Eur/usd - page 214
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EUR/USD: Euro Escapes Psychological $1.15 Barrier
US dollar bulls were resilient enough to break through the $1.15 barrier and lock the pair above the level, after it briefly visited $1.14 territory earlier in the day.
The greenback gained 0.78% and was seen at $1.1538 against euro, after hitting a 12-year high at $1.1460.
As for the euro, the currency has been exposed to increased pressure since news broke about the Swiss central bank's decision to discontinue its three-year-old policy of maintaining a floor in the EUR/CHF exchange rate, which caused turmoil in the foreign exchange market.
US macro reports
Industrial production dropped 0.1% in the final month of the past year, compared to the gain of 1.3% booked a month ago.
A preliminary consumer sentiment index, based on a survey conducted by Reuters and the University of Michigan (UoM), rose to 98.2 in January, up from December's final 93.6.
That is the strongest reading in seven years - the last time it was seen higher was in 2004. The index has been posting a steady increase since August last year.
US CPI fell 0.4% in December, after a 0.3% drop in the previous month, missing analysts' forecast that had suggested a 0.4% decline.
Excluding food and energy, core CPI came in at 0.0% in December, after a 0.1% increase in November. It was forecast to inch up to 0.1%.
Meanwhile, market participants are still digesting the hugely surprising step of the Swiss National Bank, which decided to lift its EUR/CHF currency peg, leading to massive volatility on currency markets and undermining the dollar's performance versus its peers and sending the yen up to ¥115.97 during the Asian hours on Friday.
Technical analysis
The EUR/USD free fall continues as the cross breached another big psychological area of $1.1500. Technical oscillators are hugely oversold as the downtrend continues without any longer correction.
Intraday charts failed to stop a decline above $1.1500 even many option contracts are placed around that level. On the other hand, every spike in prices will find a resistance at the previous support at $1.1750.
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EUR/USD: Euro Hits New 12-Yr Lows Amid Catastrophic SNB Decision & ECB QE Fears
The shared currency remained under pressure during the week and fell to new twelve-year lows as investors are pricing in the QE, which should happen at ECB's next meeting on January 22.
EUR/USD closed the week at $1.1558, down 2.40% on the week.
SNB stunner
While the downtrend was consistent over the week, volatility was extreme, especially following the SNB's shocker to abandon its EUR/CHF peg, which spurred a massive franc strengthening and enormous volatility across currency markets. This measure also indirectly hinted that the ECB is about to unveil full scale QE next week.
Moreover, this surprise move will have and has already had catastrophic and devastating consequences for many traders, funds, investors, who had been holding levered long positions on EUR/CHF and USD/CHF.
The first cases are starting to pop up already, with the broker FXCM saying that it had lost around $225 million on clients' debits and the New Zealand broker Excel Markets closing down the business as it is facing millions in losses.
UK foreign exchange brokerage Alpari, sponsor of premiership's football team West Ham United, has declared itself insolvent after the majority of clients sustained losses on the Swiss franc’s dramatic move yesterday.
ECJ approved OMT
The ECJ counsel takes the view that "The objectives of the programme are in principle legitimate and consistent with monetary policy...The ECB must have a broad discretion when framing and implementing the EU’s monetary policy, and the courts must exercise a considerable degree of caution when reviewing the ECB’s activity, since they lack the expertise and experience which the ECB has in this area."
ECB in focus
Market participants are bracing for the upcoming meeting of the European Central Bank (ECB) on January 22. The central bank is expected to announce some form of full-blown QE, with predicted amounts ranging from €500 billion to €1 trillion.
"Comments from ECB council member Nowotny Tuesday provided more support for expectations that the ECB will deliver, arguing for a decision “sooner rather than later” and that purchasing government bonds is in fact a 'traditional' policy instrument," analysts at BNP Paribas wrote in their research note on Wednesday.
The overall situation still favors dollars to euros, with any potential rally in the EUR/USD pair seen as a selling opportunity. Should the ECB announce QE, the euro is expected to fall further, with levels below $1.10 eyed.
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EUR/USD forecast for the week of January 19, 2015
The EUR/USD pair fell during the course of the week, slicing through the massive support at the 1.18 handle. We fell all the way below the 1.15 handle at one time during the week, but found enough support to bounce back over it. With that being said, we could bounce a little bit to test the area near the 1.18 handle for resistance, and as a result we could look for selling opportunities there. As far as buying is concerned, we would need to see this market break back above the 1.20 level in order to start buying long-term.
