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Is the Yen Ready to Turn Higher?

May 15, 2014 in Forex Articles

When we look at the trading activity in forex markets over the last several decades, one of the most consistent scenarios has been seen in Japan.  For many investors, this might sound like a good thing but the opposite scenario is a much better description of the situation.  Specifically, the country has been caught in several “lost decades,” where GDP annualized growth rates have been at or near zero with little reason to believe that things will be changing time soon.  With growth rates lackluster at best, the Bank of Japan (BoJ) has had no reason to raise interest rates and this removes key incentives for investors to hold long term positions in the currency.

With interest rates in the Yen very close to zero for long periods of time, forex traders tend to use the Yen as a means for funding carry trades in higher yielding currencies.  So, the Yen tends to have two central pegs against it:  The BoJ has no reason to add incentives to buy the currency and investors have active reason to sell the currency in favor of higher yielding alternatives.  This makes longer term investments an almost no-win scenario, and this is the reason why many people in Japan itself (the so-called, Ms. Watanabe) will exchange their domestic currency for foreign alternatives (such as the Australian Dollar).

Could the Tide Be Turning?

Of course, economic trends can never last forever and there is reason to believe that some short term data will start to look more positive over the next few quarters.  If we think back to 2011, there was a good deal of volatility in Japanese growth data, as the Tsunami destruction and the following recovery created some erratic GDP reports.  These figures have yet to completely work themselves out and quarterly growth for the first quarter of this year actually came in at 5.9%.  This is obviously well above the growth rates seen in recent history and when we look at the changes seen in consumer inflation levels, so additional factors rise in importance.

Specifically, consumer prices in food and energy suggest that the BoJ will not be able to continue adding monetary stimulus at their current rates, as this is putting too much pressure on regular households.  This is a positive scenario for the Yen and a negative for all pairs that are denominated in the currency.  Common examples here include the USD/JPY, EUR/JPY, and GBP/JPY so those that currently have long positions in any of these forex pairs might want to consider trimming back positions on any rallies.  The longer term scenarios (when looking at things from the year and decade perspectives) are still intact.  But there are now reasons for why shorter term rallies in these pairs might have trouble gaining bullish traction.

How to Read Forex Charts

March 30, 2014 in Forex Articles

Forex traders use technical analysis as a method to gain insights on what to trade next. This method is heavily based on forex price charts as it makes use of historical price data for the prediction of future price movement and trends. However, price charts are not used only by technical analysts but they are arguably the most widely used tools within the entire investors’ community.

Price charts are simple graphical representations of a forex instrument’s price against fixed periods of time. But make no mistake; these simple representations are able to give instant and valuable details about how instruments’ prices moved in the past. History tells that since the 18th century, rice traders in Japan began plotting price charts on paper to help them study the patterns formed and make profit out of them. These days, traders are still very much interested in price charts for the same reasons and with the use of computers they can have within seconds a variety of chart visualisations such as line, bar, or candlestick charts.

Line Charts

The simplest chart of the three is the line chart mainly because it projects only the closing price of a forex instrument against a fixed period of time. The line chart is formed by connecting the closing prices points together. Even though there is no information about open, high, and low prices of a forex instrument, the closing price is the most important reading. The forex chart below is an extract from the easy-forex MT4 platform and it shows daily closing prices of the EUR/USD for the last two months.

Line Charts

Bar Charts

Traders who demand more information from a chart can use a bar chart which displays information for Open, High, Low, Close price points for each time period, and that is why it is sometimes also called an ‘OHLC’ chart. The chart displays a series of vertical lines for each price point. For each of those lines representing a time period, the highest price is the top of that vertical line and the lowest price is the bottom of that vertical line. The small horizontal line on the left side of the bar shows the opening price of that time period and the small horizontal line on the right shows the closing price.

Bar View

A daily bar displayed on the trading platform shows the daily price-action of a currency pair. Notice that some of the bars are green because the day’s close price is higher than the day’s open price, and the rest of the bars are red because the day’s close price is lower than the day’s open price.

Bar Chart

Candlestick Charts

The candlestick chart shows the same information as the bar chart but it is visually different. Each bar also represents a time period and has the main body that represents the difference between the open and close price. When the colour of the bar is green then the close price is higher than the open price for each day and when the bar is red it means that the close price is lower than the open price, just like the bar chart. The tips of the two vertical lines on top and below the main body show the high and low prices for that time period. Note that in case that there is no vertical line on top and/or below the main body, it means that the top and/or low part of the main body also represents the high and/or low prices.

