Wow Massive Forex Swings

Mario Draghi

By now, you probably already know that the ECB cut their interest rates from 0.15% to 0.05%

Two weeks ago, Draghi signaled that he was ready to act again, and yet, no one expected the ECB to act so quickly…

But here we are, they reduced their interest rates by 10 basis points to spur economic growth and reduce the risk of deflation…

Was it a good measure?

Only time will tell… but if you want to hear my opinion, Draghi knows his stuff, so its probably the way to go.

Now, did you see the impact in the market?

We saw massive forex swings on most currency pairs and crosses!

Did you get advantage of them?

Market reaction to the ECB interest rate cut

Last tuesday I talked about the sentiment (market condition) of a few of the currency pairs that I was watching…

  • AUDJPY – was Bullish
  • NZDCAD – was Bearish
  • GBPCAD – was Bearish
  • EURUSD – was Bearish
  • GBPUSD – was Bearish
  • AUDNZD – was Bullish
  • NZDUSD – was Bearish

And what was the reaction on all of them, during the ECB rate cut:

  • AUDJPY – moved up
  • NZDCAD – moved down
  • GBPCAD – moved down
  • EURUSD – moved down
  • GBPUSD – moved down
  • AUDNZD – moved up
  • NZDUSD – moved down

What’s the conclusion here?

That most of the time, the market moves in the direction of the sentiment of the market (market condition). And as I said on my previous article, the market takes these fundamentals as an excuse to move in the direction of the market condition…

And that’s exactly what happened.

It will always pay to trade in the direction of the market condition! Always!

Your turn

Did you trade during the ECB interest rate cut? or did you have anything opened?

What are your thoughts about trading in the direction and against the market condition?

Share your thoughts!

ECB, forex, interest rate cut

Raul Lopez

I've been trading the markets for more than 15 years. I believe the best way to trade is by adapting to the market conditions. You can learn it too, join our community .