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.