Candlestick View

The colours explained here are not standard and are not based on any rules. Graphic representations by various platforms such as the MT4 provide the option to change the colours to the user’s preference. Make sure that there is understanding of what each colour represents so that there is no confusion between rising and falling prices of candlestick charts.

Candlestick Chart

Many analyses and online forex content use candlestick charts mainly because of their ability to easily interpret price movements and therefore they are user friendly to novice forex traders. In any case, forex charts are probably the number one tool for technical, and even fundamental, analysts and it’s important to know how to read them.

by David Parker @

Pros and Cons of Forex Leverage

February 20, 2014 in Forex Articles

Picture depicting attractions of Forex LeverageForex markets have grown ever more popular, and one reason for that is the leverage offered to traders by forex brokers. Here are some facts, benefits, and potential dangers involved with leverage.

There are various reasons why the forex markets have become hugely popular and why the daily volumes traded are more than $5 trillion, but one of the reasons that investors shift to forex markets rather than stock markets is leverage. Even though it is a common term within the markets, few traders are aware of what leverage is, how it works, and especially how it could backfire under some circumstances.

First things first: leverage means borrowing. In the financial sector, it means the borrowing of money in order to invest in something. Forex traders borrow that money from their forex brokers. Most forex brokers offer high leverage to their clients so that they are able to invest a considerable amount of money by contributing only a fraction of that amount from their own pocket, the margin. Forex brokers advertise their offers in leverage by representing them as ratios, e.g. 1:50, 1:100, or 1:200, depending on account types and regional restrictions. Consider the case of 1:100 leverage, this means that for $1 deposit by the trader (margin), he will be able to trade $100. If the same trader was considering trading a respectable amount of $100,000 (1 lot) on USD/JPY, he would only be required to have a margin of 1:100, or 1%, or $1,000.

So why is there so much leverage offered in the forex markets? It all makes sense when you take into account that prices of currency pairs move in pips, which are the fourth decimal place of that price. This means that if the EUR/USD price moves from 1.3700 to 1.3800 (100 pips) then it is considered as a major increase of the price, but the reality is that the price only moved one cent upwards. This is why it is beneficial to magnify trades in forex currencies with the use of leverage to reach some decent profits. But does leveraged forex trading imply possible decent losses also? Let’s take a simplified example to find out.

Suppose that two traders have $1,000 each and they are both interested in buying the USD/JPY since they believe that it will gain in value.  The current price of the USD/JPY is 102.

Trader A decides to use 1:100 leverage and therefore buy $100,000 worth of USD/JPY (100 x$1,000). In this scenario one pip is worth approximately $9.80. If the USD/JPY rises to 103 then Trader A will gain 100 pips which are worth approximately $980. But if the USD/JPY falls to 101 then Trader A will lose $980, that’s 98% of his money.

Trader B is more risk averse and chooses to take 1:10 leverage and therefore buy $10,000 worth of USD/JPY (10 x $1,000). For Trader B one pip is worth approximately $0.98. If the USD/JPY rises to 103 then Trader B will also gain 100 pips which are worth approximately $98. But if the USD/JPY falls to 101 then Trader B will lose only $98, that’s less than 10% of his money.

The above example may be simplified but explains clearly that leverage is a double edged sword. By using more leverage, potential profits may be multiplied as well as potential losses. Leverage should be used with caution, and traders should consider applying stop losses to their positions to limit any big losses to their capital. Leverage is best to used in moderation because after all the aim is not to become a millionaire within a few months, but rather to make sensible moves within the forex markets. Nobody wants to see their hard earned money evaporate within a few days.

by David Parker at

Indonesian Rupiah to Rally as Mineral Ban Eased

February 14, 2014 in Forex Articles

The Indonesian Rupiah is showing strong bullish moves this week, with the currency hitting its highest levels in a month as one of the best performers in emerging markets.  The recent strength has been propelled in part by the Indonesian government’s decision to allow some forms of mineral exports to move forward and continue, and this has come as a positive surprise to currency traders that had previously operated under the possibility that these policy bans would actually be made more strict.  Given these changes in policy perspective, traders should start to look at new short positions in the USD/IDR currency pair, at current levels.

