Abe Cofnas is author of “Sentiment Indicators” and “Trading Binary Options: Strategies and Tactics” (Bloomberg Press). He is editor of binarydimensions.com newsletter and can be reached at email@example.com.
Central banks are the key catalysts for currency directions. By setting interest rates and monetary policy, central banks generate either bullish or bearish expectations about the currency direction. Central bank statements are carefully constructed, where each word is compared to the previous statements. Any differences between statements impact immediate market reactions.
Since the Aug. 11 surprise devaluation of the Chinese yuan, and the follow-on Aug. 24 “black Monday” Shanghai market sell-off, forex traders have had to be more cognizant of the impact of Chinese currency and Shanghai market movements.