Euro Dollar Rate Forecasts for 2014-2015 - page 45
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Deutsche Bank bails from EURUSD shorts after Draghi "Significant disappointment" cited Probably not the first or only
They issued an FX blueprint back in Sep so they should have closed with a decent profit
Their disappointment came versus expectations
Let's see how Goldies handle their recent 300 pip lower call for the euro (pin drop?)
ECB: A Hawkish Easing; Disappointing In Absolute Terms - Deutsche Bank The interpretation of what today’s ECB events means for markets depends on three things, says Deutsche Bank: "What the ECB announced relative to expectations; what the ECB hinted at in terms of the next potential moves on policy; and the degree of support (consensus vs. unanimity) for today’s action. We use these three dimensions to frame our reaction to today’s events," DB clarifies.
"In our view, what was announced was disappointing, relative to expectations and in absolute terms. The key disappointments were no acceleration in the pace of purchases, maintaining the yield floor and the absence of incentives to increase the use of the TLTRO. The hints about what the ECB might do in the future were also disappointing.
The technical parameters of QE will be reviewed in the spring, but the fact that this was not mentioned in the prepared press statement raises a question in our minds about whether the Council at large was sending a signal. Finally, a “large majority” for relatively unimpressive policies does not tell us how close or far Draghi was from have the support for an acceleration in the pace of purchases. The concern is that he was not close and no argument about the effectiveness of policy to date or about the importance of the reinvestment policy will make up the difference,"
The market got carried away. Part of the responsibility, in our view is to be attributed to the recent ECB communication. Over the medium-term, what matters for ECB is the impact on the real economy and inflation. The ECB staff projects inflation to 1.6% in 2017. After the ECB press conference equity prices fell, government yields increased the euro appreciated. For the ECB to succeed in bringing inflation back to target “as quickly as possible”, today’s financial market tightening has to be more than offset by the other channels for the transmission of unconventional policy, like bank lending.," DB argues.
source
Euro Week Ahead: EMU Data, SNB Decision Follow ECB 'Letdown' European investors will look to reassess their views on both the future of monetary policy in the currency area and its prospects for growth and inflation following one of the most controversial decisions of Mario Draghi's tenure as President of the European Central Bank.
The Governing Council's decision to deepen its policy stance with a five-step package of rate cuts, asset purchases and liquidity support spectacularly failed to meet market expectations last week, with the single currency rising the most in more than five years against the US dollar in the wake of Draghi's underwhelming press conference in Frankfurt.
As a result, focus now shifts to US Federal Reserve's Open Markets Committee meeting on December 16 in order to see if Janet Yellen and her colleagues can relieve some of the upward pressure on the single currency by not only commencing its long-awaited interest rate liftoff but also signally the pace at which it intends to normalize its policy stance in the medium term.
In the meantime, it is likely that ECB policymakers find themselves facing tough questions in a slate of appearances this week that will hopefully both shed light on the December 3 decision and offer context to the level of support Draghi was able to reply upon during the Frankfurt debate.
Executive Board member Sabine Lautenschlaeger is first up, speaking Wednesday in Abu Dhabi (07:00 CET) in a speech that is, however, likely to focus on banking supervision.
Governing Council member Ewald Nowotny follows next at 10:00 CET in Vienna in a presentation focused on projections for his home economy in Austria. Bank of Estonia Governor Ardo Hansson also speaks Wednesday, in a similar domestic-economy focused event in Tallinn. (noon CET).
Bank of Finland Governor Erkki Liikanen speaks Thursday in Helsinki (10:00 CET), while Executive Board member and markets specialist Benoit Coeure participates in a roundtable discussion on EMU policy in Brussels (12:30 CET).
Later that evening, Bundesbank President Jens Weidmann will address an event in Lisbon focused on improving EMU stability.
read more
Fed's Bullard: Urges reduction in Fed portfolio to more normal levels
Bullard talks way too much.
He spent the last 5 years saying low rates would cause high inflation. Now he's saying low rats will cause low inflation.
Either way, the market will continue to ignore him.
EUR/USD forecast for the week of December 7, 2015 The EUR/USD pair broke higher during the course of the week as the European Central Bank shot the market by doing much less stimulus than originally anticipated. This was an interesting move, as we slammed into the bottom of the uptrend line that had formed the previous ascending triangle. The fact that we fail there suggests that perhaps the “knee-jerk reaction” of the ECB disappointment may be running out of steam already. After all, we not only have the uptrend line, but we also have the 1.10 large, round, psychologically significant number just above there. At this point in time, this particular we might be crucial as to what happens next in the EUR/USD pair, but we also recognize that we may have to look to shorter-term.
