By: Christopher Lewis
One of the most exciting and enticing things about the Forex market is that you have the ability to trade 24 hours a day, giving you the opportunity to profit and trade around your current lifestyle. The common person could go to work for 8 hours during the day, and then come home and trade during the evening.
It is because of this that so many traders suffer when times are quiet. They simply cannot sit still in the market long enough to wait until the market starts to move again. This can lead to choppy conditions that simply will not work for the trader. Traders need to recognize when the markets are waiting for something, and this is one of those times.
Europe has two important events this week. Thursday has the ECB meeting, and a rate cut is very likely. The market has probably priced this in, barring some kind of extraordinary action by the central bank. Because of this, Thursday will more than likely be a sideshow to the real catalyst for action on Friday in the form of the EU summit.
What to Expect from the Summit
The summit will have one major theme: deciding on a new treaty for the EU. The S&P ratings agency has already warned that mass credit downgrades will be coming if the summit doesn’t produce some kind of convincing solution. The idea of a new treaty would include the ability for countries to be punished for going too far into debt, something that the EU was supposed to fix in the first place. As time went on, we saw several countries spend far more than they were able to pay for, and this new treaty could in theory end this problem.
Of course, there is a lot riding on this meeting, and as a result: the entire market is sitting fairly still as it waits for word out of Brussels. The results will be gone through with a fine tooth comb, and the weekend will be dominated by the headlines that follow one of these types of meetings. The future direction of the Euro, and by extension risk currencies, will be determined by what comes out of this meeting. The time to put up or shut up has finally come. Until then, the markets will simply wait.