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Although, the US Central Bank left rates on hold, last week’s EUR and GBP rally against the greenback suggest the doom caused by the FOMC members median projection of rates that was cut by 50bp, leaving just two possible hikes for this year, pretty much taking out of the table any kind of announcement until September.
Over the past two weeks, the imbalance between the FED and the ECB kept widening, which means that sooner or later, the USD will outperform the common currency. However, does this sentiment imply that the rally may continue? All fingers point towards it. Consider the uncertainty surrounding the pace of rates hikes in the US and the ECB’s projection to effect easing later this year, one may only agree that the greenback may really have been doomed.
Does the 2016 composition of the FOMC members in which case they are always inclined to take a DOVISH stand portend doom?
See for yourself:

The past days have seen continued market volatility after the FED's dovish-hold on Wednesday last week, in which the FOMC decreased their expectation for hikes this year from 4 to 2. Notably, USD weakness has been a prominent theme as traders have sold out bullish-USD on t…
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9jakas avatar
9jakas 30 Mar.

Thanks rajib217

Mariia avatar
Mariia 30 Mar.

very well done

9jakas avatar
9jakas 30 Mar.

Thanks Mariia

Mariia avatar
Mariia 30 Mar.

you are welcome 9jakas

fx211pips avatar

great article, very informative and practical

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As we head into 2015, a few themes dominate the FX market and they will have substantial impacts on to currencies
  • Firstly, Oil prices will play a hefty role in determining monetary policy, as well as inflation expectations. So far this year, Oil is down some 36%

  • Secondly, the market is still underpricing US hikes... now we may see a change to the fundamentals, but as it stands the US rate market is still way of the pace of the Fed and Taylor rule estimates Looking at each currency bloc in turn we can see the potential moves.

GBP outlook
Near term risks for GBP are on the downside as remaining bulls capitulate with the weakening inflation picture. The basing of inflation would mark the low in market rate expectations and set the GBP base as well.
A potentially doubly hung parliament adds to well flagged uncertainty around May’s General Election. Investors don’t see any positive outcomes for GBP, with a Labour majority/coalition bad for business and Conservative majority/coalition raising prospects of Brexit.
When we look at risks going forward, the options space is pricing in some interesting moves for next may... if we look back to the scottish referendum it is far less signific…
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ostin avatar
ostin 12 Dec.


mimuspolyglottos avatar

Thanks Adrian. Good material for a discussion as always. In general, Q1  is quite simple to trade if we could escape sell-off in stocks. Some political tensions emerge in Achilles' land again and I will be really suprised if it sets the fire across the south. During low liquidity conditions several pairs could really overshoot and give us a chance to capitalize on it. I expect currencies exposed to energy export will find a bottom and be attractive at future valuations again in 1Q,  still not sure if they'll be reversal against USD. 

fullmoon avatar
fullmoon 17 Dec.

Where did you took all those nice looking charts from? The first screenshot looks like Bloomberg, but the last 4?

khalidamassi avatar

nice to read.

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2014 is lining up to be a very interesting year, and this article is broadly summing my thoughts from the webinars that I've conducted on this idea.
So starting off - 2013 - volatility has been very low, and the EURUSD has had its smallest range since its introduction. With it performing the best on a YTD basis (up 4.11% when writing), with AUD and JPY being the weakest down 13.7% and 16.1% respectively.
2014 - Fed heads to the exit. The USD has failed to gain top spot for 2013 after being no.1 in June, and since this we've been going through a slow upswing, but there are a few factors that show real USD potential
1. The US economy is leading the Global Recovery with forecasts approaching 2.9% growth and a reasonably strong housing market, the US economy has great potential and we need to remember that the unemployment rate has recently dropped to 7% with payrolls being >200k.
2. There is unlikely to be another Fiscal crisis as in the last couple of days congress has finally sorted their problems out and fixed any funding problems that were likely to be a headwind in 2014. Bear in mind, Fiscal constraints is the reason why we didn't taper in Sept and now that it …
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xau avatar
xau 16 Dec.

Very informative, thanks Adrian!

mimuspolyglottos avatar

After reading, no need to go to FT, DJN or to Bloom. The highest grade. We will see how euro will behave after AQR which is supportive factor now. Thank You very much.

Daytrader21 avatar

Definitely 2014 will bring many trading opportunities, and I'm expecting volatility to raise and as you pointed out it seems that Fed will be the first central bank to move away from his easing cycle and this will have massive consequence on the back of the dollar. Can we see the start of the multi year dollar rally? that's the question from my own point of view.

scramble avatar
scramble 24 Dec.

I do really expect the ecb to introduce something weakening the euro. And the fed started tapering already. The process has already started. Now "we" only have to wait and see first results of these early actions in the first part of 2014! Nice article, well exposed with good explanations!

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The Office for National Statistics produces two main measures of consumer price
inflation: the Consumer Prices Index (CPI) and the Retail Prices Index (RPI).
The RPI was introduced in 1947 and was made
official in 1956. The CPI was introduced in 1996 as the Harmonized Index of
Consumer Prices (HICP).
In May 1997, the new government handed control
over interest rates to the politically-independent Bank of England Monetary Policy Committee (MPC). In few
words, the committee is given the responsibility of adjusting interest rates in
order to meet the inflation target set by the Chancellor. (related article here)
In December 2003 the National Statistician
decided that the UK version of the HICP would be renamed the Consumer Prices Index (CPI) and the UK
inflation target would in future be based on the HICP, replacing the Retail Prices Index excluding mortgage
interest payments (RPIX).
The difference between the RPI(X) and the CPI
is a bit complex and out of the topic
of this article, where I will consider the CPI as the most important data,
since it is the BOE’s inflation target and also for length purposes.
Actually the CPI tracks th…
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scramble avatar
scramble 10 July

@jose: yes that's what i'm doing! since i have a huge lack in fundamental study, i will go deep and deep in all main aspects, showing main things after i understood them. this will certainly improve my perception in markets. prize or not ;-)

AdrianWS avatar
AdrianWS 11 July

Very nice article once again, keep up the great work :)

Ficlubi avatar
Ficlubi 18 July

Nice work! It helps me to understand a bit more the factor behind GBP. It will definitely helps my trading in gbp/jpy which so far need more improvement.

shaukat113 avatar
shaukat113 20 July

yet another good article from a trader how know the art of trading

projectx44 avatar

Great article!Forex Community is looking forward to reading your next article about trading...

orto leave comments
Approaches to the formation of
the central bank interest rates on operations as a reduction in inflation and
the sustainability of the national currency.         
In terms of a single interest rate policy of the state has its own unique
structure. The main instruments of the central bank's interest rate policy are
the basic refinancing rate and interest rates on bank transactions in the
financial market. The refinancing rate during the evolution of the monetary
system was more indicative measure, giving the economy a reference value of
national currency in the medium term. Although, of course, one can not deny the
fact that the refinancing rate has a significant influence on the level of
interest in the economy.
Interest rates on central bank operations in the financial market (hereinafter
- the rate of Operations) - online tool for interest rate policy. For him the
bank conducts transactions in the financial market, carry out refinancing and
withdrawal of liquidity from banks, thereby forming a rate of return on various
financial market segments.
The central bank in the conduct of interest rate policy adheres to certain
principles and approaches focused on specific goals, has a ma…
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TelisHellano avatar

Intresting article +1

ritesh avatar
ritesh 26 Feb.

where can i buy that I love Fx mugs, maybe Dukascopy provides them to all winners as goodies..nice article +1

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