The EUR/USD pair fell significantly during the session on Wednesday as the markets reacted to the FOMC statement. However, I believe that breaking below this trend line is just the beginning of what the market is trying to do. However, I also recognize that as I write this, the market is starting to bounce a little bit so I think we’re going to have more confusion. Quite frankly, it doesn’t matter what the Federal Reserve says because the European Central Bank has already suggested stimulus at the same time. In other words, we have a currency war going on yet again. It’s not a big surprise, central bankers only understand how to loosen rates over the longer term, and cause inflation. That being the case, we will eventually get inflation in both areas but right now we are far from it. The deficits will continue to expand, while value of currency drops.
Two lightweights
I think that we are going to continue to see a lot of choppiness in this particular pair because most of the banks are trying as hard as they can to devalue their own currencies. Ironically, it’s almost as if they don’t understand that the global markets are truly global. In other words, that even with cheaper currencies, Americans are not by European goods and vice versa. Yes, they are to a point, but not like they were ten years ago. There is nothing that can be done about deflation, at least not by a central bank. This is important for you to remember as we are quite a ways from getting out of this.
Unfortunately, most traders come into the Forex markets expecting to make big money off the EUR/USD pair because of the short spread. The spread isn’t what makes a pair, although the marketing professionals in the Forex arena would have you believe that. The truth of the matter is that it’s all relative to pip size, and by extension position size. With this, I think you will have to continue to trade back and forth on short-term charts and quite frankly I have no interest in trading this pair at all.
