So as I write we have seen the Eur/Usd trend positively from the morning lows of 1.28470, on the back of what positive news we ask ourselves?. Last night SnP rating agency downgraded Spains credit rating, this would usually cause a drastic selll off in European and Eur related markets but instead we have seen a slight rally. The only logic behind this rally can be down to the fact that a downgrade has already been priced into both foreign exchange and equity markets. As a trader, the psychology of the markets has changed over the past few months we have started to see a negative correlation between bad news/data and market reaction. Usually bad news causes the markets to trend in a downward direction and positive news causes the markets to trend upwards in a positove direction, but this has however not been true. In my opionion this can be directly attributed to the level of intervention that we have witnesses by the BIG3 (ECB,FED,BOJ). The markets have become a battle between the central banks, Who can print?How much can be printed? When do we need to start printing?
The result of the above has left the market ranging in no definate direction, we have seen the diminishing effects of QE3 a rally that lasted no longer the 5trading days and there is already talk of QE4. I think that we could see an unusual swing in the final quarter of this year, we have earnings season which will undoubtely be highlighted by poor earnings from US corporates, a heated US election battle, slowing growth in China, a crippled Eurozone and yet the markets continue to make gains? Something is not adding up, the correlation is no longer.
Happy Trading
No comments:
Post a Comment