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Originally Posted by Noor
TraderPierre,
The Forex is traded with over 10 trillions DAILY !
30% out of that goes into Euro/Usd Alone.
Now, how much money would central banks pump into the Market?
100 Billion? 200 billion? 400 Billion?!
Do you really think pumping 3% out of the tottal money traded in Euro/Usd would Flip the direction?
This 3% would get eaten easily, and will never have any effect on the monthly chart. You wont see it.
Perhaps it would be easier for them to flip the direction by faking their economic numbers... It would be a much easier/cheaper less risky way... But cant be applyed in current time since the US economy is in a big trouble now.
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Hi Noor
I'm not sure where you're getting your volume information from, it can only be an estimate, but that's not really important here so there's no point dwelling on it.
Intervention is not as simple as for example the MOF instructing the BOJ to sell Yen or buy USD and off they go to fight the market. Intervention requires meticulous strategic planning and co-ordination, details like the time and volume must be exact or else it risks being ineffective, the amount of research that goes into it is staggering. The BOJ for example have a vast war chest available specifically for the purposes of manipulating currencies both overtly and covertly and they use it wisely and without hesitation when needed as we've seen in the past with some spectaculor results.
Aside from that their biggest weapon is rhetoric, jawboning. How many times have we heard rumours on the wires that the BOJ is likely to intervene at a certain level, everyone pays close attention because they obviously want to trade with the institutional flow, no-one in their right mind would trade against it. Back in 2004 buying Usd/Jpy at 103 was pretty much a no-brainer! Do you see how it works, the BOJ aren't fighting the market, market participants are using the BOJ volume and visa-versa, the BOJ's job in the most part is already done with the
help of the market.
Now imagine co-ordinated intervention by all the G7 central banks, when that line in the sand is drawn it's pretty much another no-brainer. With the exception of probing for and running stops the major players respect (or as I've said before perhaps fear) those levels, why swim against the tide? Look at how Eur/Usd was supported in 2000/01 by co-ordinated intervention, no-one can say it doesn't have the desired effect.
Anyone who thinks central bank intervention is ineffective is living in a dream world, and if they think co-ordinated central bank intervention is ineffective they probably need a straightjacket!
That's a very over-simplified explanation because the subject is so complex it would probably take an economics degree to fully understand it and I'm not that clever.
Anyway I better go and manage my bulletin board, my ego, and what was it, oh yes my 'sophmoric writings', lol, whatever they are! And that's all before I have to go and flip burgers at the local McD's! Hey, I have to pay the mortgage somehow when Landlord Bernanke comes a knockin'
Have fun all, trade safe.....and watch out for intervention
