David Long

Draghi All Bark, No Bite – Forex Trading News – Oct 3rd 2014

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Forex Market News

It would seem that Draghi is all bark and no bite. Investors overnight disappointed that the ECB not only did nothing but also announced bugger all really. He announced some bond and other asset purchases over the next 2 years in a futile attempt to lift inflation. It is not enough and one gets the feeling that the “additional measures” he keeps talking about are not going to happen. Maybe he is hoping that the talk of it will be enough, not the implementation of it. Perhaps they have not agreed on the best method/strategy. Either way, what he has done is nada and inflation will remain stagnant for some time. The Eurodollar bounced a little on the fact that no stimulus is coming. I think they miss the point, the point is that the Euro economy will remain in the doldrums for the foreseeable future (most of 2015 now) and your money should be going elsewhere. I would look to sell as this minor rally stalls.

In other areas, some obscure wingnut from the BOE came out and said the British economy may not be strong enough to warrant an increase. This put pressure on the pound, bucking the trend of most other majors. It is interesting that Carney allowed this to happen. Perhaps he meant it to without coming directly from him, a smart play at keeping the pound out of favour. Last night’s construction data certainly was stronger and opposite to the call of a weak economy. It’s hard to hide in the open, so I am still bullish the sterling.

Overall I do see a little correction of the recent moves coming in the next few sessions, but all in all I would remain bullish the US dollar for some time yet and look to get back into the trend, ie: sell the rally, or buy the dip.

For example, over in Japan it is as murky as it is dull but clearly we are heading back into the 106/107 area before running back up to 115. However, there are headlines I see that are starting to question the weak yen policy of Abe’s. No real growth is coming from the stimulus as Japan continues to refuse to grow. Yet we have one former finance minister quoted yesterday as saying “further declines in the currency may trigger intervention. The Bank of Japan’s stimulus policy leading to a weak yen is mistaken”. So, confusion and mess reins in the world’s 4th largest economy. Could get choppy between 110 and 120.

I like this article for today, currency war is being mentioned again, after a hiatus of several months. http://www.bloomberg.com/news/2014-10-02/dollar-aids-world-economy-amid-currency-war-for-faster-inflation.html

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