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Archive for the ‘ECB’ Category

293homealone121107.jpgWell, maybe while you were getting ready for bed. The Federal Reserve Bank decided to make an emergency move this evening and cut the bank lending rate to 3.25 percent from the 3.50 percent it was at earlier. This move made by the Fed was meant to “try” and create some stability in the financial markets. Also, at the same time, Bear Stearns (BSC) is being bought out by JP Morgan (JPM) at a steal of a price. This last minute buyout and the move by the Fed (who also approved this buy out by guaranteeing the deal with $30 billion) had an immediate effect on the overseas market and crushed the dollar. The EUR/USD hit a high of 1.5905 and the YEN hit 12 year low against the dollar at 95.74. Gold also was trading (at time of posting) around 1,026 an ounce. (I guess there goes the gold teeth I was considering!)

One way to help you against the falling value of your dollar is to hedge against it with the other currencies like going long the Euro or even long the Yen. Any trading against the dollar seems to be the most logical move. When asked what should be done about the financial crisis in the US, Federal Reserve chairman Ben Bernanke said “I don’t know!” No wonder the dollar is crashing and the basic carry trade is dead.

Well, hedge your bet for now or wait and see if the fed moves some more on Tuesday with another cut of 75 basis point. Bernankes strategy seems to be trying to keep the economy supported and worry about inflation later. We may see on the EUR/USD 1.6000 before Tuesday if the market sees even more weakness. Also, the USD/JPY may see an even lower level below 95.00 as weakness in the dollar continues. Tomorrow is a new day.

~ G

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The Federal Reserve moved today to add liquidity to the markets by announcing a series of actions with other central banks to help improve liquidity and lending for the markets. The Fed are taking this coordinated action without cutting interest rates due in part of rising inflation. US markets showed instant gratification in pre-market trading. and the Dollar rose in strength. The EUR/USD reversed an earlier move 150 pip run up right after the announcement. The USD/JPY ran up 120 pips after the announcements. With all this good news, the bulls may be back for the dollar.

This coordinated effort with the other central banks is being excepted very well with the ECB because it falls in line with what they are trying to achieve. Time will tell if it is a good move for the US markets and other markets around the world.

~G

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georgio-stoev.jpg     As the ECB is due to announce its decision on interest rates, the central bankers face on of the biggest dilemmas. To do it or not?

    On one side is the pro-inflation factor of the growing petrol prices, as the inflation in the eurozone reached 3% in the November. On the other, the concern of the credit crunch on the other side of the Atlantic spreading over in Europe and thus threatening the economic growth. Granted, European officials expect slower growth next year.

    The credit crisis, the petrol prices and the strong euro are seen to moderate this expansion.

    Therefore some economists are calling for the central bank to lower rates. They also indicate that the Fed has done it twice and it’s about to do it again in December. The fear is the USD will move lower as a result, thus, further increasing the chaotic movement of the currency in the market. This of course, may lead to a further slow down for the exporting economies of the EU.

– Georgio Stoev

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It’s been fun to watch the EUR/USD: weeks ago we talked in the Daily Commentary about its trendline bounce up; more recently it surprised me as it broke through rising resistance, and now possibly a flag on the way to a support bounce. There’s a big maybe there, nothing is set in stone but that’s what I’d like to see in my technically-perfect world. Besides, in midst of this nice, orderly consolidation the stochastics reset downward, what more could you want?

 

The mini, rectangular channel falling away from the major trend is a flag. Like a flag at half mast, it suggests the pair may be only half way through its move up. Which is handy because now that we broke the upward channel the pair was in, we’d expect it to move up the distance of the width of the old channel – a snap with the flag’s target. Let’s see if we do get a bounce back upward.

 

It could always fall back in the old channel. People are abuzz about that amazing nonfarm payroll data/revision last Friday. Fed minutes tomorrow and ol’ wily Trichet speaking tonight (downside risk for the euro, as they’ve been yapping about the too-high EUR/USD of late) could send us one way or the other.

eurusd2.JPG

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