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EUR/USD breaks one downtrend resistance line; one more to go
In the weekly EURUSD forecast we mentioned that the pair is trading in two downtrend channels. The recent dollar weakness not only helped it escape from downtrend support, but also break out out of two downtrend resistance lines.
If this break is confirmed, the second downtrend line could be challenged soon. However, this is already a longer running line, and €/$ might find it harder to break above.
The second resistance line currently stands at 1.3821 and the broken, lower one at 1.3790. This is a narrow trading range. Further resistance appears in the veteran 1.3830 line followed by the 2013 peak of 1.3894. Support awaits at 1.3740 followed by the round 1.37.
The 1.38 line, where the pair is currently floating around, serves as a pivotal line within the range.
The dollar is on the back foot across the board throughout the day. The better than expected JOLTS figure, which was the best since 2007, did not really help the greenback.
Good news is coming from other places as well. In the euro-zone, it seems that the ECB is not that eager to enact QE and that any such program could certainly have a limited effect.
We can expect ECB members to try talking down the euro, as we’ve seen in the recent past when it approached the “line in the sand” of 1.40.
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Germany’s Trade Balance 15.7B vs. 17.8B forecast
Germany’s trade balance fell unexpectedly last month, official data showed on Wednesday.
In a report, Destatis said that Germany’s Trade Balance fell to 15.7B, from 17.3B in the preceding month whose figure was revised up from 17.2B.
Analysts had expected Germany’s Trade Balance to rise to 17.8B last month.
German Feb Exports Fall More Than Forecast; Imports Rise
Germany's exports declined more-than-expected in February, while imports increased for the second consecutive month, official data revealed Wednesday.
Exports fell 1.3 percent from January, marking the second drop in three months and the largest since May 2013, Destatis said. Exports were forecast to fall 0.5 percent after expanding 2.2 percent in January.
On the other hand, imports rose 0.4 percent, faster than the 0.1 percent growth estimated by economists. However, the rate slowed from the 4.1 percent increase seen in January.
Consequently, the trade surplus fell to a seasonally adjusted EUR 15.7 billion from EUR 17.3 billion in January. The surplus also declined from the EUR 16.7 billion surplus posted a year ago.
On a yearly basis, exports advanced 4.6 percent and imports climbed 6.5 percent in February.
The current account of the balance of payments showed a surplus of EUR 13.9 billion in February compared to a EUR 15.7 billion surplus in the prior year.
Exports to the EU countries increased 6.7 percent from last year, and imports from those countries by 9 percent. While exports to euro area nations rose 3.7 percent, imports surged up 8.4 percent.
The outcome of the Purchasing Managers' survey for March showed a moderation in private sector growth in March from a 33-month high, mirroring a slowdown in both manufacturing and services. Markit said the results of the survey signal 0.7 percent economic growth for the first quarter.
The first quarter GDP estimates from Destatis is due on May 15.
The European Commission has raised its economic growth forecast for Germany this year to 1.8 percent from 1.7 percent and the projection for 2015 was lifted to 2 percent from 1.9 percent.
Market research group GfK, in its monthly consumer confidence data for April, said private consumption will once again be a reliable pillar of the economy this year. Consumer confidence remained at a 7-year high of 8.5 in April.
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Euro zone swaps one crisis for another
Put out the flags. Run up the bunting, and start building the memorials. The euro-zone crisis which, for much for three years from 2011 onwards, threatened to blow up the single currency EURUSD +0.04% , and quite possibly the global economy as well, is now over.
The European Central Bank, the governments of Germany, France, Italy and Spain, and the International Monetary Fund can now declare victory. The late-night crisis meetings in Brussels, and the promises of unlimited firepower to unleash against the speculators, can now be left to the historians to ponder over.
Over the last weeks, there have been a series of signals that the worst of the crisis is now passed.
Such as?
Italian BX:TMBMKIT-05Y -0.14% and Spanish five-year bond yields BX:TMBMKES-05Y -0.34% have now fallen to the same levels as those on U.S. Treasurys. Greece is rumored to be about to re-enter the bond market for the first time since the country went bust. And the euro is taking a growing share of central-bank reserves. All of those would have been unimaginable even a year ago — and they are all certainly signs that this is not a currency that is about to disappear.
The trouble is, while the financial crisis is over, the economic and political crisis is only just beginning. The markets will not tear the currency apart, but over a far longer period grinding recession will do the same job, and probably more painfully.
Through much of 2011 and 2012, it looked as if the future of the euro was in the balance. The markets were constantly attacking the currency.
Yields on Greek bonds soared to more than 30%. Italy was on brink of insolvency, and the government of Silvio Berlusconi had to be hastily evicted from office to calm the markets. Spain came close to joining Portugal and Ireland in bankruptcy.
The collapse of the Cypriot economy threatened bank runs across Europe, and private banks busied themselves with transferring assets to safer havens in Switzerland or London.
