here's the Fed statement from the last 3 meetings:
"Readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures. However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand".
The dollar weakened after the last time this statement was released on 10/25.
This is like saying "Readings on the amount of cars traveling thru this street remain elevated, however, the amount of cars seems likely to moderate over time and I expect to be able to cross this street safely because of the restrctions I have previously placed on traffic flow and other factors restraining traffic".Ignored
DislikedInterestingly 4 times out of 6 the Euro has fallen on the day interest rates have gone up. I think a February hike was expected by the market but what Trichet said about inflation shows that that might be the last for quite a while.Ignored
DislikedI do not agree EURO rally is dead. That just a short term correction. I believe USD is facing a great devaluation crisis.Ignored
DislikedGreenie the Dollar Meanie:
Who said Forex was easy? As u know, I called for an end tothe Euro rally and I said it would continue as long as the fundamentals held. So we got an unsheduled fundamental release.
OK, Greenie says the current account is important. No doubt he's right and as it happens, we have the number coming out tomorrow. How might it go?
Well, as a currency devalues the cost of it's imports go up, which usually dampens demand leading to a shrinking of the trade deficit. There's a good chance tomorrow's number will be lower then consensus, but we'll see.
Overall I have not changed my opinion regarding the EUR/USD. What I have done is close my position with about a 25 pip loss. Since I believe that a large potential correction exists for the pair, there's no reason to hold it right now, but I do have an order to sell it if and when the price goes below 3175.
If that does occur tonight, I still plan to exit the position prior to tomorrows reports and Fed statement. I'll re-assess at that time.
Remember also that the Fed is depending on a continued slowdown in housing to slow growth and that Greenspan also said a while back that housing had likely hit a bottom. We also had this report today:
Traders also continued to pare bets that the Fed would cut rates at the March meeting. Only 28% believe now in a March rate cut. That leg of the theory is standing stronger then ever.Ignored