[Archive] FOREX - Trends, Forecasts and Consequences (Episode 8: October 2011) - page 16

 

margaret, you have just broken the stereotype of "trading on the news".

Maybe people will even think about the cause and effect relationship :)

 
Vizard:

just one thing...the whole thing started an hour earlier...(before the eurozone rate announcement)...

margaret:

I will start by saying that the fall started technically

 
Vizard:

Just one thing...the whole brouhaha started an hour earlier...(before the eurozone rate announcement)...

The market must have studied these recommendations carefully:

Thursday's important central bank meetings are the Bank of England (key rate and size of asset purchase programme to be announced at 15:00 MSK) and the European Central Bank (key rate to be published at 15:45 MSK and press conference at 16:30 MSK).

BMO Capital Market analysts note that there are 4 combinations of possible outcomes:

- BoE does not change policy, ECB does not change policy;

- BoE increases quantitative easing, ECB does not change policy;

- BoE does not change policy, ECB cuts rate;

- BoE increases quantitative easing, ECB cuts rate.

According to experts, the latter scenario is the most favourable for trading. In this case, the markets may initially react to the reduction of the interest differential in favor of the UK, and the single currency will depreciate against the British pound. In the meantime, investors are likely to quickly realise that the ECB's actions are aimed at improving the situation in the Eurozone. As a result, European bank shares and the Euro will rise. Thus, the BMO advises to buy EUR/GBP when the rate declines, at 0.8550, putting stops below 0.8500 and targeting 0.8700.

 
tara:

margaret:

Let me start by saying that the fall started technically

FAs helped.
 

And this info is on the same 'sore spot':

Nouriel Roubini, professor of economics at New York University, who predicted the 2008 financial crisis, says that before it's too late, the bailout fund for troubled eurozone countries should be increased to €2 trillion ($2.7 trillion). According to the specialist, it's not a matter of months, but weeks.

Roubini underlines that the main risks come from Italy and Spain because these economies are "too big to go under and too big to be saved". - they have already lost market confidence.

Debt reduction will not ensure the recovery of the region's economies, real exchange rates need to be changed through a depreciation of the euro and a return to national currencies. The economist notes that the ECB needs to soften its policy by lowering rates. From his point of view European banks should be recapitalized and a procedure for an orderly exit of Greece from the monetary bloc should be set up. In order to avoid a recession in all European economies, fiscal stimulus is needed in the "core" countries of the monetary union.

Roubini emphasises that, due to political controversies, the probability that all these steps to save the region from the contagion of the crisis will be fully realised is very low. The economist, known for his bearish forecasts, expects that the consequences of the European debt crisis will surpass the results of the Lehman Brothers bankruptcy.

 

Here are some more misinformers:

Barclays Capital currency strategists believe that the European Central Bank will ease its monetary policy today, taking both traditional and unconventional steps to do so.

In their view, the ECB can resort to several ways of monetary stimulation of the economy: to offer additional refinancing operations, including the duration of 6 and 12 months, continue to buy Italian and Spanish bonds, resume covered bond purchases, and expand the corridor of interest rates and lower funding costs.

Barclays believes that the central bank will implement all of the above measures. They believe the ECB will expand its interest rate band from 25 to 100 basis points and cut its key rate from 1.50% to 1.25%.

Analysts expect the EUR/USD to fall to $1.2500 in 3 months.

Currency strategists at UBS believe that the European Central Bank will reduce the cost of funding by 50 basis points to 1.0% at its meeting on Thursday, October 6.

According to experts, the downside risks to EUR/USD in the short term come more from the ECB than from the possibility of a Greek default.

The bank stresses that interest markets, as opposed to currency markets, have already priced in the possibility of a 25 basis point decline in funding costs. If the ECB softens its policy, long-term investors - central banks and sovereign wealth funds - will sell the single currency.

As a result, UBS believes that the EUR/USD trading range will move down to levels of $1.20/1.30.

 
Vizard:

No not on the basis of technique... there were real reasons...
Right based on the foundation, but coincided with the technique and that's why such an almost irreversible slump took place.
 
margaret:
The FA helped.


Comments?

"... Toss a coin, monsieur et madame - I'll pick it up, merci :) ..."

 
Vizard:

she just missed it... (apparently wasn't at the computer during the day)...

So far it looks like that on the euro... I don't know...


Who cares, as it seems to me, at what point did the FA help, the TA result at that point and the comments on the hot trail!

I really want to!

(Vizard, the question is not for you)

 
Tantrik:
What's new with the pound, any changes? (I do not understand why he is chasing the euro - England has only oligarchs and everything is fine there)

Pound remains under strong pressure

Pound/dollar pair rollback from the resistance area of 1.5500 was almost 200 pips amid widespread sterling weakening, caused by the decision of the Bank of England to expand the asset purchase program to 275 billion pounds from 200 billion. The pair updated 14-month low at 1.5270.
Reason: