Eur/usd - page 286
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The euro recorded serious losses against the dollar on Tuesday. The single currency did not meet expectations and tumbled against the dollar, breaking and first support at 1.1214 and the second at 1.1149. If the negative trend continues in the future, the key level at 1.1081 will be threatened.
Eurogroup Meeting starts in 32 minutes.
Carry Trade Could Explain EUR/USD’s Counterintuitive Moves
Traders the world over have been surprised by the relative resilience of the euro over the last few weeks, despite growing concerns that Greece may default on its debt and be forced to exit the Eurozone (the feared “Grexit”). Analysts have proffered various explanations for the EUR/USD’s durability: that the European financial system has had plenty of time to “ring fence” Greece and prevent contagion to other countries, that a last-second deal is imminent, or even that traders are just blithely underestimating the risk and damage of a Grexit.
One alternative explanation that we find particularly compelling is “Euro as a Funding Currency Theory.” As a reminder, the carry trade is when a trader borrows in (sells) a low-yielding currency and invests in (buys) a higher-yielding currency in an attempt to profit from the difference in interest rates. With the European Central Bank driving its main refinancing rate down to 0.05%, pushing its deposit rate all the way down to -0.2%, and engaging in large-scale quantitative easing, the euro represents the perfect funding currency for carry traders looking to borrow cheaply. Carry traders can then use these funds to invest in higher yielding currencies such as the New Zealand dollar, Turkish lira or even the Russian ruble.
However, as all experienced traders know, every strategy comes with risks and the carry trade is no exception. As a general rule, carry traders prefer low volatility and predictable risks, lest adverse movements in the spot market overwhelm any gains from interest rate differentials. Unfortunately, the Greece’s debt drama has neither of those features, and the increasing concerns about Greece have prompted carry traders to reverse their trades by selling higher-yielding currencies and buying back the euro, even though the source of risk (Greece) emanates from the Eurozone itself.
The “Euro as a Funding Currency Theory” hypothesis succinctly explains the counterintuitive moves we’ve seen in EUR/USD over the last few weeks. When it looks like Greece and its creditors are making progress on a deal, carry traders pile back in to sell the euro (as we saw yesterday), and conversely, when the negotiations suffer a setback (as we’ve seen repeatedly over the last few weeks, including earlier today), the euro sees a seemingly implausible rally. This theory also has empirical data to support it: though there’s no precise statistics on the prevalence of the carry trade at any given time, we have seen a dramatic reduction in euro short positions in the CFTC’s Commitment of Trader data over the last few weeks, confirming that many traders have reversed previous short positions in the single currency.
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French Unemployment Hits Record High: 80th Consecutive Month Of Rising Joblessness
While French president Hollande is busy "grilling" (in the words of The Local) president Obama over the latest US "spying on its allies" snafu, the French economy continues to deteriorate and according to the latest French labor ministry data, in May the number of French jobseekers rose by another 0.5%, or 16,200, to 3.552 million, 10k more than expected, and a new all time high.
The number was 5%, or 168,500 greater, compared to a year ago as the so-called European recovery has yet to have a positive impact on what is supposed to be Europe's second strongest economy.
Most troubling: this is the 80th consecutive month of increasing Y/Y unemployment, yet stocks are delighted of course.
Labour Minister Francois Rebsamen said Wednesday that that "by the end of the year we will see, I hope, a phase of stabilization followed by a decline in the number of jobseekers."
Well, there is still hope... at least until the ECB runs out of Bunds to monetize and starts buying it up next.
source
Price is testing support line 1.1172 until now we dont have a break below the support line but the RSI broke below the rising trend line which support more drop on the price. I am looking forward for 1.1100
EUR/USD: Pair Without Moves as Eurogroup Meeting Postponed
The EUR/USD cross experienced a muted trading session on Wednesday compared to the significant drop seen yesterday.
The meeting of the Eurozone's finance ministers was scheduled for today, but ended soon without any deal, taking only one hour. The Euro zone officials agreed on continuing in talks tomorrow at noon.
Shortly before the US closing bell, the euro currency added 0.37% to trade at $1.1208 against the greenback, moving down from an intraday high at $1.1234 reached during the European market hours.
As mentioned, the third estimate of annualized GDP for the January-March caused little volatility on the forex markets, as the data unveiled a 0.2% contraction. However, the latest figure improved from the 0.7% fall shown in the second estimate, while still much worse than the 2.2% expansion posted for the fourth quarter last year.
