Euro getting ready to reverse direction

Feb. 18 (Bloomberg) -- Following is the text of a statement today from the Federal Reserve in Washington:

The Federal Reserve Board on Thursday announced that in light of continued improvement in financial market conditions it had unanimously approved several modifications to the terms of its discount window lending programs.

Like the closure of a number of extraordinary credit programs earlier this month, these changes are intended as a further normalization of the Federal Reserve’s lending facilities. The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy, which remains about as it was at the January meeting of the Federal Open Market Committee (FOMC). At that meeting, the Committee left its target range for the federal funds rate at 0 to 1/4 percent and said it anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The changes to the discount window facilities include Board approval of requests by the boards of directors of the 12 Federal Reserve Banks to increase the primary credit rate (generally referred to as the discount rate) from 1/2 percent to
3/4 percent. This action is effective on February 19.

In addition, the Board announced that, effective on March 18, the typical maximum maturity for primary credit loans will be shortened to overnight. Primary credit is provided by Reserve Banks on a fully secured basis to depository institutions that are in generally sound condition as a backup source of funds.
Finally, the Board announced that it had raised the minimum bid rate for the Term Auction Facility (TAF) by 1/4 percentage point to 1/2 percent. The final TAF auction will be on March 8, 2010.

Easing the terms of primary credit was one of the Federal Reserve’s first responses to the financial crisis. On August 17, 2007, the Federal Reserve reduced the spread of the primary credit rate over the FOMC’s target for the federal funds rate to
1/2 percentage point, from 1 percentage point, and lengthened the typical maximum maturity from overnight to 30 days. On December 12, 2007, the Federal Reserve created the TAF to further improve the access of depository institutions to term funding. On March 16, 2008, the Federal Reserve lowered the spread of the primary credit rate over the target federal funds rate to 1/4 percentage point and extended the maximum maturity of primary credit loans to 90 days.

Subsequently, in response to improving conditions in wholesale funding markets, on June 25, 2009, the Federal Reserve initiated a gradual reduction in TAF auction sizes. As announced on November 17, 2009, and implemented on January 14, 2010, the Federal Reserve began the process of normalizing the terms on primary credit by reducing the typical maximum maturity to 28 days.

The increase in the discount rate announced Thursday widens the spread between the primary credit rate and the top of the FOMC’s 0 to 1/4 percent target range for the federal funds rate to 1/2 percentage point. The increase in the spread and reduction in maximum maturity will encourage depository institutions to rely on private funding markets for short-term credit and to use the Federal Reserve’s primary credit facility only as a backup source of funds. The Federal Reserve will assess over time whether further increases in the spread are appropriate in view of experience with the 1/2 percentage point spread.

I wont be constantly short GU or EU. Go check your charts again. Back when GU was 1.50, everybody said it will go down to 1.30 and so forth, it rebounded back to 1.60 within couple of months.

GU is in the dive again because the market is trying to price in what the fed will do in the next policy meeting after the discount hike. But that doesn't mean USD has no problems of its own.

I see capitulation

Watch this BOYS


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Those who went long in the range of 1.35-1.36 got stopped out early this morning as the Fed raised the discount rate. By understanding the behavior of the herd, now more and more people are jumping aboard to short euro due to the Fed's discount hike. And market has always taught you that if doomsayers are coming out and saying euro will reach parity to the dollar , etc, doesn't it usually mean a reversal is coming?

Lunch, see u all

First of all, i want to ask you if you have ever thought that the market has priced in bad news in both pounds and euro?

Ok, try to think outside the bell curve, think of extreme events.

IF euro data comes out to be bad, how many pips do you think it will go down from here? Another 100? 200? 300?

What if the data turns out to be good?

So ask yourself this: What's my downside and upside risk ? (depending on which trade you take)

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Added on February 19, 2010, 3:04 pmNote:

If you have noticed, companies are hiking up their dividends, and repaying shareholders. This itself is a sign that the companies are confident going forward.

This post has been edited by AdamG1981: Feb 19 2010, 03:04 PM

Well, if you think way deeper, a lower euro and pounds are a positive for future economic data release. Of course, market will always try to price in future fair value of each currency base on the respective countries' economic strength. And although it seems like Europe is in deep sh** right now, it doesn't necessary mean that Germany and France won't do well. With a weaker euro, Germany and France will benefit the most compare to the others. All and all, we have yet to see what germany plans to do with greece, but i suspect a big reversal is coming soon for euro.

I use fibo fan, retracement, and channel.

PM me, and lets see if i can help.

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Added on February 21, 2010, 11:19 pmI have doubts about usd moving upwards, simply because Bernanke is testifying this week and fed meeting is coming. UNLESS, some shit happens in the middle east or more euro problems.



This post has been edited by AdamG1981: Feb 21 2010, 11:19 PM

+1

So the guy wants us to be the guinea pig?

Shorted GJ with the kauness.

Let's wait and see if China surprises.

Weak fundamentals, and wave / fibo TA to support trade.

Long eu with kauness

It's not just technical. It's base on forecasting of events.

Means, all in in the hokkien dialect

Means, long eu with big sized lots

First, too many doomsayers.

Second, there are clues in the weekly chart

Third, overcrowded trade (especially shorting the Greeks bonds)

Fourth, German pride lies with the EURO currency

Fifth, the euro declines bode well for euro states

This post has been edited by AdamG1981: Feb 24 2010, 11:11 AM