What happened and what will the national banks do with the markets.
After better than expected employment numbers out on friday and better economy data in general, more and more members of the Federal Reserve Bank (FED) have to think about starting to withdraw liquidity out of the market, as the FED has printed already tons of fresh money to put liquidity into the market.
What would be the consequences of that step?
First of all the FED will not do that immediately and should they start doing it, they would do that in tiny steps, not to cause a disaster in the stock-market. Though it is fact that the USA will start first with withdrawing liqudity from the market, as the economic data in the USA is already a lot better than in the Eurozone and Japan is a seperate theme, as they like to weaken their currency (YEN) of course.
As more and more traders and funds will jump on that idea that the USA could start soon doing that, EURUSD should soon move below 1,3000 again with a target of 1,2850. Also, the USDJPY should test soon the 100,00 though as the market is already long on the USDJPY we could see a wash-out first and I would recommend to buy on dips around 98,00-98,50 with a target of 101,00.
Let’s go back to EURUSD – there are some more reasons why the EUR should test the 1,3000 level again very soon. There is still the story with Greece, Cyprus and now the next country Slovenia. I would guess Slovenia will ask the EU and IMF for help within the next 2 or 3 weeks. Even if it is a tiny country, it is the whole story that more and more countries in the European Union have bigger issues. And it is not only that story, there is also the problem that some countries in the European Union would prefer a weaker Euro (Portugal, Spain, France, Greece, Italy) and some would never agree with that (especially Germany). So I see a lot of discussions coming up the next weeks and months regarding that topic while the USA will already start the turnaround.
The market is currently small short EUR, small long USD and a bit short YEN, so we could see market makers taking out stops first before the next moves appear. That’s why I would open positions at the levels shown below:
Go long: USDJPY if we see 98,00-98,50 with target 100,00-101,00
Go short: EURUSD at 1,3130-1,3150 with target 1,3000 and lower
Go long: USDCHF at 0,9330-0,9350 with target 0,9450-0,9500
Go long: USDCAD here with a stop at 1,0000 and a target of 1,0150-1,0230