If we analyze USD in this year, all of us care about FRB monetary policy, especially interest rate,.
and its interest rate affect other countries' currency, today I want to post about EUR/USD.
first, let's see about interest rate of ECB and FRB.
if we back to the past, as we know, ECB follows FRB to make interest rate no matter it is up or down. ECB decided interest rate after FRB, shortest period is 4 months, longest one is 18 months, and average is 9 months.
In Sep.1998: FRB Interest Rate: Down
7months later,
In Apr.1999: ECB Interest Rate: Down
Jun. 1999 FRB UP
5 months later
Nov.1999 ECB UP
01.2001 FRB DOWN
4 months later
05.2001 ECB DOWN
06.2004 FRB UP
18 months later
12.2005 ECB UP
9.2007 FRB DOWN
13 months later
10.2008 ECB DOWN
therefore, if FRB will make interest rate up on Aug 2010,. probably ECB will make interest rate up in Dec 2010 at shortest term estimation or after 2011 at long term estimation.
As noted above, ECB followed FRB, and EUR/USD tend to be strong USD and Weak EUR just before FRB makes interest rate up as data.
For Example,.last time FRB had made interest rate UP was Jun 2004 and Jun 1999. both time started strong USD and weak EUR from a few month ago around 10%. then trend had changed strong EUR and weak USD until ECB had made intrest rate at both time in 1999 and 2004.
If this time 2010 is also according to past data, EUR/USD would be 10 % drop, then EUR/USD 1.5 could be at 1.35. and strong USD starts half years before FRB makes higher interest rate.
Finally, if FRB will make higher interest rate on Aug 2010. USD would be getting stronger since March, but EUR/USD already dropped from 1.5 since end of last year, so FRB would make higher interest rate on May or Jun 2010, or FRB would make higher interest rate in Aug, and EUR USD drops since Mar 2010, nowadays EUR/USD has been up, right? so it could be Aug. then we can analyze;
Jan to Mar EUR/USD UP to 1.5
Apr to Sep EUR/USD Down to 1.35
Oct to Dec EUR/USD UP to ?
