Fundamental news events continue to rock the Forex market as regular as the sun rises. Last week the market was surprised by the timing of Swiss National Bank’s (SNB) decision to release its peg with the Euro. This week the ECB rocked the market with its quantitative easing (QE) program and on Sunday political elections will take place in Greece. Lastly, next week the US will steal the show with several important news events such as new home sales and the FOMC statement.
ECB GIVES GREEN LIGHT FOR QE
This week it was the European Central Bank (ECB) with a central seat in the limelight. On Thursday it made an announcement that it will launch a quantitative easing (QE) program of more than one trillion euro. The full-scale bond buying program will be completed at a rate of 60 billion euro per month for the next 1.5 years.
ECB’s DILEMMA NOT SOLVED
The main opponent of the decision were German board members, supported by one Dutch and one Austrian member, who highlight the concern that the ECB bond plan will not be able to fix Europe’s economy. Despite these objections, sufficient ECB members supported the initiative and upon the release of its decision, traders saw government borrowing costs decline, the Euro weaken, and European stocks rise quickly.
Whether the Euro zone deflation is created by the lower oil price or not, the fact remains that its economy is far from booming. Although the ECB’s QE program itself might not be enough to solve the EU’s entire problem, it could be a pre-requisite to spark a recovery start. The member’s state will need to do more in order to stimulate a full revival. It seems that the ECB has given the opportunity and signal for the economy to start its rebound, but government action will be needed to seize the momentum and make use of the opportunity.
WILL ELECTIONS LEAD TO GREXIT?
The timing of the ECB’s decision could perhaps be connected to the upcoming elections in Greece on Sunday January the 25th. The political landscape in Greece is uncertain but an anti-bailout political party is leading the polls. The ECB’s QE program might be a way to smoothen negotiations after the election between the ECB and the new Greek (collation) leader, in which the ECB can (eventually) offer to purchase more Greek bonds.
NEXT WEEK’S ACTION
Next week fundamental news events will remain a dominating factor. The US will release its FOMC statement and Federal Funds rate on Wednesday. This will provide an insight for how the FED board members are viewing the US recovery and whether interest rate hikes are an option during 2015. Although I have my doubts that this will take place in the next 12 months, a rate increase would place even more downside pressure on the EURUSD.
SPECIAL WEBINAR FOR YOU!!
On Tuesday, January 27, 2015 Winners Edge Trading will hold a special webinar for you!
Casey Stubbs, Nathan Tucci and myself, Chris Svorcik, will be presenting the webinar, which will be a live event focusing on the news and the fundamentals.
The webinar will be discussing the news event itself:
- Live commentary on the CB consumer confidence and new home sales news release
- Price action trading during the news event
- Preparation of the trade plan prior the news event
- After show evaluation and discussion
But also the bigger global picture as well:
- How is the US economy REALLY performing?
- Will the US increase the interest rates?
- What will the FOMC statement say on Wednesday?
- Is a Grexit on the way? What’s the impact on the Euro?
- Is the ECB QE program beneficial for the EU?
- Euro and USD expectations for 2015
- And much, much more
Join us on Tuesday for all of the details you MUST know.
Thanks for sharing! And Happy Hunting!
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