Saturday, May 11, 2013

The old advice is still good: You do not fight the tape

The US Dollar is resurgent in recent times. It has taken on new life against such as the Japanese Yen and the Aussie dollar. The Euro, however, is not suffering the same fate against the US  unit. EURUSD has been resiliently straddling its 200 day moving average, which is the centrepiece of a sideways channel, since early April:

This is worthy of note. The Eurozone economy is not exactly setting the world on fire; Sr. Draghi, chairman of the European Central Bank (ECB), just recently announced a reduction in the main interest rate, and there are expectations of more to come.

As the old investing saw has it – “Do not fight the tape”. OK, the tape is now so many electronic pulses but the principle is still the same: if the price stays up for reasons you are not aware of, you abide by what the price is telling you, and not your expectations of what “should” happen.

This is what the Omicron Silver Trigger algorithmic routine does, to good effect.

If it were deemed essential to speculate on the causation of the sticking power of the EURUSD pair around the 1.30 level, this writer would have to suspect intervention in the market, in one form or another. They have done it before and very often just a series of well-timed phone calls by the ECB to a number of dealing desks, inquiring about the ASK, can do the trick.

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