Sunday, December 6, 2015

Euro-dollar bias is still down | U.S. Non-Farm Payrolls put the last brick in place for rate rises

For all that there was a surge in the EURUSD on the eventual turnout of the ECB monetary policy statement and press conference last week, when the president, Mario Draghi “failed to produce the big bazooka” that the market had promised itself, and given that a large part of said market was seriously wrong-footed and was forced to buy the Single Currency at almost any price in order to close out massive short positions, the tendency for this pair is still to the downside.

The gap down at the start of this week’s Asian session, at 10:00 GMT last evening (see chart), is a technical indicator of this. The gap will no doubt be filled (price will go back up to the top of the gap) at some stage today, but the medium-to-long term move is still down, and parity is still in prospect.

Last week, though, was a perfect example of the desirability of having a market neutral trading system, such as the one based on the Mandelbrot algorithmic trading routine is, where one can be indifferent as to the direction that the market will take on any given day.

U.S. Non-Farm Payrolls put the last brick in place for rate rises

The last brick in the wall of persuasion for the Federal Reserve to start raising interest rates at its December meeting (18th) has been slotted into place with the plus-200k (211,000) result in last Friday’s Non-Farm Payrolls report. There will no doubt be more excitement when it is announced, even though it has been so well telegraphed, but that is the Forex market.

Attention now will inevitably turn to the possible frequency and size of interest rate increases in the U.S., and to speculation about how long it will take the Bank of England to follow its counterpart on the other side of the Atlantic.

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