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The Bundesbank Tells it Like it is

October 08
03:03 2014

No BS From the Bundesbank

We can always count on the Bundesbank to give it to us straight. Being in the country that went through the worst hyperinflation period in recent history (not counting Zimbabwe),they are quick to tell us the truth even if its not so pretty. I have to say I admire them for standing their ground under pressure. If anyone recalls it was Axel Weber that was supposed to be the next head of the ECB after Trichet but that didn’t happen because he resigned as president of the Bundesbank in protest of the first LTRO Trichet undertook to save the Euro. Im sure he is just fuming now as Super Mario goes even further buying bonds than Trichet did. Now its up to poor Jens Weidman to hold them back and in all reality hes losing the battle.

I know I have sort of poked fun at the fact that the Bundesbank really runs the ECB but its not totally true. The true ECB controllers are the politicians in Brussels and the Bundesbank is just trying to keep them at bay while still holding the Euro together and keeping the German people happy. What I found interesting is an interview with Jens in the Wall Street Journal where he don’t hold back much at all. Here are a couple of quotes.

In an interview with The Wall Street Journal, Mr. Weidmann rejected calls from the International Monetary Fund and within the ECB for Germany to cut taxes or ramp up public spending despite mounting signs that its economy is succumbing to Europe’s downturn. The European Commission should consider rejecting France’s 2015 budget, which exceeds deficit targets mandated by the European Union, he added.

Mr. Weidmann said he stands by the conservative principles that have characterized the Bundesbank throughout its nearly 60-year history: keeping inflation low; protecting the central bank’s balance sheet from risks and strict separation from the financial needs of governments.

His cautious stance stands in contrast with the ECB’s latest attempts to convince investors that it will act forcefully to boost the flow of money to the economy, and may raise doubts about the bank’s ability to gain the consensus needed to do still more expansive steps if needed. It also exposes the deep rifts that still mar the Eurozone, with countries including France and Italy calling for more flexibility while Germany insists on fiscal rigor.

“There is a risk of monetary policy, especially in the euro area, being held hostage by politics,” Mr. Weidmann said in an interview Monday at the Bundesbank’s headquarters in Frankfurt, just a few kilometers away from the ECB.

At the conclusion of a Zero Hedge article noting the WSJ there was also a quote from Mises Patrick Barron that puts it rather bluntly.

Of course the ECB will get stuck with low-quality loans purchased at inflated prices! Economic logic makes this a certainty. If the institutions selling such loans could get as high a price in the open market as the ECB will offer, they would sell them now. This program is nothing more than a back door bailout to politically connected, privileged, special interest groups. It is corruption on a grand scale. Of course the ECB has a good role model–the US Federal Reserve Bank.
It don’t get any simpler than that. The key words in that statement being corruption on a grand scale. Just how long can this last is a mystery because in all reality it has been going on for ever and only gotten bigger. People ask me about the corruption in the Philippines and the only thing I can say is its no different than the US. The main thing is in the US they have made most of the corruption legal so nobody goes to jail but mobsters maybe.
On to the charts


The EUR/USD may just be done with pushing up here. The push from the lows yesterday did run 98 pips making it qualify even though it didn’t break with a higher hourly close. We have a topping formation and push off during the Asian session as well. I will remain open on direction due to a third push scenario but do prefer the short since current price is closer to the highs at the moment. Otherwise I will be open for the long today from the Asian lows if they hold this range and leave the Asian box closer to the highs. The set up will need to be really nice because of the added risk in taking entries in the middle of this range. Having said that we do have a 44 pip Asian range now so its plenty wide enough to consider the highs and lows as levels.

EUR/USD Chart Oct 8, 2014



The GBP/USD did make a sloppy second push yesterday so I will be bias for getting the third today. I will also be cautious on my entry if I trade this pair due to the way it pushed in the chop yesterday. I wont be looking for shorts unless it holds yesterdays range for today and will consider it a non directional chop tomorrow. The best level for the long seems to be the Asian lows for now but they could test 1.6045 or lower as well.

GU chart Oct 8, 2014


The EUR/JPY managed to make the first push down yesterday and has tested the daily low this morning at 137.03 setting up but looks like it will run off without giving me the pullback for entry I need. The GJ and UJ do agree but need the pullback as well. I did take the GJ yesterday seeing it had the best chance with GBP weakness. However I closed it at the end of the live training session for 48 pips since it was having so much trouble breaking below the Asian lows. Taking the profit and getting out was the safest choice even though it eventually ran 130+ pips.

I will be bias for the short here today and hope to catch it early. If it does show the conviction above 137.03 then they will probably push it up to 137.31 before a push down. Otherwise I will be open for the long trading against the first push but will need to see something at 136.70 to change my bias and not be holding a short waiting for the break down.

EJ pushing down

Forex News Today

The calendar for the London session is rather bare with nothing high impact until late in the NY session where we have the Fed Meeting Minutes. That does have a decent chance of causing a big move if they surprise and talked about more QE but I highly doubt that. Otherwise it will most likely be very close to the previous policy statement.

Tomorrows Asian session has Aussie Employment data to watch out for but thats about it.

Happy Trading


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