On the whole, this creates a more encouraging scenario for Indonesia’s current account figures, which currently show as a deficit at a rate that many have described as alarming.  Prospects for an improved current account deficit are generally positive for currency values, as well — and the market’s reaction to these developments have fallen in line with these common trends.  “The rupiah is currently trading just under 12,000 per dollar,” said Sam Kikla, markets analyst at BestCredit.   “These are the highest levels we have seen since the middle of December, so it is clear that the market is taking these policies developments as a bullish signal.”

Prospects for Continued Strength

Last Sunday, the Indonesian government announced plans to put in place a complete ban of mineral or exports.  But this announcement was later altered by President Susilo Bambang Yudhoyono in favor of a more flexible ban that would allow certain mineral types to be more freely traded.  Specifically, exports of iron ore, led, copper and zinc concentrates will be able to continue as the revised policy decisions aim to take some of the pressure off of Indonesia’s current account difficulties.

Looking forward, the fate of the rupiah will depend on a number of factors but a good deal of attention will be focused on the extent to which trade policy limits the chances Indonesia will be able to make progress in its trade balance.  In 2013, we saw a number of emerging market currencies struggle to gain a stable footing against its developed market counterparts.  These trends are troublesome, given the fact that we saw a good deal of evidence supporting the argument that the global economy was recovering in a sustainable fashion.

Broader growth rates will continue to guide the market’s bias in the buying and selling of the rupiah and other emerging market assets.  Wider trends in the US dollar will also make up a critical element in currency valuations (as these currencies tend to show an inverse correlation with what happens in the greenback).  But country-specific developments are what is moving markets now, and with the rupiah at its highest levels since December 12th, there are prospects for further gains on the prospect that government policies will not do as much to hinder Indonesia’s trade balance relative to the earliest expectations and official policy announcements.

Sterling rise gone too far?

January 17, 2014 in Forex Articles

This morning, UK retail sales came in much stronger than expected with year on year sales to December at 5.3 per cent – the strongest growth since October 2004. This much higher figure gave a massive boost to Sterling against the US dollar with the pound jumping more than 100 points on the news. Sterling is currently trading at 1.6450 against the greenback, perilously close to its 52 week high. The pound had a very strong 2013 much to the surprise of analysts with sterling rising from 1.48 USD when Mark Carney became governor of the Bank of England to the current 10% plus appreciation since then. Respected financial institutions such as “Global Investment Authority” predicted that the pound would fall below its 2009 low of 1.37 USD soon after Carney took office. How wrong they have been! They certainly have egg on their face with that prediction.

Sterling has had a very strong 12 months against a number of currencies as economic indicators for the UK have been beneficial to the currency but has the rally in sterling gone too far? Against commodity based currencies such as the Australian dollar, the pound has risen from 1.44 AUD to the current 1.87 USD – more than a 25% appreciation for the pound. Against the Canadian dollar, Sterling has risen from 1.52 CAD to over 1.80 CAD today, the pound is nearly 20% stronger today from its 52 week low. Against two of the BRIC countries, Sterling has risen from 2.90 to 3.88 against the Brazilian Real, a 30% appreciation against the South American super power and against the Indian Rupee, Sterling has risen from 80 Rupees to over 100 Rupees to the pound, a 25% rise from its one year low.

A strong Sterling is going to make it difficult for UK exporters and as many overseas currencies are beginning to look too low and making their exports more competitive, it is going to be difficult for the pound to trade at these hefty levels as UK exports become more uncompetitive with the high pound and surely Sterling is braced for a fall in coming weeks.

The Various Interpretations of Bollinger Bands

January 3, 2014 in Forex Articles

One of the primary advantages of using Bollinger Bands is that they can be interpreted in many different ways.  This can be helpful for traders with stylistic methods or trading goals that vary from the wider major and makes Bollinger Bands a highly flexible tool that can be used by almost anyone.  One of the most popular methods used by traders is to buy a currency once prices reach the lower Bollinger Band and then rise back through the middle Bollinger Band.  Conversely, this strategy can also be used for sell positions, which would be initiated when prices rise to the upper Bollinger Band and then fall back below the middle Bollinger Band.

