Tuesday, April 8, 2014

Euro zone Quantitative Easing | Has our Mandelbrot algo routine caught the tip of the GBPUSD pennant?

Rumours have emerged of a Trillion Euro Quantitative Easing (QE) package that is to be made available to fight both deflation and unemployment in the Euro zone, and in the EU in general. Such a development would place considerable strain on the ability of the Single Currency to remain as resilient as it has been against its major counterparts around the world.

However, our sources in Brussels, home of the EU Commission, tell us that this package has become mired in the infighting that can often become apparent between that same Commission and the European Central Bank (ECB).

The politicians are bracing for a kicking from the electorates in the various EU member states in the upcoming European elections and would, therefore, welcome a development like QE as it might give them some support with the voters.

Our source tells us that the relations between Brussels and Frankfurt, where the ECB is based, have become so strained that the Central Bank could hold off implementing the package until after the elections for the very reason that it might actually be of assistance to the incumbent politicos.

Our source also says “…the good old Bundesbank would not be that happy with QE, despite what Weidmann [Jens, Bundesbank president] (sort of) said last week - they may give it a very slight nod but would not be up for it long term - they hate inflation!” 

Has our Mandelbrot algo routine caught the tip of the GBPUSD pennant?

Yesterday we drew attention to the fact that a classic Technical Analysis pendant pattern had formed in the GBPUSD pair, and remarked that sometimes identifying the tip of the pennant, which can often mark the start a further rise in price, is “not a perfect science”.

Later in the morning a strong UK manufacturing report produced a surge in the pair, which seems to have the potential to bring it into completely new price territory to the upside.

We had initiated our Mandelbrot routine on the GBPUSD instrument and, using its proprietary algorithm, it entered a position, at the level shown in the chart. This trade is already in profit to the tune of 1% of equity.

Has Mandelbrot located the tip of the pennant? Time will tell.

No comments:

Post a Comment