June 1st | Day Trading the Currency Market
Japan is not the only major country to have intervened in the currency in recent years. The central bank of the Euro area also came in the market to buy the euro in 2000, when the single currency of 90 cents to 84 cents depreciated. In January 1999, when the euro was first launched, it was valued at 1.17 against the u.s. dollar. Thanks to the sharp slide, the European Central Bank of the United States, Japan, the United Kingdom, and Canada to the coordinated intervention to prop up the euro for the first time ever convinced. The eurozone felt that the market concerned lacked confidence in his new currency but also feared that the slide in the currency was the increase in the cost of oil imports of the region. Europe?s heavy dependence on oil imports necessary with energy prices 10-year highs hit at the time, a stronger currency. The United States agreed intervention because euros buying and selling dollars would help to aid in the funding of an already-growing u.s. trade deficit and boost the value of European imports. Tokyo joined the intervention, because it was becoming concerned that the weaker euro that was a threat to Japan?s own export. Although the ECB releases details on the extent of its intervention, the Federal Reserve reported did not have bought 1.5 billion euros against the dollar on the account of the ECB. Although the actual intervention itself caught the market by surprise, the ECB gave good warning to the market with numerous attacks of verbal support of the officials of the ECB and the European Union. For trading purposes, this would have an opportunity to buy one of the European traders in anticipation of intervention or avoid shorting the EUR/USD. Figure 9.26 shows the price action of the EUR/USD on the day of intervention. Unfortunately, there is no minute available data dates from September 2000, but from the daily chart we can see that on the day that the ECU have intervened in the euro 119 with the help of its trading partners, the EUR/USD had a range of over 400 pips highlow.
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