Tuesday March 3, 2015 - 15:48:20 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 among 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 around EURUSD 1.20, the EUR seemed to encounter support.
It is possible now that the EURUSD floor has been lowered to perhaps to 1.10 or 1.00. I do not think is much lower than that. The floor has been dropped to give the Eurozone economy a lift. As for confirmation that there is an agrement, I donít think it will be coming any time soon The market manipulation only can work if it remains secret. Odds are major central banks have been acting quietly through several channels.
If I am right, this is why the recent SNB moves vs. the EUR have been a fiasco. The SNB blundered in the first place by trying to peg the value two major exchange rates. This never works. At the time of the pegging, everyone knew the EURCHF peg would ultimately fail. Then learning the peg was untenable, the SNB abruptly dropped its defense of 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. The unannounced agreement between major central banks does not make the same mistake of trying to defend a fixed exchange rate.
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 all they can to continue tokeep their activities secret.
John M. Bland
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