In Forex it is easy to be taken for a ride by many people, same goes the with popular Bernanke of late announcing a high possibility of QE3 this week. While many are pricing this into the Forex market before he speaks again this week there is still a possibility that it may not happen..
Do you want to hear the theory? Please note before i speak on this, this is only a theory, please do not trade off this post.
- The theory is that QE3 is not a effective as it used to be, so to do it again would not be efficient.
- Not only that the US needed to push the QE3 to help boost the Euro which was boosted very effectively due to its release. Boosting the Euro in a sense if done right actually will help boost the US in the future and thus reduce fiscal worries in January being a popular trade partner.
- The fiscal cliff is not until January and acting now is not a good idea as printing more money will only put more pressure on consumer low spending which before an election is a big no no..
- Lastly, Obama would not approve it until after the election and he is reelected. Why would any president risk losing his seat over doing something so risky right now.
- While the fundamentals are not showing great signs of improvement, there is signs of improvement with a recent drop in unemployment.
So, with this theory what is more likely to happen, well not what the public is expecting, more likely a mild form of something that will have very little effect on the devaluation of currency. My opinion is 50 / 50 overall.. Because the price of QE3 is priced into currency already if it does happen then expect a rally on Euro or Gbp up say 150 to 170 pips, if it does not happen then expect a major sell off up to 250 to 300 or more pips.. Good luck all..