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EUR/USD Forecast Jan. 19-23 2015
EUR/USD fell to lows last seen over 10 years ago after receiving an unexpected blow from the Swiss. tension was growing towards this week’s big event: the ECB rate decision, in which QE is on the cards. We also have a few other events this week. Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
The Swiss National Bank shocked financial markets by removing the floor of 1.20 under EUR/CHF after more than three years. This sent the franc up by double digits and hit the euro hard, falling below 1.15 for a while.. Many traders and quite a few brokers were impacted. The SNB kept the EUR bid, and that’s gone now. The move is certainly related to the upcoming ECB decision and implies a very big QE program. Tension also mounts towards the elections in Greece on January 25th: one poll showed an absolute majority for the opposition, while others showed a very close race. There is also concern about capital outflows which have intensified and already triggered a tapping of emergency loans. In the US, data has been mediocre, with optimism from consumers contrasted by weak spending. Also manufacturing and jobs numbers were somewhat contradicting. All eyes are now on Draghi.
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Euro Vs. ECB: Winner Or Loser?
EURO and the Risk of ECB Disappointment
Over the past few months, investors built up massive short positions in the euro and judgment day is quickly approaching. The highly anticipated European Central Bank monetary policy announcement is 4 trading days away. The question that everyone is now asking is whether the euro will turn into another big loser like oil, copper and EUR/CHF or a big winner that will save funds at the brink of collapse after the SNB pulled its peg. Smart investors won't wait that long for an answer because since June, the euro has fallen more than 15% against the U.S. dollar with approximately half of those losses incurred over the past 4 weeks. The European Central Bank has done a fantastic job of preparing the market for Quantitative Easing which for the most part is already priced in. The euro is trading on the 1.15 handle, having dropped below it intraday, bond yields are at record lows and the stock market has been holding up well.
As a result, the conversation has now shifted to the size of the debt-buying program. It is widely believed that the European Central Bank will announce a €500 billion program but at this stage this could be the minimum that the ECB needs to do to satisfy the market which is where the challenge lies. There is a serious risk of ECB disappointment on Thursday. There is a small chance that there is not enough support for quantitative easing. The decision has never been easy for the ECB because unlike other central banks, there are 18 countries within the Eurozone and selecting how much of each sovereign bond to buy could be politically challenging especially given the risk of holding Greek debt. Yet the ECB can't sit by the sidelines and do nothing because falling prices has deepened concerns about inflation at a time when growth is very slow. If there is enough support for QE, the ECB could still not have the details of the program worked out so soon including things like size and scope. Preannouncing QE like ABS purchases may not satisfy the market. The real test for the ECB is the size of the program. In order to impress, the ECB needs to commit to buying a trillion euros worth of sovereign bonds or more. Investors are already questioning whether 500 billion euros will be sufficient to drag the EZ out of its sluggish state of growth and low inflation. So as you can see, the bar is set very high for Thursday's ECB meeting.
For traders, the price action of the EUR/USD could be particularly dicey around the ECB rate decision. In the early part of the week, we expect the euro to weaken further but in the hours before the rate decision, EUR/USD could bounce on profit taking. The potential for disappoint could trigger short covering right before the rate decision. How the euro trades afterwards will of course hinge on the power of the central bank's announcement. If they shock the market with a 1 trillion euro bond-buying program, the euro should collapse. However if they provide no details or come in below 500 billion mark, the disappointment could lead to a short squeeze.
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EU Preview: D-Day for Draghi?
European Central Bank President Mario Draghi may launch QE after the Governing Council holds its first policy meeting of the year. Investors and traders will scrutinize the BoE Minutes release, WEF deliberations in Davos, as well as a set of important macroeconomic data, including flash PMIs, ZEW survey results and IMF global outlook update.
It will be a hard time with challenging circumstances at the European Central Bank's (ECB) policy meeting next Thursday. With the deflation threat increasing in the euro area, the ECB may announce broad-based government bond purchases after the Governing Council holds its first policy meeting of the year.
Speaking for the French newspaper Liberation on Friday, ECB Executive Board member Benoit Coeure said that the European Central Bank (ECB) will decide next week on the size of a planned sovereign debt purchase.
"We will take the American and British experiences into account in order to determine the amount of debt to buy, so as to reestablish confidence and bring inflation back to a level close to and lower than 2%, while keeping in mind the institutional specificities of the eurozone," Coeure told the paper. "We should also decide if the purchase would concern the debt of certain countries or if it should be balanced across the entire eurozone," he added.
Eurozone deflation of 0.2% in December puts massive pressure on the ECB as price growth in the euro area turned negative for the first time since 2009 in December, Eurostat confirmed on Friday, with plunging oil prices driving a bigger-than-expected decline.
"In fact, 12 of the 19 Eurozone member countries suffered deflation in December (including Lithuania which joined in January): Greece (2.5%), Spain (1.1%), Cyprus (1.0%), Luxembourg (0.9%), Belgium (0.4%), Portugal (0.3%), Ireland (0.3%), Italy (0.1%), the Netherlands (0.1%), Slovakia (0.1%), Slovenia (0.1%) and Lithuania (0.1%)," Howard Archer, Chief UK and European Economist of IHS Global Insight, reminds in a note to clients.
"A small crumb of comfort for the ECB came from the fact that core inflation (excluding energy, food, alcohol and tobacco) was stable at 0.7% in December," he said.
