Central bankers lose confidence in themselves

I find it strange that both Draghi and the president of the SanFran Fed both come out admitting what might be quite ‘controversial’ a few years ago.  Draghi first in all his brilliance:

The conditions in the economies of the rest of the world have undoubtedly proved weaker compared with a few months ago, in particular in the emerging economies, with the exception of India. Global growth forecasts have been revised downwards. This slowdown is probably not temporary.   ~ ECB

All things considered, this isn’t exactly news.  Honestly though I’m not sure where we started thinking that high-growth is the norm.  And CB policy based upon trying to get us back to an abnormal state seems rather foolish.  However, I’m digressing.  So now onto that fed president:

San Francisco Federal Reserve President John Williams said on Friday that low neutral interest rates are a warning sign of possible changes in the U.S. economy that the central bank does not fully understand.


“I see this as more of a warning, a red flag that there’s something going on here that isn’t in the models, that we maybe don’t understand as well as we think, and we should dig down deep deeper and try to figure this out better,” he said during a panel discussion at the Brookings Institute in Washington.  ~ Reuters

Of course his reference to something in the real-world not being ‘in the models’ is hilarious.

In theory there is no difference between theory and practice. In practice there is.

~ Yogi Bera

But at least Williams is able to admit something may not be right, although since when do Central Bankers invalidate their own omnipotence?  It almost seems like a CYA.


Anyways, time to write about volatility in the EUR/USD and whatnot.  I said a couple weeks ago,

On the other hand this is still kind of an inflection point with the prices being so close to support levels and so if the EUR gets smashed below that, things change.

Well, things might be changing with the recent smashing.  The EUR failed to confirm its recent attempts at building an up-trend.  We’re looking at pretty weak support right now; a lot of it just previous inflection price levels,   If the EUR/USD can’t hold onto its 1.07 mark, we will probably see at least 1.05.  Also considering that a drop below 1.05 would be multi-year low, we might see some capitulation into the channel bottom (1.035).

I’m also going to comment on the mid-term chart this time due to the recent drop.  While there isn’t much to see in it, we can see that it’s broken out of a wedge with the recent drop.  Also looking at the RSI, it can still drop for a bit longer…

So now for TF.  I was wrong about it failing to get back over its MA, that’s for sure.  There’s a potential reverse H&S pattern building.  The (blue) pattern would take us possibly with enough momentum to retest a trendline.

For oil there’s really not much to talk about.  There’s a very slight bullish divergence between the RSI and the price.  Although we can also see oil is diverging from coal more.  No trendlines, no price support.  A volatility dream.U1kFDV
Mogwai sometimes blends rather interesting styles of music together; part of the instrumentation is rather reminiscent of country music; but this song is anything except for that.


  1. Pingback: Is the EUR/USD about to take a breather? | Eric's TA Alcove

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