The EURUSD
pair, which we trade a lot using the Mandelbrot algorithmic routine, has been
in a resolute sideways and choppy pattern all last week and so far in this one.
The extremes of the range lie at 1.13 at the top and 1.11 at the bottom (as previously
noted, the market likes round numbers when it comes to establishing support and
resistance levels). Over the last couple of days, the range-bound action has
even confined itself to the 1.12 level on the downside (see chart above). This
coincides with zone of the 200 period Exponential Moving Average (EMA) on the
4-hour chart but this is to be expected as, mathematically, it is equidistant
between the two extremes mentioned.
We prefer
the solid sweep of rhythmic trend trading, but Mandelbrot is designed to deal
with this type of ranging situation as well. Its job under these circumstances is
to preserve capital while staying active in the market so that it will benefit
when the big profit opportunities reappear, which can happen at any time.
It would
appear that the market participants that have the capacity to move the exchange
rate are sitting on their hands in the run-up to the Non-Farm Payrolls report
on Friday, which will mark the final such report prior to the next FOMC
monetary policy statement, on October 28th. There now has to be a
very strong expectation that the Fed will finally raise rates on that occasion.
However, there is one other meeting this year, in December, which would also allow
for the fulfilment of the prediction of many Fed members that rates will begin
to rise ‘this year’.
German non-inflation has no impact
Yesterday
saw the release of German inflation figures. No matter what way they are
measured, whether month-on-month or year-on-year, or by means of the German CPI
(Consumer Price Index, released by Statistisches Bundesamt Deutschland) or the
Harmonised Index of Consumer Prices (HICP, released by the Statistics Office of
the EU) inflation is non-existent or negative in the most important economy in
the Eurozone. Annualised CPI was 0.0% y-o-y, as against 0.1% previously, while
HICP for the year came in at -0.2%, as against -0.1% previously.
Normally,
such news could be expected to trigger a sell-off of the Euro, as it is
calculated to accelerate ECB Quantitative Easing (QE), but in the hiatus that has
prevailed since early last week the Forex market, as represented by EURUSD and
the crosses of those two currencies, does not seem to be responding to any
fundamental triggers.
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