“The rationale behind most Bollinger Bands trading comes from the fact that prices have reached extreme levels, based on historical averages,” said Haris Constantinou, currency analyst at TeleTrade.  “This tells us that a major high or low is in place.”  Since we now have some sense of where prices are likely to be contained (inside the Bollinger Bands), we look for confirmation in the move.  This can be seen once prices cross back through the middle Bollinger Band.  In the bullish scenario, we can take buy positions once prices reach the lower band and cross back above the middle band.  In the bearish scenario, we can take sell positions once prices reach the upper band and then cross back below the middle Bollinger Band.  Trades are taken on the assumption that prices will next travel to the opposite Bollinger Band (which is where profits should be taken and trades should be closed.

Close Bollinger Bands Versus Wide Bollinger Bands

Another way that Bollinger Bands can be interpreted is to use the space between each Bollinger Band as a way of forecasting price activity.   When the Bollinger Bands are seen tightening, this is an indication that market volatility is decreasing.  Since markets are unlikely to stay this way for extended periods of time, this is also a suggestion that a breakout is imminent.  Unfortunately, Bollinger Bands cannot tell us which direction will be seen (bullish or bearish).  But once prices break through the tight Bollinger Bands, significant follow through can be expected.

Conversely, critical information can also be seen when Bollinger Bands are very wide apart.  This occurrence indicates that market volatility is heightened and since prices have difficulty maintaining these extreme levels for very long, wide Bollinger Bands suggest that markets will need to calm down and revert back to normal averages so that the “dust can settle” and the previous volatility can ease.  So, when Bollinger Bands are seen as being very wide, it is generally not a good idea to place a trade in the direction of the over-riding trend.  Instead, contrarian positions should be considered because the wide Bollinger Bands are giving an indication that the previous trend is ready to end.

Strong US non farm figures to act as a cataylst to push the US dollar higher

December 6, 2013 in Forex Articles

US non-farm payroll figures released earlier today showed that the US is making decent progress on the employment front and demonstrating that the US economy is recovering better than expected. Non-farm payroll figures are probably the most important and closely watched economic figures watched by the financial markets. Figures released showed that the US economy added a better than expected 203,000 to employment. The unemployment rate fell to 7 per cent in the US. A figure of 180,000 was expected and this non-farm payroll figure may be the deciding factor for the Fed decision on December 18th.

The US dollar soon after the release recovered against a number of major currencies and equity markets surged with the Dow Futures currently more than 100 points higher.

However, the surprise 203,000 increase may be a double edged sword as the better than expected figures may act as a catalyst in bringing forward tapering. The $85 billion dollar a month of bond purchases (quantitative easing) may be reduced sooner now as the economy shows signs of better recovery prospects.

With the US showing signs of stronger recovery, the weakness in the US dollar in recent weeks may start to reverse. With the US dollar above 1.3650 against the Euro and above 1.6330 against Sterling, both those currencies seem rather over-stretched and over-valued on fundamentals and especially on purchasing power. With tapering now seen to be closer, the US dollar will be a major beneficiary when it finally comes. Buy the US dollar!

Understanding Breakout Trades

December 5, 2013 in Forex Articles

When a price breakout occurs, the market is telling you that the paradigm has shifted and that the previous idea of what was an appropriate value for the currency is now being revised higher or lower.  The market is also telling you that we can expect prices to continue in the same direction (the direction of the break) going forward.  We base this assumption on the fact that markets would not have been able to push prices through the significant resistance level if momentum in the currency was truly in the present in the previous direction.  Bullish breakouts occur when prices make an upward break of resistance, while bearish breakouts occur when prices make a downside break of support.

“When major areas of support become invalidated, it makes sense to initiate sell positions,” said Haris Constantinou, currency analyst at TeleTrade.  “When major areas of resistance become invalidated, it makes sense to initiate buy positions.”  The main logic here ultimately resides in the fact that we would expect prices to continue to move in the direction of the price breakout.

Increasing the Probability in Breakout Trades

Now that we understand the mechanics of a forex trading breakout, we next need to learn how to increase the probabilities in these trades so that we can maximize gains relative to the trading majority.  One way of doing this is to look at market volumes as these support or resistance breaks occur.  If trading volumes are low, it is a signal that a majority of the market is not behind the breakout move and that there is a possibility of a false break.

Because of this, it is generally prudent to wait for breakouts that are accompanied by higher trading volumes.  Higher trading volumes will show you that a majority of the investment community is in favor of the direction in which prices are moving.  This is a better indication that prices will continue in this direction in the future.  Without this confirmation, the probabilities for a successful trade are lower.

