Wednesday, March 4, 2015

Euro at lowest in over a decade | Sterling breakout in jeopardy

Yesterday the Euro went below its recent extreme low of 1.11 against the US dollar, which it had established in January, to trade at a level it has not seen since September of 2003. This move came in spite of the announcement of very good retail sales for the Eurozone. There are other signs of improvement in Euro land too, but it would seem that the Forex market is prepared to ignore all that and concentrate on the anticipated actions of the ECB. These will become perhaps a little clearer later today when the President, Mario Draghi, will present the latest monetary policy statement and hold his customary press conference.

The good news is that the OmiCronFX Mandelbrot algorithmic routine is able to ignore the instinct that might say the Single Currency was likely to use those retail sales and other data to bounce off its support at 1.11, and the heavily sold Euro futures that would also point to such a possibility. Yesterday it showed a profit trading in the EURUSD pair…to the downside. Mandelbrot always picks the trade direction.

Sterling breakout in jeopardy

Market sentiment towards Europe in general, combined with a rampant US dollar, which is resurgent on the back of continuously good economic news out of the US (despite winter weather that is every bit as bad as last year, when all dollar movement was placed on hold), has resulted in a reverse for the GBPUSD pair as well.

This tendency has now placed the nascent Sterling breakout from its recent dominant down-trend channel in danger (see chart). Today also sees the Bank of England interest rate and Asset Purchase Facility (recycling of bond purchases that were bought to implement UK Quantitative Easing) announcements. There has been no change in either of these for some time, and none is expected today. Therefore they are unlikely to change the situation in one direction or the other.

What prediction has Mandelbrot made about this, I hear you ask. The answer lies in the fact that the algorithm only makes its decisions at the last moments before a trade, based on price movement at the time. Algorithmic routines are very good for this kind of activity, as they can monitor the action continuously, and react with split-second timing when called upon to do so.

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