US Dollar Strengthening On Euro Consolidation

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(GR) Ratings agency S&P revised Greece’s sovereign outlook to negative, affirming its rating a CCC. Following delays in implementing budgetary consolidation measures and a worsening Greek economy, S&P believed Greece is likely to require additional financing for 2012 under the EU/International Monetary Fund (IMF) program (EU/IMF Program).

(DE) ECB said to be awaiting German court decision prior to intervening – financial press

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Note: ECB’s Draghi from Aug 2nd post rate decision press conference that the final decision to come only after the German Constitutional Court rules on the preliminary injunction on Sept 12th

(UK) GBP was off session lows as the BOE quarterly inflation report was not as dovish as expected:

  1. BOE cut the 2012 growth to 1.0% from 1.25% prior but above the speculation of 0.0% (flat).
  2. GBP/USD was at 1.5580 ahead of the report and tried to move above the 1.56 handle
  3. GBP firmed above 1.5640 as the NY morning began after BOE Gov King noted that a rate cut would harm some institutions and not change the economic outlook significantly.

How to interpret these headlines?

Market saw US Dollar strengthening on the back of S&P’s reminder of the dire situation in Greece, and the sentiment was further compounded by ECB’s reminder of the upcoming German Court’s decision on the injunction to prevent Germany’s participation in the ESM until the court ruling, which if you remember, could possible drag into the 2013…   Of course, the speculation of a sharp downgrade in today’s BOE Inflation Report didn’t help either, as the USD gained across the board against all majors except for the JPY…

Although we did see a sharp turn in the Sterling following the better than expected Inflation Report and Governor King’s comments, it is my believe that GBP’s strength is not sustainable, nor is the US Dollar strength… I believe what we are seeing today is just the normal ebbs and flows of the market, and I’ll take this opportunity to position my trades to go LONG on the EUR, CHF against the USD… I’ll hold off on going LONG on the Sterling, as UK’s economy is definitely worse than what BOE believes.

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About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

You can find more information about me on my Google Profile.

Comments

  1. Henry, What is your thought today? Euro is very weak right now and not found that much fundamental left to boost the euro. I think Euro consolidation will continue up to 1.2200. So from which point i can build Long position in euro? Can you please help me? Thank You!

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