Eur/usd - page 299
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EU Preview: Navigating the Storm
The fragile recovery in the euro zone economy appears set to return to its slow but steady pace. The impact from the lower euro and oil prices may be fading, but the Greek crisis is, hopefully, heading to resolution, providing another boost for investors' confidence.
"One reason for the region’s resilience is the fact that the crisis has remained tightly contained," the Capital Economics Q3 outlook says.
"At the same time, the euro zone has continued to benefit from several favorable tailwinds. The real growth of retail sales and household spending has been boosted by the decline in inflation caused by lower energy prices. And exports have received some support from the steep decline in the euro over the last year, though less than the experience of previous devaluations might have suggested," the report pointed out.
Meanwhile, the proposal for a third bailout is not merely an opportunity to end the Greek crisis. While there is now a general agreement that Greek debt has to become sustainable, it is also inevitable to start thinking about making the whole euro zone more sustainable -- unless Europe wants to face the chance of another Grexit.
This third Greek debt crisis is also an opportunity to start correcting the flaws in the euro design and work toward closer integration in the single currency area.
Political contagion fears
Whatever is said about the last Greek debt crisis, one aspect has been largely left out of mainstream considerations, but nevertheless, has been constantly present in the minds of the main actors in the euro zone drama of the last six months.
European Council President Donald Tusk expressed the fears very clearly on Friday: "For me, the atmosphere is a little similar to the time after 1968 in Europe... I can feel, maybe not a revolutionary mood, but something like widespread impatience. When impatience becomes not an individual but a social experience of feeling, this is the introduction for revolutions."
It is true, radicals from the right and the left have been threatening good old "well defined" parties and this year has once again given the anti-establishment and anti-austerity movements an opportunity to stir Europe's discontent.
Perhaps financial contagion has not been so worrying for the EU establishment, but political contagion forces them to consider the possible waves of discontent rolling over the continent.
Policymakers across Europe should start thinking about what and how to change the obsolete status quo. The vested interests in Europe and unaccountable bureaucracy in Brussels have far too much power on all levels. It is an absolute must to find ways to engage those who are disillusioned -- especially the crowds of unemployed youth in Greece and other countries of the euro zone periphery -- to prevent a repeat of the turmoil of the 60’s. Or something worse.
"The most impressive for me was this tactical alliance between radical leftists and radical rightists, and not only in the European Parliament ... It was always the same game before the biggest tragedies in our European history, this tactical alliance between radicals from all sides. Today, for sure, we can observe the same political phenomenon," Tusk warns.
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EUR/USD forecast for the week of July 20, 2015
The EUR/USD pair broke down during the course of the week, breaking below the 1.09 level. Because of this, it appears of the market is ready to go down to the 1.05 handle. That being said, it’s probably easier to trade this offer short-term charts though, as the longer-term candle simply don’t offer enough risk to reward ratio. With fact, we are sellers but recognize that it’s probably be easier off the daily or even four hour charts. Any rally at this point time will be looked at with suspicion.
5 Reasons Why EUR/USD Shorts Are Attractive Again – BNPP
As a new week is about to begin, many ask: can the euro continue falling?
The team at BNP Paribas provides a clear answer and lists 5 reasons for this:
Here is their view :
In its weekly FX note to clients today, BNP Paribas discusses why EUR/USD short positions are attractive again particularly from a risk-reward juncture. The following are the key reasons outlined in BNPP’s argument along with the details of its current short EUR/USD position.
1- Greek outcome still favours EUR weakness. “The EUR’s attempts to rally on positive Greek news proved short-lived this week. As we have long argued, a return of positive risk sentiment re-encourages markets to rebuild long risk positions funded in EUR,” BNPP argues.
2- EUR less vulnerable to positioning squeeze. “EUR short positions now stand at -6 versus a high of -35 this year (on a -50 to 50 scale) according to BNP Paribas positioning analysis. This suggests markets have more scope to rebuild EUR shorts and should be less vulnerable to a positioning squeeze should risk sentiment deteriorate again,” BNPP notes.
3- ECB can only maintain or increase QE. “There were few surprises at the ECB policy meeting this week…We think the bottom line is that the ECB stands ready to counter any economic weakness or market volatility with even easier policy, which would be negative for the EUR,” BNPP argues.
4- US rates have substantial upside. “There is still substantial scope for an upward adjustment in US front-end yields, which should be supported by the recent improvement in risk sentiment,” BNPP projects.
5- Real rate spreads are bearish for EUR/USD. “We see scope for both US nominal rates and eurozone inflation expectations to push the spread even further against EURUSD, but even at current levels it is sending a clear bearish signal for the pair,” BNPP adds.
The trade: In line with this view, BNPP maintains a short EUR/USD position from early this week from 1.1025 targeting a move to 1.05, with a stop trailed to entry.
source
EUR/USD closed above the support level 1.0820 a break under will lead to more drop to test 1.0725.
EUR/USD: Sell Bounces Into Near-Term Resistance - Credit Suisse
EUR/USD has extended its decline in its broader “triangular” range to weigh on the May low and 61.8% retracement support at 1.0819, notes Credit Suisse.
"This is holding for now, and we allow for a potential bounce from here. However, we look for an eventual breakdown to test trendline support, now at 1.7041. We would expect a bounce here, but beneath it can trigger a move down to 1.0660," CS projects.
"A move below 1.0660 should be sufficient to confirm a bear "triangle" has been finally established for the March 2015 low at 1.0458, and eventually our 1.01/.99 target," CS argues.
"Near-term resistance shows at 1.0962/66, above which can see a move back to 1.1035, with 1.1083/89 expected to cap," CS adds.
In line with this view, CS runs a limit order to sell EUR/USD at 1.0962, with a stop at 1.1036 and a target at 1.0745.
source
On Friday session the EURUSD tried to rise but found enough selling pressure to turn back south, breaking below the 61.8% Fibonacci level (support) at 1.0860 and closed in the red at the low of the day. After a clear down run of 5 days we should expect some consolidation or even a minor pullback before the resumption of the downward trend.
High volatility and a lot of surprises!
This Could Cause A Temporary Pause By EUR Bears - SocGen
It feels as though summer has arrived in markets, notes SocGen.
"That can happen, on Monday morning, and change pretty quickly but the calendar is largely empty, the Greek crisis is taking a brief time out, Chinese equity prices are trading in a narrower range than for a while," SocGen adds.
"The key to further Euro weakness may now be economic data. The close correlation between the Euro and Euro (as opposed to US) rates should given bears some temporary cause to pause," SocGen argues.
"Flash PMIs on Friday will dictate the near-term mood unless the Greek parliament gets itself back into the headlines this week," SocGen adds.
source
The single currency recorded the third consecutive drop against the dollar on Friday. The session started at a price of 1.0873 and just before lunch reached a daily high at 1.0906. In the afternoon the direction went down at the end of the day the pair finished at a price of 1.0844. In case that the downward trend of the last few sessions continue, most likely the euro will be able to break through the first support at 1.0817.
Support level 1.0820 still hold the EUR/USD from dropping.