ECB Rate Cut Expectations

It’s widely expected that The European Central Bank will cut it’s base lending rate by 25 bps later this week.

Now fundamentally speaking a rate cut is usually considered to be a negative for the currency, but here we are again in a position where we must look at the “current environment” – then do our best to apply the fundamentals.

Assuming that  every “newbie forex trader” on the planet will take it as a “given” that the Euro will plunge on the news, I’d imagine taking the other side of that trade ( and we know it’s not so fun trading against Kong ) as the current environment will likely absorb any further easing ( or attempt to make things “easier” in Europe ) as positive for world markets in general.

Coupled with the recent weakness in USD across the board – I would expect the EUR to move higher and may even take my long-awaited trade at 1.3170 mentioned here:

Otherwise my short USD vs the Commods trades as well CHF have been performing well over the past 3 days, as well the active trading here long JPY “still” looking to see a much larger bounce .

The USD has continued lower as suggested while equities markets still struggle to reach new highs.



6 Responses

  1. tio April 29, 2013 / 10:05 am

    Fundamental analysis is not simple as i think about it. If US dollar, US stock and US bond fall together, where big money WILL go next? I still think that in risk-OFF environment, big money always go to US Treasury for safety, and in effect USD will go up against commodity currency. So 3 days ago i sold AUD/USD, NZD/USD and bought USD/CAD, and now all position being in the red. How is possible USD sold off in risk-off environment ?
    Probably currency trading is not for beginner like me, there’s mooore to know about fundamental and intermarket than i think.

    • Forex Kong April 29, 2013 / 10:58 am

      Fundamental analysis is extremely difficult, and applying it to current environemental conditions is equally challenging. You really need to put all the pieces together before expecting to do well trading forex.

      I’ve been posting for several days now that the usual “risk correlations” are out the window – and that I expected to see the USD and equities trading in tandem / together – not opposite each other.

      Yes those trades of yours will continue moving against you here.

      Good luck buddy.

  2. rolo April 29, 2013 / 3:31 pm

    Short USD v Commods and CHF have worked greatt Kong thanks – sticking with it as you indicate and watching for your next move

    • Forex Kong April 29, 2013 / 3:48 pm

      Hi Rolo.

      Thanks – I do caution – make sure to watch / manage these trades as per your own “risk profile”. If you’ve been following along for a while – you know me – I’ll turn on a dime / in a heartbeat / no looking back.

      We are in some uncharted waters here as SP 500 “double tops” here today – and USD moved lower – so we could just as easily see the opposite tomorrow ie……USD takes a “pop” higher while equities sell off.

      Be nimble – be safe – be smart.

  3. Power Corrupts April 29, 2013 / 4:54 pm

    forex kong – the dexterity of your trading is impressive! so much so that i’m wondering if a guerilla is your proper mascot as they like all other primates besides homo sapiens lack the ability to oppose thumb to digits… anyway, your insights are appreciated!

    • Forex Kong April 29, 2013 / 5:04 pm

      He he……PowerCorrupts! Thanks you!

      Please keep in mind – it’s a time travelling gorilla from the future no less.

      Funny – I went with it at the time, but in retrospect could have made a more “fitting” choice.

      It stuck – and for what it’s worth is relatively easy for people to identify with – not to mention damn good lookin!

      Thanks again!

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