Eur/usd - page 108
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EUR/USD forecast for the week of June 9, 2014
The EUR/USD pair fell drastically during the course of the week as we slammed into the 1.35 handle. All things being equal though, the buyer stepped in and formed a bit of a brick wall. With that, it’s obvious that the market has a “floor” in this area, and it’s quite likely that it will be the lowest print that we will see over the course of the summer. In fact, we are starting to believe that we are finding the summer range between the 1.35 handle, and the 1.40 handle. The 1.37 handle does cause some type of reaction though, and that must be paid attention to.
The fact that the European Central Bank went into real negative interest rates, and that the Euro still managed to find its footing suggests to us that the market will not sell off below that level. With that being the case, we feel the longer-term traders can play this more or less is a range bound market, but pullbacks should be thought of as buying opportunities. In fact, we would even suggest going to shorter timeframe charts to find a decent entries based upon supportive candles. Anytime this market pulls back, we would be very interested in what the 4 hour chart is doing. A nice 4 hour supportive candle within the context of the longer-term chart might be a nice way to play this market. Buying a supportive candle on the 4 hour chart while using the backdrop of the weekly chart as your guidelines, might just be the way to go.
We find it very difficult to imagine that this market is going to go above the 1.40 handle anytime soon. It could possibly down the road, but right now it appears that the market is fairly content to go sideways. This particular market has been very choppy even when it’s “trending” so that’s not a huge surprise truthfully. If we did manage to break down below the 1.35 handle however, we would feel this market was coming undone and would become very bearish.
ECB to hold judgement on stimulus until end of year
The European Central Bank will wait until the end of the year to assess fully the wave of measures intended to bolster growth and prevent deflation, an ECB board member said on Friday
"We have to give it some time and wait until the end of the year to evaluate the consequences of the broad measures taken Thursday before we consider any further measures," said Luc Coene, head of the Belgian central bank and ECB board member.
On Thursday, the ECB announced an unprecedented package of measures, including negative interest rates, in its fight to head off the spectre of deflation in the euro area.
"Depending on the outcome, we'll see if there is a need or not for more measures," Coene told a news conference in Brussels.
"A long period of low inflation has its risks," the central banker said. "It was important that we take these measures."
In addition to cuts in eurozone interest rates, ECB chief Mario Draghi unveiled a series of new measures to kick-start bank credit, which has been contracting for months now.
EUR/USD Forecast June 9-13
EUR/USD had a dramatic week thanks to the ECB: falling to low support and eventually making a big comeback. Industrial production figures, ECB Monthly Bulletin and inflation data are the main events on our calendar. Here is an outlook on the highlights of this week and an updated technical analysis for EUR/USD.
Last week, the ECB made a historic move by setting a negative deposit rate of -0.10% and cutting the main rate to 0.15%. Draghi made commercial banks pay for lodging money at the ECB while giving incentives to banks willing to boost their lending to private companies. This move excludes lending to the real estate market. The European Central Bank also left the door open for further monetary-policy action, including further purchases of asset-backed securities but did practically close the door on more cuts, and this allowed the euro to recover. The Governing Council reiterated its commitment to using unconventional instruments in case inflation levels remain low. Will the ECB’s historic measures boost inflation in the Eurozone? In the US, it was business as usual with the NFP coming out as expected.
* All times are GMT
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EUR/USD weekly outlook: June 9 - 13
The euro slid lower against the dollar on Friday after data showed that the U.S. economy added jobs for a fourth straight month in May, a day after the European Central Bank unveiled a package of measures to avert the threat of persistently low inflation in the euro area.
The Department of Labor reported that the U.S. economy added 217,000 jobs last month, just under expectations for jobs growth of 218,000, while April's figure was revised to 282,000.
The unemployment rate remained steady at a five-and-a-half year low of 6.3%.
EUR/USD initially touched a two-week high of 1.3677 following the release of the data, before pulling back to 1.3642 late Friday. For the week, the pair was 0.34% higher.
The U.S. jobs report came one day after the ECB announced fresh steps to stave off low inflation in the euro zone, briefly sending the single currency to four month lows of 1.3502 against the dollar, before later erasing the day’s losses.
The ECB cut the main refinancing rate in the euro area to a record low 0.15% and imposed negative deposit rates on commercial lenders, in a bid to stimulate lending to businesses.
The bank also implemented a new Long-Term Refinancing Operation, designed to help banks lend to small companies and said it would "intensify" its preparatory work on the 'asset-backed security' market.