There was a constant succession of weekend summits as the IMF and the leaders of the EU cobbled together yet another rescue package, few of which lasted longer than a few days. It certainly seemed possible that the whole construct could fall apart chaotically, under attack from the markets.
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EUR/USD steady near 1-week highs ahead of Fed minutes
The euro was steady close to one-week highs against the dollar on Wednesday as investors looked ahead to the minutes of the Federal Reserve’s March meeting due out later in the trading day.
EUR/USD was trading at 1.3794, not far from Tuesday’s highs of 1.3810.
The pair was likely to find support at 1.3760 and resistance at 1.3819, the high of April 2.
The dollar remained softer after last week’s U.S. payrolls report came in slightly below expectations. Market watchers were looking to the Fed minutes for further indications on the future direction of U.S. monetary policy.
Fed Chair Janet Yellen said recently that slack in labor markets showed accommodative policies will still be needed for some time.
The single currency continued to remain supported as recent comments by senior European Central Bank officials indicated that there is no urgent need for quantitative easing to stave off the threat of deflation in the region.
In the euro zone, Greece was preparing to return to the sovereign bond markets for the first time since 2010, when Athens sought its first bailout. The yield on 10-year Greek debt dropped to below 6.1% earlier, down from 6.18% late Tuesday, ahead of an auction of five year bonds on Thursday.
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Top economists warn Germany that EMU crisis as dangerous as ever
The eurozone debt crisis is deepening and threatens to re-erupt on a larger scale when the liquidity cycle turns, a leading panel of economists warned in a clash of views with German officials in Berlin.
"Debts above 130pc of GDP for Italy and 170pc for Greece are a recipe for disaster once we go into the next downturn," said Professor Charles Wyplosz, from Geneva University.
"Today's politicians believe the crisis is over and don't want to hear any more about it, but they have not tackled the core issues of fiscal union and public debt," he said, speaking at Euromoney's annual Germany conference.
Ludger Schuknecht, director-general of the German finance ministry, insisted that the debt-stricken states of the eurozone are well on the way to recovery, ending their EU-IMF rescue programmes successfully one by one. There is no need for any major shift in policy. "The strategy has been right. We need to bring down debt and this is now consensus," he said.
Mr Schuknecht, the chief architect of the EMU anti-crisis regime, said Europe's banking union may need tweaking but nothing more. "There are some loose ends. These will be tied in a timely manner," he said.
This optimism is sharply at odds with the view of almost every foreign-based economist attending the event. Charles Dallara, former head of the International Instititute for Finance and chief negotiator for global banks in Greece's debt-restructuring, said little has be done to put the eurozone on a viable footing, even if sovereign bond yields in southern Europe have fallen to record lows.
"We should not be distracted by what is happening in financial markets, and look at the underlying economies in Italy and Spain. The pace of recovery is so slow and painful that is going to be challenging for democracies," he said.
"There has been too much belt-tightening and not enough structural reform. Credit is continuing to shrink in the heart of the eurozone. What is needed is a collective effort across the entirety of the eurozone to boost confidence, with a new package of fiscal measures and an end to austerity. Imagine how powerful that would be," he said.
Benn Steil, from the Council on Foreign Relations, said Germany's refusal to allow the eurozone rescue fund (ESM) to recapitalise banks directly means there will be no back-stop in place to prevent problems spinning out of control if European banks fail stress tests later this year, as expected.
This ignores the key lesson of the US stress tests, where government capital lay in reserve to ensure the stability of the system. "There is the potential for a fresh crisis if they announce the stress tests without the ESM being able to recapitalise banks," he said.
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Euro More Exposed to Inflation Data Than Many Expect
It is easy to evaluate the Euro on the performance of the EURUSD alone. Up three straight trading days and once again above 1.3850, this pair looks like it is backed by the motivation to make a second attempt on 1.4000. Realizing such a bullish target, however, requires far more robust participation from the euro. Much of the benchmark currency pair’s performance is the responsibility of the dollar and its unique weakness. For pairs like EURGBP, EURAUD or even EURCHF; we see little of that same conviction. The steady – albeit moderate – stream of capital flowing backing into the Eurozone for reserves diversification and speculative appetite for periphery yield wouldn’t be a strong enough motivator to offset a convincing bearing development. Ahead, we have a very serious test of conviction in the Eurozone. Economic surveys for Bloomberg, jobs figures (for Greece) and inflation data for the ‘periphery’ will tell us whether the weakest link in the chain necessitates stimulus.
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Americans, Germans clash on US-EU trade standards
Americans and Germans are broadly supportive of a US-EU free-trade pact under negotiation, but differ over details, especially forging similar goods and services standards, according to a survey released Wednesday.
Common regulatory standards are perhaps the most ambitious objective of the bilateral talks that began last July to create the world's biggest free-trade zone.
