Fundamental and technical analysis – eur/usd forex market news

Posted by 5 February, 2010

Impact the decision of the European central bank rate has had on the quotation EUR / USD during the last two meetings

January 2010 Decision of the rate of European Central Bank
The European Central Bank left its benchmark interest rate to 1.00% in January as they waited while the Central Bank president Trichet, said regulators are doing everything they can to encourage economic growth, while also pointing to the officers wait for more signs of economic recovery before removing the emergency support. At the same time, the European Central Bank president declared that certain principles should be respected on the payment the banker, because the institutions are able to pay, adding that “we’re not losing sight of our medium-term mandate: delivering stability the price. ” Meanwhile, during the question and answer segment, Trichet public that “no change (the central bank) our collateral system for any particular country. Investors are setting a zero percent chance that regulators will raise rates at its policy meeting on Feb. 4, according to Credit Suisse rate swaps during the night.

December 2009 Decision of the rate of European Central Bank
The European Central Bank left its benchmark interest rate unchanged at 1.00% in December as expected, with the central bank president, Jean-Claude Trichet saying that financial markets have improved and that a gradual withdrawal of the emergency measures during 2010 is “appropriate.” Furthermore, the European Central Bank raised its economic outlook, with Trichet saying the risks to growth were “broadly balanced” while adding that the central bank will keep its latest proposal for the financing of 12 months at the end of this month. At the same time, the European Central Bank found that conditions will improve in the financial market, having indicated that not all liquidity measures are necessary to the same extent in the past, and with consideration of price developments, annual inflation HIPC euro area has become positive again after five months of negative rates.

To be taken into account before publication

Operators with access to deep market information through the Active Trader FXCM platform can use it to estimate the strength in the publication of this economic report as well as to clarify the directional signs on the market. The incremental volume of air a face to the ad tracking behind any move likely to materialize, while an imbalance in the available liquidity in the demand side versus supply-side market sets the direction we probably favor the most representative institutions facing the statement:
Bullish Scenario:
If we show liquidity available, meaningful and deep on the side of the market demand, this will indicate that providers most representative market prices are looking to buy the euro currency against the U.S. dollar. Considering that about 60% of all turnover in the FX market is represented by six major banks, we wise to be on the same side of the operation in which these institutions are and will favor bullish signs for trading EUR / USD towards publication of the report.
Bearish Scenario:
If we show liquidity available, meaningful and deep in the supply side of the market, this will indicate that providers most representative market prices are looking to sell the euro currency against the U.S. dollar. Considering that about 60% of all turnover in the FX market is represented by six major banks, we wise to be on the same side of the operation in which these institutions are and will favor bearish indications for trading EUR / USD towards publication of the report.

How to Operate This event risk

The European Central Bank is widely anticipated to keep the benchmark interest rate to 1.00% this month while the board of directors aims to balance the risk to the economy, but the press conference with President Jean-Claude Trichet at 13 : 30 GMT, could cause volatility in the exchange rate, while the investors weighed the prospect for future policy. A Bloomberg News survey shows that all 55 economists surveyed forecast that the central bank kept its cost of borrowing at record low as investors are setting a shift to increased rates of zero percent rate under the swap overnight, as regulators keep a pessimistic outlook for inflation. The consumer price in the euro region grew at an annualized rate of 0.9% in December, which remains well below the target of 2% for price growth, while the estimated CPI increased 1.0% in January amid expectations for a rise to 1.2%, and the central bank probably is holding its current policy throughout the first half year, while maintaining its unique mandate to ensure price stability. Meanwhile, the unemployment rate increased to 10.0% in November from a revised 9.9% in the previous month, marking the highest reading since August 1998, while retail spending unexpectedly remained in a horizontal result in December , and the Fed can continue to provide support to the real economy in the coming months, while regulators are designed to encourage a sustainable recovery.

A member of the board of directors, Axel Weber, said he expected economic activity in Germany grew at a “measured pace” this year, and said the “number of insolvencies should increase in 2010,” which continue to pressure the decline in the labor market. Further, the Commission noted that the effects of the financial crisis “have yet to materialize through the European Union,” and stated that the unemployment rate “will probably rise further,” because businesses keep a veil over the production and employment. In addition, the board member, Vitor Constancio said the European growth will remain subdued in the coming years, while President Trichet argued that the operation of governments under the single currency, “must be solvent on its way back to normal public finance at the World Economic Forum in Davos, Switzerland, while the central bank begins to withdraw its emergency measures. Therefore, Yves Mersch, European Central Bank, said the board probably is discussing the next steps for the March 4 meeting and reiterated that the central bank would continue “the progressive withdrawal of excess liquidity, while markets finance and the global economy improves.

While the European Central Bank is expected keep the cost of borrowing for the record low this week’s event risk may not be as clear at that market participants expect the press conference with President Trichet, but the behavior prices following the rate decision, could set the stage for a long operation of the euro, while the central bank aims to standardize the policy this year. Therefore, if we hear any comments from the central bank upbeat following the meeting, we need to see a dollar, a five-minute candle following the subsequent follow to achieve purchasing confirm an entry on two lots of trading EUR / USD. Once these conditions are known, base our initial stop near a swing low (or reasonable distance more volatile taking into account), and this risk will determine our first target. Our second objective will be based on discretion, and in order to preserve our profits, will move the stop to the second batch at the break, once we reach the first target.

In contrast, fears of a prolonged recovery along with the slight price increase could lead to the board of directors to maintain a pessimistic outlook for future policy and a change in the rhetoric of central bank could weigh on the euro, level that regulators aim to balance the risk to the economy. As a result, if the ECB keeps rates expected fine and price growth remains below 2% throughout the year, we favor a bearish outlook for the single currency, and implement the same strategy for an operation short of euro – dollar, as the long position mentioned above, just the reverse.

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