The longer-term outlook for this particular currency pair will be interesting because it is essentially a battle between 2 central banks. After all, the European Central bank disappointment was still added stimulus, so having said that the market is starting to believe that perhaps the situation in Europe is getting better. However, the ECB is nowhere near raising interest rates while the Federal Reserve almost looks assured to. After all, the jobs number on Friday was 211,000 added last month, and that of course is a very positive sign. There were also upward revisions of previous months so it’s very likely that the Federal Reserve will not only have to raise interest rates at the next meeting, but they could possibly give us hands as to a longer-term rate hike cycle as well.
At the end of the day, it is interest-rate differential that allows for the Forex markets to trend. It most certainly is favoring the US dollar still, and at this point in time we will have to wait to see whether or not we get the right resistive candle in this area to start selling. We think it could happen, but we also recognize that if we break above the uptrend line and maybe even perhaps the 1.11 level, the market could very well sir reaching towards the 1.15 handle again.
Ray Dalio: Don't fade Mario Draghi Ray Dalio is one of the world's best macro traders and he sent out a statement on what happened to the ECB and Mario Draghi.
"There was going to be selling on practically any announcement," he wrote. "The market's reaction reflected more about the positioning and erratic behavior of players than the inappropriateness of ECB monetary policy."
Dalio does argue that Draghi should have done more in order to reach 2% more quickly but recognizes that he was constrained by the ECB hawks. Eventually, Dalio believes he will get it right.
"At all the key moments, he has done the right things and the whole world is better off because of it," he wrote. " By now the world should know, don't fade Mario Draghi."
What does it mean? It means he believes the ECB will eventually introduce more stimulus. That argues for buying European equities and shorting the euro. As usual, it's a matter of levels and timing.
US Preview: Retailers to Reign Over Fed Blackout Week
Only two big economic reports, one of which will be released next week, remain before the Federal Reserve's policy-making committee announces its interest rate decision on December 16.
The releases - November retail sales due on Friday and November CPI due on Tuesday the following week - are unlikely to alter the outcome of the meeting as most members, including Chair Janet Yellen, appear to have their minds set on an increase of the target range for the federal funds rate.
The November employment report should have dispelled any worries about a sudden weakening in labor market trends, a sign that most businesses are content with the prospect of higher interest rates. Thus the markets will start viewing incoming data in the context of the outlook for the first follow-up hike sometime next year.
When they last issued their forecasts in September, Fed officials as a group projected four 25 basis point hikes for 2016. But of course, these forecasts are dated as they were made in completely different circumstances in which markets were still adjusting to the Chinese summer currency devaluation. The Fed will publish a new dot plot after the December gathering.
EUR/USD: Recovery Or Reversal? Levels & Targets - SocGen After breaching below the flag formation, EUR/USD has retested March lows of 1.05/1.04 which more importantly correspond with the multi decadal channel lower limit, notes SocGen.
"Currently a sharp rebound is being witnessed however signs of reversal still lack. Monthly RSI indicator is probing a horizontal line while weekly MACD still languishes within negative territory and below a resistance line," SocGen adds.
"Thus indicators point towards limited upside in EUR/USD and the rebound is likely to remain capped," SocGen argues.
"Ongoing correction is retracing the 2000-2008 up move however a break below key levels of 1.05/1.04 will confirm that this is in fact a downtrend of a larger degree.
In such a scenario we can expect retracement of the whole up cycle since the 1980s and first meaningful support will be at 1.00/0.9930 and next at graphical levels of 0.96/0.9530 consisting of 1989 lows, 2001 highs and a projection for the down move," SocGen projects.
Look To Fade EUR Rally As Short Positioning Now Very Light - BNPP ECB President Draghi sought to reassure the markets at his speech in New York on Friday afternoon saying that “there cannot be any limit” to how far the ECB was prepared to offer further accommodation if needed, notes BNP Paribas.
We think it will take some time for EUR bears to recover from last week’s disappointment...
...but, with EUR overall postioning very light (only -2 out of +/-50 according to this morning’s positioning update) and the reaction in European rates already having run its course ultimately we believe EURUSD will prove unsustainable at current levels," BNPP argues.
Goldman Sachs raises EURUSD forecasts Goldman Sachs were very bearish going into the ECB meeting but on Friday they revised their stance, as I reported here Now our friends at Livesquawk are posting the latest Goldmans EURUSD forecasts and unsurprisingly less dovish than before
So they still it lower but not as low as before
Currently 1.0816 just off session lows