The so-called Transatlantic Trade and Investment Partnership (TTIP) would vastly expand the US-EU economic relationship, already the world's largest, through a multipronged approach that includes tariff cuts and improved market access.
But hopes to conclude a deal by the end of 2014 have faded as talks bogged down, particularly over agricultural, food and environmental issues, with the US and EU at odds over regulations to protect people and the environment.
The Pew Research Center, in partnership with the Bertelsmann Foundation, the North American arm of the Germany-based private non-profit foundation , took a look at how residents of the world's largest economy and Europe's main powerhouse view the prospect of the new pact.
In 2013, the US was Germany's fourth biggest export market and source of imports. And Germany was the fifth-largest trading partner of the United States. US-EU trade totaled $649 billion, according to US government data.
The survey found that roughly the same number, 53 percent of Americans, and 55 percent of Germans, think that TTIP will be a "good thing" for their country.
But the respondents diverged over details of what would be the most economically significant regional free-trade agreement in history, especially disagreeing on harmonizing regulatory standards.
While 76 percent of the Americans surveyed supported making American and European standards for products and services similar, only 45 percent of Germans felt that way.
"On a range of consumer issues, Germans simply trust European regulatory norms more than American ones," the Pew report said. Americans, on the other hand, were supportive of US standards but not as strongly.
The longstanding US-EU dispute over the safety of genetically modified organisms used in US crops, including soybeans and corn, and US poultry and meat, stood out clearly in the survey findings.
More than nine in 10 Germans (94 percent) said they trusted EU food-safety standards and only 2.0 percent trusted US regulations, the survey found.
A tepid two in three Americans (67 percent) trusted US food-safety standards and 22 percent of Americans trusted European standards.
Similar lopsided trust was found in auto and environmental safety standards on both sides of the Atlantic.
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Greece ends market exile with triumphant bond auction
Bailed-out Greece returned to bond markets with a bang on Thursday after a four-year exile, raising 3.0 billion euros and sending a major signal that the eurozone debt crisis is fading.
Greece's EU-IMF creditors hailed the move which the Greek prime minister said had "opened the way for cheaper borrowing" for the recession-hit country.
"We have opened the way for cheaper borrowing on the markets tomorrow," Prime Minister Antonis Samaras said in a televised address.
"If all goes well from now on, next time the country will be able to borrow higher sums at lower interest," he said.
The finance ministry said Greece had sold the five-year bond at 4.75 percent interest, with participation of long-term investors outside Greece expected to approach 90 percent.
In Washington, IMF chief Christine Lagarde said the bond issue showed Greece was headed in the "right direction."
"I see the issuance that took place today, which was massively oversubscribed, as an indication that Greece is heading in the right direction," Lagarde told reporters at the World Bank/International Monetary Fund annual spring meetings.
EU vice-president Siim Kallas added: "It is an important sign that the Greek economy is starting to regain the confidence of investors, and reflects the positive effects of the far-reaching reforms undertaken by Greece."
Deputy Greek Prime Minister Evangelos Venizelos told reporters that the sale had been "at least eight times oversubscribed".
The return to the medium-term debt market is a milestone for a country still suffering deeply from the effects of the crisis and resulting austerity reforms after two EU-IMF bailouts.
The last issue of five-year bonds four years ago carried an interest rate of 6.1 percent.
"One year earlier, nobody would expect (Greece) to stage such a fast return to international markets," said Platon Monokroussos, chief market economist at Greece's Eurobank, adding that he expected another debt sale in the second half of 2014.
Another analyst said the appetite for the Greek sale had been "jaw-dropping."
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EUR/USD gains on Greek bond issue, positive U.S. data supports dollar
The euro traded higher against the dollar on Friday, boosted by Greece's return to capital markets, while the dollar saw some support on upbeat U.S. consumer sentiment and wholesale pricing data.
In U.S. trading, EUR/USD was up 0.08% at 1.3898, up from a session low of 1.3863 and off a high of 1.3905.
The pair was likely to find support at 1.3673, the low from April 4, and resistance at 1.3948, the high from March 17.
The euro saw support after Greece made a successful return to the financial markets on Thursday, raising €3 billion in its first bond auction since 2010, when Athens sought its first bailout.
In the U.S., meanwhile, upbeat U.S. indicators supported the greenback and cushioned losses against the euro.
The preliminary Thomson Reuters/University of Michigan consumer sentiment index came to 82.6 in April, beating expectations for a 81.0 reading.
Separately, official data showed that the U.S. producer price index rose 0.5% in March, exceeding expectations for a 0.1% gain, after a 0.1% fall the previous month.
Core producer price inflation, which is stripped of volatile food, energy and trade items, rose 0.6% in March, beating expectations for a 0.2% rise after a 0.2% decline in February.
Still, growing market consensus that the Federal Reserve is nowhere close to tightening policy kept the greenback lower against the single currency.
The euro was up against the pound, with EUR/GBP up 0.3
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