The ECB acted after a report on Wednesday showed that the annual rate of inflation in the euro zone slowed to 0.5% in May, well below the bank’s target of close to but just under 2%.
Elsewhere Friday, EUR/JPY was almost unchanged at 139.87 at the close of trade, recovering from the lows of 138.66 struck in the previous session. For the week, the pair was 0.42% higher.
In the week ahead, investors will be looking ahead to Thursday’s U.S. retail sales report for further indications on the strength of the U.S. recovery, while the euro zone is not scheduled to release any major economic data.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Monday and Wednesday as there are no relevant events on these days
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Once More Unto the Breach, Dear Draghi
Mario Draghi must wonder if there's any gratitude left in Europe. The president of the European Central Bank who saved the euro zone in 2012, and has since driven country borrowing rates sharply lower, is once again being asked to rescue Europe's politicians from their own economic failures. If only the politicians would give him pro-growth economic reform in return for all of his monetary exertions.
That's the way to understand Mr. Draghi's decision on Thursday to announce more monetary derring-do to revive Europe's flagging animal spirits. No one else was going to do it, so maestro Mario was given the job. His efforts didn't go as far as many wanted, but then what the critics really want is the impossible. Economies cannot grow by monetary conjuring alone.
This is not to say Mr. Draghi lacks a case for trying to do something. The ECB's only statutory mandate is to promote price stability, and Europe's inflation rate is well below the central bank's 2% target. In some corners of the euro zone the price level is already falling. Mr. Draghi understandably wants to prevent Europe from slipping into Japan's deflationary trap.
So Mr. Draghi dug into a bag of multiple tricks designed to lift inflation and promote more bank lending. He cut the ECB's short-term lending rate to 0.15% from 0.25%, though with rates already so low it's hard to see how this will make much difference. He did avoid the U.S. Federal Reserve's mistake of going to near-zero, which has distorted price signals and capital flows.
More daring is Mr. Draghi's decision to make banks now pay the ECB for their deposits and excess reserves. This "negative deposit rate" means that banks will pay a penalty for not finding ways to put their deposits to work in the private economy. While this penalty is starting at 0.1%, the implicit threat is that it will increase if banks resist. A negative 0.4% would not be out of the question down the road. The problem here is that negative deposit rates haven't had much success in lifting inflation where they've been tried.
Mr. Draghi disappointed some by not announcing outright purchases of private assets, but a market for private asset-backed securities doesn't exist in Europe the way it does in the U.S. Mr. Draghi wants to develop that market, and he took a step toward that by announcing a new lending facility that banks can draw on at low rates for two years.
The goal of these TLTROs—we'll spare you the full name—is to improve bank balance sheets to spur more private lending. The facility is supposed to pave the way for a broader securities market as banks lend these funds to create assets, which they can then package into securities.
The ECB says this facility cannot be used to lend to households to buy homes, so the banks will have to target small and medium-sized businesses. The banks will also have an incentive to lend this cash because the ECB is now their regulator, and Mr. Draghi is hinting that banks that lend more will get favorable capital treatment.
Will all of this work? Count us skeptical. Mr. Draghi may stimulate more bank lending, but a lack of cheap money isn't Europe's main economic problem. What Europe really needs is broad and liberalizing economic reform.
One reason Europe, like Japan, runs the risk of deflation is because like Japan it is burdened by constricted labor markets, high taxes, and overregulation that limits domestic business competition and innovation. Add an aging population and you have a recipe for slow to negligible growth that can slip into deflation more easily than the more dynamic U.S. economy.
Mr. Draghi's implicit offer to Europe's politicians in 2012 was that he would provide easier money in return for more reform. He has done his part by shrinking national bond spreads between the euro zone's weak sisters and Germany. Yet these same falling bond spreads have reduced the incentive for elected officials to carry out reforms that are politically difficult.
So now the politicians are back begging Mr. Draghi for more, and in particular they want the euro to fall against the dollar to spur European exports. This is also like Japan, where the Bank of Japan 8301.TO -1.94% has provided easier money that has helped Japan's exporters, but Prime Minister Shinzo Abe has failed to follow through on his "third arrow" of domestic economic reform. The yen has fallen but faster growth hasn't materialized.
Mr. Draghi no doubt hopes that his new measures will work at least enough to buy more time for Europe to undertake the "structural reform" he once again promoted on Thursday. If that doesn't work, he may be hoping to buy enough time for the U.S. to start growing fast enough to once again pull Europe out of its despond. It wouldn't be the first time America has rescued Europe, but it would be so much better for the world economy if Europe saved itself.
