Right now EUR/USD is moving basically in line with the US stock market. The S&P goes up, the Euro goes up versus the US dollar. The S&P goes down, the Euro goes down. This kind of relationship won’t last permanently, but that’s one of the major themes presently in play for EUR/USD. convert usd
Explanation: Growth in the US stock market can be considered a sign of restoration. What this means is investors are ready to take more risk, worldwide. Thus, they get their money away from the safety individuals binds and put it into emerging markets. In this process they have to sell US dollars, in order to convert them into other currencies and get those local non-USD possessions. This is the so called risk trade. This situation has been creating downwards pressure on the dollars.
The interest rate differential box is another key unbekannte. You currently get an almost 0% return on the USD and 1% on the Euro. This kind of is why the Dollar has been rapidly rising, up until recently. Best now the industry appears to be reassessing the prospects of this interest rate differential.
Matching to Marc Faber, a favorite investor, “the Euro is overbought, the US buck is oversold, and North american and other equities are essentially overbought. ”
Marc Faber has often recently been right.
Does that suggest I am going be shorting EUR/USD tomorrow? Definitely not. Marc Faber may be, and probably is, right. BUT his assessment might not exactly materialize on Monday, August 5, 2009. It may well not materialize next week or even throughout the month of October.
Tomorrow My spouse and i is going to consider the news flow, “event risk” (any major reports, toasts, announcements). I am heading to read my institutional research update during the day before the start of the trading day.
Once My spouse and i have some guidelines in my go get the what the EUR/USD price range could look like, I will look at the 1-hour chart, and determine the dominant pattern on that period frame. In the event that the 1-hour chart says me the overall opinion for EUR/USD is, say neutral to bearish, My spouse and i will be trading in the direction of the trend, i. e., shorting EUR/USD.
But I are not going to brief it at any level, whenever I feel like pushing a button. Is actually a business, so My spouse and i desire a plan.
That plan is to find a good value (using 2, 20 Bollinger bands, moving averages, and momentum indicators). I am approaching the market with a predetermined set of ideas for the morning.
It will be a little more difficult on the Monday, because everything is “new”. The market is not “reprocessing” yesterday’s news flow, price action etc… Folks are looking at how other people are positioning themselves.
That’s why We will be more cautious on a Monday, the beginning day of the trading week, then, say on a Tuesday. If in doubt, I won’t control by any means.
I am not looking for thrill. Is actually a business, all we want here is to make money, and maybe have some fun at the same time!
Good luck trading!