ECB policymakers have debated various forms of quantitative easing, and several Council members, including Executive Board member Benoit Coeure, have said there was broad consensus for action as early as January 22. Such a step in favor of QE would be an historic one for the ECB.
The ECB "must take into account three immediate and complicating considerations: market interest rates have already taken another meaningful step lower, the uncertainty surrounding the Greek election later this month, and the fact that many income-challenged European citizens appear in no mood to be told that higher inflation will be good for them," Mohamed El-Erian, chief economic adviser at Allianz, chairman of US President's Global Development Council and former chief executive officer of Pimco, wrote in his article published last week by Bloomberg.
However, El-Arian warns: "Market interest rates in Europe are generally very low already, raising doubts about the effectiveness of additional ECB balance-sheet operations. In fact, the moves have been so extreme as to also drag down other interest rates, including those on US Treasuries."
Truly, the yield on the 10-year German government bond has now fallen below 0.50%, while in France it has slipped to 0.66% and Italy's to 1.74%. Moreover, even in the so-called peripheral euro zone countries, with the exception of Greece, yields are at or close to historically low levels, he noted.
El-Arian has also noticed that the political landscape in Europe is currently far from accommodating. "Many European countries are experiencing a rise in the popularity of non-traditional political parties whose economic policies, to the extent that they can be defined, have a distinct non-establishment tilt," he writes. In the case of Athens, "which is already heavily indebted to the ECB, the central bank has to weigh whether to take on even greater payments risk before the January 25 election" in Greece.
As a third challenging circumstance, El-Arian noted that "the ECB is targeting higher inflation even as the average European’s real income has been frustratingly stagnant. This ... can breed anxiety because of their potential to contribute to general deflationary forces," he said.
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Euro Bought Before ECB, Recovers From 12-Yr Low
The euro dusted itself down and managed to edge up on Monday, ahead of the week's main event - the European Central Bank (ECB) convene on Thursday, while US markets will be closed today due to the celebration of Martin Luther King Day.
The euro inched up 0.19% to $1.1578 versus the greenback on Monday, recovering from last session's fall to a 12-year low $1.1460.
The euro came under heavy selling pressure following the Swiss National Bank's (ECB) shocker to abandon its EUR/CHF peg, with traders speculating it was protection against the expected full-scale ECB QE this week.
ECB eyed
The ECB is largely expected to announce broad-based government bond purchases when it meets this Thursday, amid increasing risks of deflation along with struggling economic growth in the euro zone.
The central bank is expected to announce some form of full-blown QE, with predicted amounts ranging from €500 billion to €1 trillion.
"Comments from ECB council member Nowotny Tuesday provided more support for expectations that the ECB will deliver, arguing for a decision “sooner rather than later” and that purchasing government bonds is in fact a 'traditional' policy instrument," analysts at BNP Paribas wrote in their research note on Wednesday.
The overall situation still favors dollars to euros, with any potential rally in the EUR/USD pair seen as a selling opportunity. Should the ECB announce QE, the euro is expected to fall further, with levels below $1.10 eyed.
Technical analysis
The EUR/USD free fall continues as the cross ticked below another big psychological area of $1.1500 on Friday. Technical oscillators are hugely oversold as the downtrend continues without any signs of a correction.
Intraday charts will try to stop a decline somewhere above $1.1500 as many option contracts are placed around that level.
On the other hand, every spike in prices will find resistance at the previous support of $1.1750.
source
EURUSD initially fell making new low at 1.14595, but found enough buying pressure to turn things back around and close in the middle of the daily range. Technically the pair remains in an aggressive downtrend as fresh 11-year lows have been carved out in the latest drop, begging the question: how low can we go? 1.1376 is the November, 2003 low and seems to be the next technical target.
bearish euro bets surge last week
The Investing.com weekly sentiment index published on Monday revealed that market players added to their bearish bets on the euro in the week ending January 16.
According to the report, 28.9% of investors held long positions in EUR/USD last week, down from 35.5% in the preceding week. A reading below 30% indicates oversold conditions.
Meanwhile, 35.7% of investors were long in GBP/USD, compared to 45.6% a week earlier.
Elsewhere, 61.6% of market participants held long positions in USD/JPY, down from 65.7% during the previous week, while 55.3% of investors were long USD/CHF, compared to 56.6% in the preceding week.
Amongst the commodity-linked currencies, 43.2% were long USD/CAD, down from 46.3% a week earlier, 36.3% held long positions in AUD/USD, compared to 51.1% in the preceding week, while 39.4% were long NZD/USD, down from 46.4% a week earlier.
In the commodities market, 53.3% of market participants held long positions in gold futures as of last week, down from 60.9% in the previous week.
The report also showed that 51.7% of investors were long the S&P 500 as of last week, down from 60.6% in the preceding week.
A reading between 50%-70% is bullish for the instrument, a reading between 30% and 50% is bearish, a reading above 70% indicates overbought conditions and a reading below 30% indicates oversold conditions.
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