ECB’s Crisis Rescue Plans, China’s Economic Releases and German court’s ruling – Push and Pull of Market Sentiments

September 11, 2012 in Forex Fundamentals and News

ECB’s Crisis Rescue Plans and Other Market Updates

ECB president Draghi’s announcement about rescue plans by unlimited bond purchase had made the sentiments not only for Euro but overall market conditions positive but almost immediately after that a very negative data about China’s imports as well as industrial output came. Not only that but the markets are impatiently waiting for the decision of German Federal Constitutional court about German standing for the bailout plans. The ruling is scheduled for September 12th.

Germany is supposed to be the biggest contributor with 27% share for the bailout fund. Well, the negative side does not end here as we have to add the possible failure of Greece reaching a unilateral agreement for the austerity measures/spending cuts to meet the bailout criteria to this list. The meeting about Greece’s plans for the spending cuts is also scheduled for September 12th.

Add all these negative pressures against the initial optimism and what comes out is uncertainties. And uncertainties are generally not healthy. The market volatility has been very low since the trading started yesterday. EUR/USD has seen just 52 pips overall move, in more than 30 hours, since the trading rooms opened yesterday. Not required to add that pressure has been downwards. AUD/USD’s movement span has been slightly more with 63 pips, GBP/USD moved without direction for a total range of 61 pips and same with USD/CHF with the total range of 52 pips and no clear direction. The story is same across the board.

EUR/USD example - low volatility of markets

This pull and push of sentiments is expected to continue till tomorrow i.e. September 12th and not much directional moves are expected till then. There is always a possibility of a sudden spike but if it comes, the expected direction for EUR/USD, AUD/USD, GBP/USD should be on downside and considering the natural correlation for USD/CHF upside.

It is better to be away from the trading desk at such times as it becomes more guess work than analysis at such times.

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