Forex Trading - Market Update

Market Update

The markets sold off in the Asia and Europe sessions only to rebound in the US session starting with the Philly Fed Manufacturing print coming in better than expected. Actual: -1.9, Forecast: -4.1, Previous: -7.1. The push higher was propelled by rumors of a sovereign Spanish rescue package, negotiations going well between Greece and the Troika, and a possible haircut on some of Greece's debt. In the forex market, one of the key drivers for price is the expectations of participants. Rumors (as baseless as they often turn out to be) can cause expectations to change and result in significant price moves. For my style of trading, the key to playing intra-day swings requires nothing more than understanding expectations and realizing when it may become conducive for a "rumor" to start making the rounds across trading desks.

The market fundamentals in Europe continue to deteriorate, but that doesn't mean the Euro is headed down. Market participant's perception of the Eurozone's stability will have a bigger impact on EUR/USD than the actual fundamentals in the short term. For example, rumor of a haircut on Greek debt doesn't really improve their incredibly bleak economic outlook, but it increases the chance that Greece doesn't exit the Eurozone, and price may rally. In the near future, market participants are looking for encouraging signs that a Grexit won't happen, and that Spain will formally request a sovereign bailout. (Spain doesn't want to have to request a bailout with any conditions attached, so they may try to drive down their rising bond yields with rumors. I don't think that will be effective for very long; but I have no doubt they'll try.)


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