- Portugal announces last year's budget deficit was much larger than they thought. - They are expected to request a bailout at any time. - Ireland says they will need another ââ¬24 billion to stabilize their banks - Their debt insurance and yields are up - "Late Wednesday, a plan to merge four troubled savings banks in Spain collapsed..." (http://www.nytimes.com/2011/04/01/business/global/01geithner.html) ...... and yet... EURUSD is over 1.42 now. I don't get it. The only related item I could find on Bloomberg is a cryptic throwaway sentence in a general article about currencies: "The dollar weakened against the euro after New York Federal Reserve President William Dudley said not to be ââ¬Åoverly optimistic about the growth outlook.ââ¬Â This seems weak. Nobody was expecting stellar growth in the US. Growth prospects in the US may not be great, but on the other hand, 2 US states are not in bankruptcy with 2 or 3 others expected to follow at any moment. Not to mention that the French and German govts are still at each other's throats every day, as last week. Also, they say IN THE SAME ARTICLE that Canadian and Mexican currencies are *UP* on strong growth prospects in the US. (http://www.bloomberg.com/news/2011-...-increase-u-s-strength-may-spur-fed-move.html) So what's going on here....??
Well, yes, it does matter... I'm far from perfect... maybe there is some big news element that I missed, in which case I would trade differently.
You assume markets are always perfectly reflecting fundamentals. They're not. Efficient market hypothesis assumes they do and obviously that is a fallacy. Even if just hypothetically the "fair value" (whatever your definition of that may be) for EURUSD was at say 1.20. Who is to say we can't travel to 1.45/1.50/1.55 before heading back south below 1.30?
Buyers are pushing the euro higher. If you think the euro is going to collapse take a long term short position with little or no leverage and leave it for a few years. Otherwise join the long queue of failed traders who try to time the exact starting date of a huge macro-economic move..
Barring some huge extraneous influences money will favor where it garners highest yield ... right now interest rate differential favors Euro and looks like that will continue for a while.
Yes. It should not be a big surprise that the euro is advancing against the dollar, especially if ECB starts hiking rates. But if one believes in a weaker euro, perhaps there is a better pair to trade than EUR/USD? I would not know since I don`t follow many currencies at the moment.
The markets can stay irrational longer than you can stay solvent. I forget who the hell said it but it highlights the problems with fundamental analysis. Is the price of Oil truly based on the supply and demand of Oil? One word -- no. Do what the other guy said, "Does it matter? Just trade it." Those six little words pack a big punch.