Thursday, October 4, 2012
The EUR/USD pair and other major asset classes have been exhibiting lower volume & volatility ahead of tomorrow's Non Farm Payroll Numbers, as investors remain hesitant to get sucked into any position in this type of risk environment. Market uncertainty has dominated the trading landscape for some weeks now, as Central Bank Policy measures are making it difficult for traders to accurately forecasts price behavior. On today, the euro strenthened in comparison to the greenback on hope generated by a few risk events from earilier this morning. Today's price action in the EUR/USD pair reflected the market's response to two central bank policy meetings and a Spanish bond auction of 2 to 5 year debt. The first of today's risk events, was Spain's successful EUR3.99 billion ($5.2 billion) bond auction. This sale was closely monitored as the market continues to wait for a formal bailout request from Spain. This request for aid would trigger the ECB's OMT (Outright Monetary Transaction) program, which would involve the purchase of shorter-dated debt to help bring borrowing costs lower for Spain and other distressed nations in the Eurozone. Unfortunately, Spain has refused to formally ask for help from the EU, IMF, & ECB over fears that certain conditions attached to the bailout aid would further cripple the already fragile Spanish economy. The Spanish 10-yr bond yield remained flat and hardly moved after the bond auction results were released.
We also had the BOE (Bank Of England) release their policy decision to leave their interest rate unchanged at 0.5% with no additional stimulus. 45 minutes later, the ECB (European Central Bank) announced their decision to leave interest rates unchanged at 0.75%, which drove the EUR/USD pair higher. In regards to the Unemployment Claims, it only rose by 4,000 to 367,000 during the last week of September.
During the last half of the trading session, the minutes to the September FOMC meeting were released. At the last meeting, held Sept. 12-13, the Fed announced a major round of asset purchases aimed at stimulating the economy and pulling down the unemployment rate, which has ranged between 8.1% to 8.3% this year. The Fed announced it would buy large quantities of mortgage bonds until the job market substantially improves. The FOMC minutes revealed that all members except one agreed that the outlook on inflation & economic activity called for more monetary accommodation. This information helped to improve risk sentiment and for the day we saw the EUR/USD pair rally 129 pips from the session low at 1.2903 to the session high of 1.3032.
In today's V.I.P. webinar, we briefly discussed the current price behavior in the EUR/USD pair and current levels of support & resitance for trade entry. We also discussed the effects that the Presidential election will have on financial markets.
Thursday, July 5, 2012
For most of the week, the EUR/USD pair has been moving within a tight consolidation pattern, with a slight bearish bias, primarily due to institutions & hedge funds resting during the 4th of July holiday week and also over indecision concerning the outcome of the June Non Farm Payroll Report that is scheduled to be released on Friday. However, during today's trading session, we saw an unexpected pickup in volatility as 3 Central Banks intervened simultaneously to stimulate their economies. The PBOC (People's Bank Of China) eased their market by cutting the reserve ratio requirement by 31 basis points in an attempt to stimulate their economy. The BOE (Bank Of England) had also announced a plan to further ease markets by adding an additional 50 billion pounds of asset purchases to their current quantitative easing program. A few minutes after their announcement, the ECB had announced their plan to cut the interest rate by 25 basis points to 0.75% and also lower the deposit rate to 0.00%, in an attempt to remove the incentive banks would have in storing money at the ECB. This decision encouraged the sell-off in the euro during the NY Trading Session and the pair had fallen 175 pips from the session high at 1.2538 to the session low at 1.2363. In addition to this, there was also good US data that strengthened the greenback as well.
In today's V.I.P. webinar, we discussed the current price behavior in the EUR/USD pair and the fundamental news & events pushing market prices. We also placed a few live trades using the Slumdog Forex trading system.