Interest Rate Cut Reflection

[Serguei]

It would be logical to assume that if FEDs cut the interest rate it would weaken USD right? (PLS COMMENT ON YOUR LOGIC)
Totally oposite was observed after latest Mr.Greenspan's announcement.

Serguei

[sourcerer]

I hate fundamentals, but if the interest rate goes down doesn't that mean that personal loans and credit lines are more interesting to consumers, therefore increasing spending and thus economical outlook, and thus strengthening the dollar?

..also putting money in a savings account gets less interesting, so people will rather spend it, again increasing volume and circulation speed.

Very wild guess tho.

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[Serguei]

Yes, but this could be expected only in 3-4 months; while in the immediate sence we had too much of supply for usd( CB is throwing more $ on the market) and not enough demand (yet).

I need help with that...

Serguei

[sourcerer]

As I said, I don't know $hit about that....but aren't expectations a big thing?
People expecting it to go up, thus locking in long positions/closing longer term shorts?

After all the reaction was very shortlived, judging from the crosses anyhow, I see little change in trend.
I have no way to check the dollar index....would seem to me people figured this was 'the time'.

Please, again, explain if I'm wrong....it's all learning :o)

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[Serguei]

5min before Alan Greenspan announced decision about rate cut I was closely monitoring eur/usd. And it went down about 70pips immediately and 40 pips more afterwards on the EU market.

I am of opinion that central bank at the moment decision was announced protected possible USD slide down by buying large volumes.

Serguei

[sourcerer]

Looking, in retrospect, at the chart I don't see any really out of the ordinary move, so the CB's idea of large volume would be kinda shabby?....it''s not like a BOJ intervention.

Also volume doesn't look that out of the ordinary.

Would they really play that small?

Usual disclaimer...

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[currencia]

One of the objects of this trading game is to have a few, select winners and 95% losers. This is a "fundamental" of the market. So, if you want to listen to and digest fundamentals, it is this "fundamental" that you ought be paying very close attention to in all you do and trade, rather than basic fundamentals of M1 and miscellaneous news that it is put out there to confuse. WHEN its is news, THEN it is confews! You been conned with that news!

WHEN the USA government finally starts broadcasting that it is purposefully weakening the dollar, and George Soros is on TV saying he is selling the USD for the Euro, THEN it is time to pay close attention to buying the USD. Call it the WHEN>THEN hypothesis.
Have you ever heard of accumulation, distribution, and capitulation as the primary market cycle? Perhaps one ought to learn it and carve it on a plaque in your trade room. I see many many traders blindly beleiving that "the trend is your friend". You have all been taught that and you beleive it because you need something simple to beleive in. I see many, many traders following the trend in wave 5 capitulation phase. You are doing just what the few want you to do.

Unless you work one spotting reversal ahead of time, you will never see wave 1 of a new trend, nor even wave 3 of a new trend until wave 3 is about to retrace in leg 4 of wave 3; that "aint " no time to be following the trend as a-b-c-d-e penannt is about to take your trendline money. What's left in the trendline is then wave 5; just the point where the few want you to follow along like sheep-the Capitulation wave.

I dont care if you want to use a microscopic view and trade the 1 min and 5 min chart. A chart is a chart. But, try to follow the accumulation, distribution, and capitulation of the market and stay away from the trendline trades in wave 4 and wave 5, or you will be giving back all your trendline profits real quick like, and then some!
WHEN does lower US interest rate strenghten the USD? That happens when most everyone insists that a lower interest rate can absolutely only weaken the USD.

[sourcerer]

Needed to hear that :o)

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