Tuesday, April 30, 2013

Big Week Ahead for the Euro-Dollar

EURUSD: Big Week Ahead by Elliottwave International Currency Specialty Forecasting

Two news stories from Europe hit the headlines Monday morning (Apr. 29).

One: Italy finally ended its political chaos and swore in the new government.

Two: Eurozone economic confidence fell more than expected.

EURUSD -- the euro-dollar exchange rate and most traded forex market -- rose on Monday. But let's pretend for a moment that we didn't know that.

Try this instead: Look at the two news items above and guess, without knowing what EURUSD actually did, which story would have "moved" it on Monday? Would you expect the euro to fall because of the economic confidence surprise, or rise because of Italy's return to political stability?

There is no way to answer that with any degree of certainty, is there?

By now you probably get the point: More often than not, the day's news is a mixed bag. And only in retrospect can you a) look at what the market has already done, and b) pick out the news item that best fits the market action. In other words, if EURUSD fell on Monday instead, you can bet the same analysts would blame it on the poor confidence number and ignore "the good news" from Italy.

Where does that leave us? Well, this week's biggest news story is arguably still ahead: The European Central Bank meeting on Thursday, when they will decide on whether to cut interest rates. Will the euro rally or fall on the news (whatever it ends up being)?

Ah . . . but you already know that's a trick question.

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