Tuesday March 3, 2015 - 14:52:33 GMT
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Invisible Hands at Work in Forex
This is only a personal observation based on observing forex trading firsthand for over four decades. The behavior of markets from just around the launch of the Euro suggests to me that at some point there was an unannounced private agreement by major players to smooth forex prices through behind the scenes intervention. For example, back when the EURUSD was pressing the 1.40 level, the pair seemed to run into a stone wall. Also below EURUSD, the EUR seems to encounter support.
It is possible now that the EURUSD “floor” has been lowered to perhaps the 1.10 to 1.00 line. I don’t think it would be any lower, to give the Eurozone economy a lift. As for confirmation, I don’t think it will be coming any time soon It only can work if it remains secret. Odds are major central banks have been acting quietly through others.
If I am right, this is why the recent SNB moves vs. the EUR have been a fiasco. First by FIXING an exchange rate, which everyone knew ultimately was doomed to fail. Then learning it had failed, they abruptly pulling out their support for the peg. The amateurish actions by the SNB rewarded those who had bet against the peg and decimated those who had supported it. Go figure! I don't imagine the SNB has made any friends these days in central banking circles.
In sum, this has become a market of limits, especially on the topside in EURUSD at the current time. Beware of the “Invisible Hands” of central banks when markets start to move to far or too fast in either direction, and expect them to do al they can to keep their activities secret.
John M. Bland
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