Additional Confirmation

In addition to this, forex breakout traders that tend to be successful will also be looking increased volatility after the breakout occurs.  After a significant break of support or resistance, follow through will depend on increases in volatility which are usually generated by stop losses that were put in place by traders on the wrong side of the break.  While these stop losses being triggered is a bad side for the traders losing money, it is actually a good thing for breakout traders as this is likely to propel prices in the direction of the breakout.

Traders looking to capitalize on developing trends should always remember to look for price breakouts as the first indication that the previous trend is changing.  Here, we looked at some of the factors involved when structuring these types of trades.

The BoMACD Trading Strategy

December 5, 2013 in Forex Articles

Broadly speaking, the BoMACD trading strategy uses two of the most commonly used technical indicators in the forex market:  The Moving Average Convergence Divergence (MACD), and Bollinger Bands (The “Bo” in the system).  If you have any experience trading in the forex markets, it is highly likely that you have heard of one or both of these technical indicators.  And, it should be understood that there is a reason for this.  If these indicators were not widely viewed, tested and shown to be reliable for forecasting future price activity in the forex markets, why would so many market experts use them on a regular basis?

The fact is, these technical indicators have stood the test of time and weathered all of the testing and research that traders have conducted when studying these trading tools.   For these reasons, it will be highly beneficial for traders to understand the basics of how and why these indicators work (and what they seek to identify) so that a firm understanding of the associated trading methods can be used and profits can be maximized relative to losses in your trading account.

Combining Indicators

“In the most basic sense,” said Rick Bartlett, a currency analyst, “The BoMACD strategy looks to combine two of the most reliable technical indicators in order to construct high probability trading strategies.”  While each of these indicators can present some highly valuable trading signals on their own, combining these tools together can give even stronger signals, allow traders to remove low probability trading scenarios and instead focus on the trades that are most likely to bring about a successful result.  So, why does this combination of technical tools help us to expand on probabilities for successful trades?

Each tool works great on its own, but in combination their powers in market forecasting rise exponentially.  Bollinger Bands essentially give traders a range in which prices are likely to fluctuate over a given period of time.  Prices are unlikely to rise above the upper band for very long.  Likewise, they are unlikely to fall below the lower Bollinger Band for very long.  This is useful in setting profit targets and stop losses.  In long positions, the profit target can be set near the upper Bollinger Band while the stop loss can be set below the lower Bollinger Band.  In short positions, the profit target can be set near the lower Bollinger Band while the stop loss can be set above the lower Bollinger Band.

The MACD comes in when we are looking to identify trend direction (which becomes the basis for the decision to place a long trade or a short trade).  When the MACD is seen above the MACD histogram, buy positions should be initiated, as this implies positive momentum in the markets.   When the MACD is seen below the indicator histogram, sell positions should be initiated, as this implies negative momentum in the markets.

Common Themes in Common Trading Mistakes Part 2

November 23, 2013 in Forex Articles

In the first part of this article, we outlined some of the most common trading mistakes, and the some of the underlying traits that are exhibited by traders making those mistakes.  The unfortunate reality is that most traders fall into very predictable traps that could have (should have) been otherwise avoided.  But when we fail to take things slowly, do proper research, and approach the markets with a conservative mindset — we are playing with fire.  These common problems quickly take traders out of the game and destroy trading accounts in short periods of time.  Next, we look at some of the trade management mistakes that are commonly seen, and the various ways these practices fit into the general theme of unrealistic expectations.

Adding to Losing Trades

“When looking to average-down,” said Rick Bartlett, currency analyst at CornerTrader “traders tend to add too much to losing trades that have already begun to show a clear shift in the wrong direction.”  These traders begin to panic (because they are also often over-leveraged) and continue to commit to the position even though there is little reason to believe that there will be a reversal in the right direction at a later time.  This is essentially delusional behavior, which comes mostly from a common fear of loss.  What these traders have thus far failed to learn is that losses are inevitable and instead what traders should be looking to do is manage these losses properly.  This involves cutting positions before the negatives become excessive so that new trades can be opened.

The last area here is the tendency for new traders to over-leverage their trades on the expectation that the forex market will create immense wealth in a short period of time.  This line of thought fails to realize that the forex market is not a lottery and that gains will happen much more gradually than you would initially expect.  Of course, all traders would prefer to become immediate millionaires but this is unrealistic and this mentality fails to understand how the successful traders operate on a daily basis.  Market realities are much more mundane and involve a greater number of ups and downs in the process.

