Just starting my forex education. I don’t understand at all why the euro would fall to the dollar (200 pips) when we had such bad US economic news this morning. Bad news for US economy and the EURO shoots straight down? Whats up with that?
Yes, I also cannot understand that. How can we explain why USD became weaker with respect to JPY but stronger with respect to, say, EUR, GBP, and CHF?
Maybe they were all expecting differently and they were disappointed, or they anticipated severe effects from such heavy stats…I’d say it’s in the expectations and following each other downward more and more
Anticipation is an important factor… when everybody expects dismal US data, they take an according position before the news release. When the news then IS released, the news is not interesting anymore, and the crowd looks for the next ‘big thing’ which will come…
Another factor: The completely connected economies on both sides of the Atlantic. Bad news for the US economy are also inevitably bad news for Europe.
High unemployment in the US -> US companies have less costs for payrolls -> Good for US economy.
High unemployment in the US -> US citizens spend less on goods -> European companies must cut down their exports (Germany is still the biggest exporter in the world), BAD for Europe.
The extremely strong JPY in the last months: I explain this by the effect of ‘deleveraging’. Carry Trade unwinds. Speculative carry positions using gazillions of borrowed yen are closed and repaid, therefore enormous demand for yen. Would also explain the gigantic fall of the Aussie dollar, which is repaid in enormous amounts.
Well, many things can’t be explained unless you sum up all the indicators impacting a pair.
If you take a look at today EURUSD, it’s not only about US unemployment. Spain debt notation has been lowered, which is bad for EUR. And, even if it looks weird, New Zealand currency is falling down, moving up USD thus moving down EURUSD. Yeah, it’s a global economy 