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by Ashraf Laidi
Posted: Feb 20, 2010 5:00
Comments: 30765
Posted: Feb 20, 2010 5:00
Comments: 30765
Forum Topic:
EUR
Discuss EUR in this thread
Sydneyjames. I may be wrong but think Trichet been conning mkts with his speek. Too many pigs in intensive care. More trichspeek is what we will hear methinks. Naive mkts could lose patience this time as expectations for rate hike now very high indeed.
Closed euro L from 1.4138 @ 1.4220
lower long entrees on special below mho
removing stops for now.... tp remains 4140....
break below 4193 would see correction down first to 4130/40 level....
break above 4250 would see test of 4282... successful break above that level would see extension to 4350 initially.... then possibly higher to 4450/70...
gl/gt
expecting currently rally from 3428 to end around 4350 or 4450/70 then 400/500 pip correction b4 heading higher toward 5000/5100 level....
short term....
support formed at 4120/30 level.... as long as this level holds see it breaking higher above 4282 high...
only break below 4060 suggest upside failure and risk bigger pullback....
gl/gt
As far as the inflation outlook is concerned, I certainly hope that Ben Bernanke remembers his own conclusion from a research paper he produced back in 1997 and doesnt overreact to the current spike in oil prices:
Our results suggest that an important part of the effect of oil price shocks on the economy results not from the change in oil prices per se, but from the resulting tightening of monetary policy.
Systematic Monetary Policy and the Effects of Oil Price Shocks, Ben Bernanke et. al., 1997
In terms of possible overreactions, I suggest you to take another look at chart 5c, representing the German yield curve. The key thing to note is the fact that, unlike in the UK and the US, short and medium term yields (those with a maturity of less than 10 years) have actually risen in Germany over the past twelve months, leading to a modest flattening of the yield curve versus a year ago.
The market is essentially taking the view that the ECB will be the first major central bank to tighten monetary policy significantly. Given the fact that several countries in peripheral Europe are on life support, such a move will probably go down in history as one of the biggest policy mistakes of all times. Pay attention!
http://www.arpllp.com/core_files/The_Absolute_Return_Letter_0311.pdf
It may still be a joke because Korea is said to have bought Euro .
I noticed however JPY was bought, too.