New traders must always remember that expectations must be properly managed in accordance with the way forex markets actually work.  But when traders understand these common issues, it becomes much easier to avoid these problems as the solutions are relatively easy to understand and rectify.  Once these situations are understood, it becomes much easier to gain a wider perspective and view the forex markets in a way that allows for successful trading over the long term.

Please also check Trading Psychology and Trading Discipline.

Common Themes in Common Trading Mistakes Part 1

November 23, 2013 in Forex Articles

There is a famous saying that the definition of insanity is repeating the same negative actions and expecting different results.  This is more true in the financial markets than just about anywhere else.  The main evidence for this is the fact that so many of the mistakes commonly made by traders exhibit strong similarities.  These mistakes are often repeated over and over despite very good advice to do otherwise.  For these reasons, it is a good idea to look at some of the similarities seen in these mistakes.  Once these become apparent, it can become easier to avoid these as the negative traits are more easily recognizable.

Common examples include over-leveraging, failing to exercise patience, and taking risky positions during times of heightened volatility.  Looking at these mistakes it should be obvious at this stage that there are come common themes that run through the lot.  For the most part, each of these mistakes involve some variation on the idea that new traders in the forex markets tend to have unrealistic expectations about their potential trading performances.  It is unfortunate that this tendency is as widespread as it is because this tends be the primary reason why most traders do not survive in this business.

Problems with Expectations

“When a forex trader positions himself before a news event,” said Rick Bartlett, currency analyst at CornerTrader. “that trader is experiencing the unrealistic expectation that news or economic events can be accurately predicted.”  These traders believe this enough that actual trades are placed and this is where the proverbial “line” is crossed and traders will likely begin to lose money.  The worst part about these types of situations is the fact that this is such an easily avoidable occurrence and if these traders would just wait until the news information is released (and see the resulting trend unfold), these traders would lose in far fewer trades and likely be able to stay involved in the forex markets for a much longer period of time.

Over-leveraging (risking too much on a given trade or during a specific day) and averaging-down are indicative of a similarly flawed trading mentality, in that traders are expecting an unrealistic outcome, despite the over-riding evidence in the other direction.  It is easy for traders to get caught up in these mindsets because the natural human reaction toward greed takes over and this logic becomes a casualty.  Any time you find yourself “hoping” for a preferred outcome rather than relying on the probabilities and the favorable odds, you should exit the trade and look for other opportunities.  This is the only way to approach the forex markets in a logical and contemplative way, and this is the only way to achieve successful results that are repeatable over the longer term.

Please also check Trading Psychology and Trading Discipline.

Markets surprised by ECB rate cut

November 7, 2013 in Forex Articles

Today’s interest rate cut by the European Central Bank caught many by surprise with the Euro slumping by over 150 points against the US dollar. Just over a week ago, the Euro was trading at over 1.38 against the US dollar. A few minutes ago it was around 1.3330. A substantial fall in such a short duration – the behaviour of the markets demonstrated that the move was a surprise but why was it? The Euro is massively over valued on fundamentals against the US dollar and I have been harping on about this for quite a while. All those analysts, especially technical ones harping on that $1.40 against the Euro is inevitable surely have egg on their face!

Economic data has been weak in much of Europe with Germany the exception. However, growth figures, PMI and unemployment have been weak and a Euro that is at least 10 per cent overvalued against the US dollar does not help the export of European goods. Surely, today’s news is no surprise. The Italian finance minister went on record saying that the Euro poses risk to the recovery in Europe a couple of days ago – ECB President Mario Draghi obviously took his words to heart. Figures last week show that deflation is a concern in Europe as the annual inflation rate in the euro zone fell to 0.7 per cent in October, far below expectations of 1.1 per cent and well below the bank’s target of just below 2 per cent.

The strong Euro is a major hindrance for many foreign tourists visiting the beautiful countries of Europe with Greece, Italy, Portugal and Spain heavily reliant on foreign visitors. Today’s interest rate cut and welcome fall in the Euro will perhaps act as a catalyst in providing the European tourism industry the boost it so craves. Unemployment above 50 per cent amongst the under 30 year olds in much of peripheral Europe may start to fall as more jobs are created in tourism related industries and provide a boost to European GDP.

Equity markets surged on news of the cut in the Euro interest rate with the major European bourses more than 1 per cent higher and bond prices increased also. Have we seen the start of a much needed reversal in the strength of the Euro and is 1.30 against the US dollar on the horizon very soon?!