European Central Bank Press Conference and the Forex Market

The Euro started it’s strong bullish run in November and has recently continued to new highs against the USD, GBP, and JPY.1360178076_currency_blue_euro

Thursday’s ECB press conference is making Euro investors nervous as they anticipate the possibility of ECB President Mario Draghi mentioning the strong Euro.

Many analysts do not think Draghi will mention the currency situation. He may just focus on some Euro Zone improvements and share what his outlook is for the Euro. (Possible recovery in 2013?)

Euro Expectations in Result of The ECB Meeting

It is likely that the Euro will continue to weaken slightly as we go into the conference Thursday. Despite Draghi’s words, I think the Euro momentum could still continue for a while in the bullish direction. If Draghi does give a negative outlook or comment on the value of the Euro, we could see a delay in the Euro getting back on it’s bullish track. I do not think it would be enough to stop the freight train that the Euro is acting like right now. If Draghi is full of positive news, outlook, good things to say, Thursday could be quite a day in the market for Euro strength. New highs?

Let’s keep in mind German government spokesman Seibert’s comments on Wednesday who stated the euro was not overvalued.

EURJPY: The Greatest Opportunity of 2013

Friends, if you haven’t been in awe on the EURJPY since September or even July for that matter, you should probably take a closer look at your charts. The EURJPY has sky rocketed over 3200 pips since July and could continue through 2013. The Yen’s outlook is: “Weak, Weak, and Weaker”. With the new BOJ governor coming into power soon and exponentially increased monetary easing, Prime Minister Shinzo could drive the USDJPY to 100. If the Euro continues to dominate, and “recovery” is expected in 2013, the EURJPY could fly up to 140 or more. I am just throwing around some possible numbers. Please don’t take this as trading advice.

Do you think the EURJPY will continue upward for 2013?

*Update from after ECB Meeting

The Euro has been soaring upward to new highs unseen since the fall of 2011. With the potential influence of the ECB meeting in mind, analysts and economists had their eyes on Mario Draghi’s words Thursday. They knew that if he mentioned the Euro strength, the Euro could lose some strength, and that is what has happened.

“We will closely monitor conditions in the money markets and their potential impact on the stance of our monetary policy, which will remain accommodative with the full allotment mode of liquidity provision,”. Draghi said Thursday.

Since the ECB will “closely monitor” the money markets, it is safe to say that the Euro may not continue upward with the same momentum that it was. Nevertheless, it is very possible for the Euro to pick up and continue it’s run, especially against the Yen.

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  • Fabrice Goeyvaerts

    Thanks a lot, Tony, for those links. I didn’t know some currency correlations and thought that US Dollar and US Indexes had more an inverse correlation … seems like it’s not very much the case.
    Always enjoy reading your very informative articles !

  • Fabrice, great question. Though the correlations could be similar at times and opposite many other times, there is always a measurable correlation. I don’t tend to believe there are many correlations that are strong enough and sure enough to truly give you an exponential edge to your trading. On the other hand, being aware of certain correlations for the purpose of diversifying trades can be useful. Also, i’m sure there’s a lot of information on certain correlations that I am not aware of. I’d recommend taking a look at this article: http://winnersedgetrading.com/currency-correlations/. This is another article on correlations: http://www.investopedia.com/ask/answers/06/usdollarcorrelation.asp#axzz2KJZwie2E.

  • Fabrice Goeyvaerts

    Tony, I don’t have a clue about EUR/JPY but a question for you:

    All big Indexes (DOW, Nasdaq, SP500, DAX, CAC, Footsie + NIKKEI) are going up since months but Currencies related to those countries (areas) are moving differently. Some are in correlation with their index (like EUR), some are a mix (like USD + UK) and some are completely opposite (like YEN).
    Could you explain the general correlation of non-correlation between one’s country (or area) index and Currency ? Could we use that in ower trading in order to have an edge ? If yes, how ?
    Thanks for your help !