On Wednesday
last, 25th November, an article appeared on the Reuters web site to
the effect that certain un-named European Central Bank officials had leaked the
information that the governing council was considering innovative ways of
accelerating its Quantitative Easing measures, for example by adding to the
classes of bonds it can buy to implement the measure, and/or by lowering the
bank deposit rate further into negative territory, with a banded structure that
would mean even lower deposit rates for those institutions that wanted to park
larger amounts of cash overnight.
Any addition
to Eurozone QE, and in particular any further lowering of the deposit rate, are
calculated to be big negatives for the value of the Single Currency.
The chart
above shows the almost instantaneous reaction of the Forex market to this news.
The release had a time line of 09:04 GMT, and within the same ten-minute bar
the EURUSD pair had started to fall. This continued for some hours before levelling
out, well into the New York session that day.
Mandelbrot catches the trade
On a day
like the 25th, the Mandelbrot Forex algo routine is set to run from
the start of the London open. We cannot predict which news reports will excite
the markets, but Mandelbrot can, and does, react very quickly indeed to the
movements that are initiated by those institutions that are in a position to
cause meaningful exchange rate rises or falls.
In the case
of the move on the back of the Reuters report, Mandelbrot only had to allow the
exchange rate to fall decisively through the 200 period Exponential Moving
Average (EMA), in case that was going to act as a support level, before it put
on a trade.
The outcome
as is shown in the chart above.
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