In Europe, Germany's Ifo Business Climate Index worsened to 107.4 points in June after May's 108.5, according to the latest report, while Greece filled the headlines after Greece's Prime Minister Alexis Tsipras said on Wednesday that the country's international lenders did not accept Athens' proposals.
"Greece continues to cause volatility because they didn't put forth the structural reforms Europe wants. Europe continues to hold out but net-net, a deal gets done," Voya Investment Management chief market strategist Doug Cote noticed.
Meanwhile, investors shifted attention to the ongoing Eurogroup meeting, which started later in the afternoon.
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EUR/USD: Pair Without Moves as Eurogroup Meeting Postponed
he EUR/USD cross experienced a muted trading session on Wednesday compared to the significant drop seen yesterday.
The meeting of the euro zone's finance ministers was scheduled for today, but soon ended without any deal after lasting only one hour. The euro zone officials agreed to continuing talks tomorrow at noon.
Shortly before the US closing bell, the euro currency added 0.37% to trade at $1.1208 against the greenback, moving down from an intraday high at $1.1234 reached during the European market hours.
As mentioned, the third estimate of annualized GDP for the January-March caused little volatility on the forex markets, as the data unveiled a 0.2% contraction. However, the latest figure improved from the 0.7% fall shown in the second estimate, while still much worse than the 2.2% expansion posted for the fourth quarter last year.
In Europe, Germany's Ifo Business Climate Index worsened to 107.4 points in June after May's 108.5, according to the latest report, while Greece filled the headlines after Greece's Prime Minister Alexis Tsipras said on Wednesday that the country's international lenders did not accept Athens' proposals.
"Greece continues to cause volatility because they didn't put forth the structural reforms Europe wants. Europe continues to hold out but net-net, a deal gets done," Voya Investment Management chief market strategist Doug Cote noticed.
Meanwhile, investors shifted attention to the ongoing Eurogroup meeting, which started later in the afternoon.
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EUR/USD: Pair Undecided, Investors Remain Cautious on Greece
The euro was seen little changed ahead of the European open on Thursday as the failure of Greece and its creditors to reach a deal remaining in the spotlight of the financial markets.
The Greece saga continues, with creditors rejecting a proposed deal by Greece and instead handing them a revised set of proposals that need to be met to unlock additional bailout funds. This was initially rejected by Greece who want more discussion on debt relief. The key areas of disagreement are over three main areas: taxes, pensions and debt relief.
The marathon of meetings will continue today, with two meetings scheduled for this morning, another Eurogroup meeting scheduled for 1pm and the European summit at 4pm.
"There are now as many contradictory statements, denials, inconclusive meetings and ad hoc special meetings on a single day as there were before within a week or a month. In our view a clear sign that the excessively used words of 'final showdown' can again be used with a good heart," Carsten BRzeski from ING wrote in a research note.
Greek uncertainty is once again keeping investors cautious. The optimism from the beginning of the week faded away and pushed the euro below $1.12 during the overnight session.
EUR/USD currency pair was unable to remain above the $1.12 ahead of the opening bell, dropping 0.07% to $1.1192.
Apart from Greek matters, the session ahead will offer only GfK German consumer climate data, while Swiss National Bank Chairman Thomas Jordan is due to speak at the General Assembly of the Federation of the Swiss Watch Industry, in Lausanne.
Looking ahead to the US session, traders will mostly focus on the price index for Personal Consumption Expenditures (PCE), the benchmark measure of inflation used by the Federal Reserve (Fed). The core PCE index will have to bottom out soon in order for the Fed to gain enough confidence by September that the inflation trends have turned.
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Yesterday the EURUSD rose and closed in the green near the high of the day, on a narrow range day, creating an inside day. The pair continues to trade inside a daily support zone and is being supported by the 50-day moving average. Key levels for today are the same of yesterday, to the downside the 1.1097 what’s left of the daily support, to the upside we have the 1.1236 the upper band of the daily support and the 1.1288 the 10-day moving average.
EUR / USD was corrected higher yesterday, formed a peak of 1.1234. Trade signals are neutral for now, perhaps with slight bullish signals for testing the resistance 1.1250. A clear break above this level could lead to upward pressure testing 1.1300. Overall I still prefer a bearish scenario at this phase but need a clear break below 1.1180 / 65 for the continuation of the bearish scenario targeting near 1.1050. On the upside, a clear break and daily close above 1.1300 could trigger further bullish pressure on area 1.1380 - 1.1465 remains a good place for sales.