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Germany’s fear of QE is what’s stopping us from cracking open the Cava
Last week saw the first time that a major central bank – the ECB – cut interest rates below zero. It was also notable for what the ECB did not do, that is to say, it did not begin a policy of quantitative easing. In the end, this non-event could be the more significant.
The bond markets have apparently decided that the euro crisis is all over. Indeed, yields in the so-called peripheral countries are now above their German equivalents by only the slimmest of margins, indicating that the market attaches hardly any default or redenomination risk to holding these bonds. So that’s alright then.
But we have been here before. Before the euro crisis began, the markets were prepared to lend to these peripheral countries at minimal spreads over Germany. In other words, they did not foresee the huge crisis of confidence that was to threaten the euro in 2012. Bearing in mind this record, I don’t find the market’s current calm at all consoling.
True, there has been some pick-up in eurozone GDP over the past two years. And unemployment has fallen a bit in several countries, including Spain and Greece. Mind you, I wouldn’t exactly crack open the Cava – or your best Metaxa: in both countries the unemployment rate is still about 25pc of the workforce.
And there is an aspect of the situation that you might think should give rise to concern in what is, after all, a debt crisis – namely debt. Even as the countries of the eurozone have implemented tough austerity programmes which have sharply reduced their fiscal deficits, nevertheless the ratio of government debt to GDP has been rising.
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Euro zone Sentix index unexpectedly falls in June as ECB fails to impress
Sentiment in the euro zone unexpectedly fell in June with investors unimpressed by the European Central Bank's package of measures to kickstart growth, the Sentix index survey showed on Monday.
Sentix research group said its index tracking morale among investors in the euro zone indicated investors were more pessimistic than a month ago about the economic situation now and for the next six months.
The index fell for a second consecutive month to 8.5 in June, its lowest since December 2013.
It skidded from 12.8 in May, confounding a Reuters poll forecast for a rise to 13.2 and easily undershot the lowest estimate for 12.4.
The index was based on a survey of investors conducted between June 5 and June 7. The ECB announced measures to boost growth on June 5.
Sentix said the decline was surprising because investors viewed the economy in other parts of the world, especially in emerging markets, more positively and also in light of the ECB's action last week.
"Investors obviously do not appreciate this aspect of the ECB's monetary policy at the moment," said Sentix.
The sub-index on the economic situation plunged to 0.3 from 7.5. Expectations for the outlook fell to 17.0, the lowest reading since August 2013, from 18.3 in May.
"The decline in expectations is remarkable because last Thursday the ECB agreed a comprehensive package of measures to fight the deflationary tendencies in the euro zone," said Sentix.
The ECB said after a meeting on Thursday that it was cutting its benchmark interest rate to a record low 0.15 percent and lowering its deposit rate into negative territory.
In a bid to boost bank lending, ECB chief Mario Draghi also announced a 400 billion euro scheme and he also fuelled expectations that the ECB could introduce a broad-based asset purchase programme.
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Special video update Watch the REURUSD closing pattern
This is Why the EURUSD Did Not Stay Down
I posted the wrong url for the prior update - that one was my weekend update and is a timely one:
Is the EURUSD Bid in an Offered market?
This one is
Why the EURUSD DId Not Stay DownWatch the closing pattern
https://www.youtube.com/watch?v=_kg4hGrs7lI
Euro Declines as Volatility Low Boosts Carry Trade; Krona Slides
The euro fell for a second day versus the dollar as a report showed investor confidence declined and as record-low foreign-exchange volatility boosted demand for higher-yielding assets.
The 18-nation common currency dropped against 13 of its 16 major counterparts. The yen fell to its weakest level in almost a month against the Australian dollar after the lower price swings emboldened traders to seek profits by exploiting differences in interest rates. Sweden’s krona slipped amid bets the Riksbank will come under pressure to cut interest rates after Deputy Governor Karolina Ekholm said last week that the nation faces deflation risks.
“The euro has become one of those low-yielding currencies that you sell on a carry-trade basis or use as a funder,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “That’s true particularly if you contemplate the diverging monetary policy stance with Europe and the U.S.”
The euro slipped 0.2 percent to $1.3611 as of 8:13 a.m. New York time after dropping to $1.3503 on June 5, the lowest since Feb. 6. The shared currency weakened 0.3 percent to 139.43 yen. The dollar was little changed at 102.44 yen.
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