Currency Traders Look At This Chart That Really Matters

Currency traders mostly are technical analysts or what you call chartists. They look at the charts and try to fathom what is going to happen in the near and the medium term. We are also chartists. We only trade what the charts are saying. But when it comes to fathoming what the central banks are going to do then you must take a look at this chart that really matters daily. The correlation chart between EURO Dollar and the 2 year interest rate swap rates is showing the gap is the most since January.

Right now, the analysts are trying to figure out whether the FED is going to increase the interest rate or not keeping in view what happened to the global markets last week. Looking at the above chart will give you a clue what is happening. What really works in the market is expectations. What the market is expecting.  This week there is an important meeting at ECB.

When European Central Bank policy makers meet on Sept. 3, they’ll deliberate whether a bigger quantitative-easing program is needed as risks to economic growth threaten their inflation goal. A day later, the Labor Department’s August payroll report will provide Fed officials with the most important data available to them before the Sept. 16-17 meeting.

A more stimulative-minded ECB may lower yields in the region and damp the appeal of the euro.