The Euro and the ECB Meetings
Written by A Forex View From Afar on Wednesday, August 06, 2008When referring to currency valuations there are two aspects that are reflected in the charts; business cycles and inflation. The business cycle can be determined by economic releases, and the central banks each gauge the regional inflation expectations.
A central bank can communicate with the market throughout several ways, ranging from speeches, statements, press conferences, and sometimes with published research papers. The ECB likes to be in touch with the market by press conferences it seems. A simple outline of the days when Mr. Trichet, the head of the ECB, had a press release shows how the market really bought his words; most trends developed from that time, the attached chart shows.
The recent price action clearly shows the euro is in a downtrend, but soon the pair will run into the 1.5300 support area, something that held the pair higher in the past. Quite interestingly, the pair bounced from the same area when Mr. Trichet appeared with a new speech the last time that we were here.
Usually, a lot of volatility accompanies the 08:30 EDT conference, especially when the market were delivered surprise message (read interest rate increase announced during the Q&A two meetings ago). Is very likely that tomorrow the market will see a new trend develop which will either turn the pair around, or make it break under the 1.5300 area. If we see the same Chairman’s thoughts, bullish over the euro-economy and its fundamentals, is very likely the pair will reverse some of the recent losses. The 1.5530 may offer some a good entry point, with a close T1 and medium range T2.
However, if Mr. Trichet recognizes the Euro weakness (which we have seen in the news releases lately) we may have a case of strong selling pressure and something that could make the pair fall under the 1.5300 support area. As such, the 1.5350 area could offer some a good entry point with a ticket split into 3 targets. The first ticket should be close range, the second target could be closed as the U.S. comes to a close, while at the same time letting the third ticket to run as low as possible, and maybe even hold it until the next press conference! No Buy, Sell Or Hold!
| Posted in »
0 comments: Responses to “ The Euro and the ECB Meetings ”