Thursday, July 30, 2015

Forex market reacts to US data | Eurozone inflation today will also impact EUR/USD

After a strong rising start on the first day of the week, the EURUSD dollar pair assumed a bearish (falling) bias after the release of the US Durable Goods orders report on Monday, halfway through the London session. Durable Goods had not been giving very good readings in previous months, but the latest report beat both expectations and the prior outcome. Thereafter, on Tuesday, US Markit Purchasing Managers Index (PMI) figures added to the feeling of positivity for the Greenback.

Then, on Wednesday, albeit after a somewhat puzzled reaction at first, market participants decided to interpret the Fed Monetary Policy statement as more hawkish than dovish, which is to say that it was taken to mean that interest rates will in fact rise in the US this year, possibly in September.

The fall in the pair (a fall in EURUSD means a strengthening dollar) gained further momentum yesterday (Thursday), when it became known that US GDP had risen on a quarterly basis, although the year-on-year figure was a little less than had been hoped for. But a quarterly rise was enough.

OmiCronFX has traded these developments using the Mandelbrot algorithmic trading system. Development of the OmiCron Mandelbrot software has been guided by the principles outlined in the OmiCron Forex Trading Manual, which is available from Amazon.

Eurozone inflation today will also impact EURUSD

The fate of the most traded pair on the Forex market is, of course, tied to the notion of a divergence in monetary policy between the US and the Eurozone. While the US is expected to begin monetary tightening in the form of an interest rate rise regime in the not-too-distant future, in the Eurozone it is easing, by means of a continuation of Quantitative Easing (QE), which is the order of the day.

That EZ easing will either be strengthened or checked by the release of Core Consumer Price Index numbers by Eurostat later this morning.

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