Eur/usd - page 153
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The Dollar experienced a mixed trading against the G10 peers during the morning of Friday here in Europe.
Was positive against the SEK and NOK, negative against AUD, CHF, EUR and JPY, and virtually unchanged against the CAD, NZD and the GBP.
bewayopa | Trading Ideas
ECB is not acting is reacting and Mr Draghi is not finding solutions.
EUR/USD forecast for the week of September 8, 2014
The European Central Bank did a surprise interest rate cut on Thursday, and then absolutely pummeled the Euro overall. On top of that, we have the Federal Reserve in the United States that looks like it wants to continue its tapering off of quantitative easing, which of course is good for the value of the dollar overall. With that, we feel that this market should continue to fall, and probably look for the real support level, the 1.28 level. Down there, we see a massive amount of support, so we think that the downside will be stopped at that point.
Bounces at this point in time should continue to offer selling opportunities, and that’s exactly how we are going to approach this market. We believe that the market should continue to be a market that can be returned to several times again and again. The market should continue to be very bearish over the longer term, and as a result we have no interest in going long regardless of what kind of signal we see, with perhaps the exception of a signal at the 1.28 handle.
We believe that the market will have plenty of resistance at the 1.30 level, and then possibly the 1.33 handle. It is not until we break well above 1.33 that we would consider buying this market, and quite frankly it would take a change in stance by the Federal Reserve for us to think about it with any type of seriousness. The market will continue to be one that will be jostled by the headlines, and the Russians invading the Ukraine, as it certainly puts a lot of fears into the European Union in general.
Going forward, the markets should continue to break down but the Euro is one of those assets the traders tend to go to time and time again, so you could never truly expect the Euro to break down completely. It will be a downward trend, but sooner or later we are about to get a bounce. We will look at that bounce as an opportunity.
ECB's moves unlikely to offer struggling Europeans much relief from low pay, high une
For the struggling Spanish shopkeeper or the Portuguese restaurant owner, the European Central Bank's latest economic stimulus plans won't likely provide much relief anytime soon.
If ever.
Confronting a stalled economy and painful unemployment across Europe, the ECB is doing what it can. It surprised economists and investors Thursday by cutting its benchmark interest rate to a record-low 0.05 percent. And it announced plans to pump money into the financial system by buying bonds backed by assets such as auto and credit-card loans.
But Europe faces a crushing array of problems — from burdensome regulations to growth-killing budget policies — that analysts say remain beyond the ECB's powers to fix.
"Monetary policy cannot carry the entire burden of reviving growth in the absence of essential broad-ranging structural reforms," said Eswar Prasad, professor of trade policy at Cornell University.
Among the businesses and individuals who in theory might benefit eventually from the ECB's actions, optimism is scarce. In Spain, with its punishing 24.5 percent unemployment, hope is especially dim.
Pablo Torres, who manages a shoe store in Madrid, said he expects the ECB's effect "on the real economy will probably be none."
"In our case," Torres said, "we are at a standstill, not getting ahead or going backwards, and the only thing that's helped us stay afloat is tourism."
In Portugal, Jose Nunes Pereira, who opened a restaurant last month in a Lisbon business district, dismissed the ECB's rate cut as "totally irrelevant."
The cut "won't trickle down to families," he said. "It's a measure aimed at big companies, not small ones like mine."
The ECB hopes to jolt a European economy at risk of sinking into recession for the third time since 2008. In the 18 countries that use the euro currency, unemployment is stuck at a collective 11.5 percent. (By comparison, the U.S. rate is 6.1 percent.) For those younger than 25, the eurozone's rate is 23.2 percent.
The ECB's goal is for lower rates to energize borrowing and spending, which would, in turn, encourage employers to hire. Banks and auto companies would lend more to consumers and small businesses if they knew they could package those loans into bonds the ECB would buy. Companies and consumers who can't get loans from Europe's cautious and troubled banks would be able to borrow.
Lower interest rates are also expected to reduce the value of the euro, thereby helping European companies by making their products more affordable in foreign markets. Indeed, the value of the euro fell after the ECB's announcement to its lowest levels in more than a year.
The ECB is also trying to boost the eurozone's nearly non-existent inflation. Prices are rising just 0.3 percent annually, not even close to the ECB's 2 percent target.
Ultra-low inflation is unhealthy for an economy. It makes it harder for consumers, companies and countries to repay debt left over from the eurozone debt crisis. And it raises fears of an outright drop in prices — deflation — that tends to stifle economic growth and business profits. That happens because many people and companies delay purchases in anticipation of ever-lower prices.
Economists generally doubt that the ECB's moves will do much to nudge consumers to borrow and spend more or to persuade businesses to buy equipment, open factories and offices and hire workers.
For one thing, the bond buying won't even start until October. So it "probably is not going to do very much for the rest of this year," said Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics.
The bigger obstacle is that Europe is contending with problems the ECB can't do much about.
Banks are struggling with bad loans. They're reluctant to do business with each other or to lend to businesses and consumers.
And employers are bound by high taxes and rules that discourage them from hiring.
"What's really hurting business is this tax burden," said Lisbon restaurant manager Nunes Pereira. "My customers have to pay high taxes on their salaries, and on top of that there's the 23 percent sales tax they have to pay at my restaurant."
Government spending cuts have shrunk pensions in some countries. In doing so, they have depressed demand at a time when consumers and businesses are trying to repay enormous debts left over from the continent's crisis.
Governments might restore business confidence if they passed reforms to make it easier for companies to hire and fire. And they might reduce unemployment by stepping up spending on projects that could provide contracts to businesses and put people to work.
"They have to drive up demand by increased government spending," said Virendra Singh, an economist at Moody's Analytics. "They have to come up with a way to push up wages."
Add to those challenges the anxiety and political uncertainty caused by Russia's military aggression in Ukraine.
In short, Kirkegaard said, the ECB's rate cut and bond-buying plans are "necessary but not sufficient" to restore health to Europe's ailing economy.
Maria da Graca, a pensioner in Lisbon who was walking home from shopping, shrugged off the ECB's latest efforts.
"All I know is my pension's been cut, and I can't buy the things I need," she said, holding up her two small shopping bags as evidence.
source
EUR/USD Forecast Sep. 8-12
EUR/USD had a dramatic week, falling once again and losing the 1.30 line as the ECB surprised with strong measures. Will we see more falls or can a correction be expected now? Trade balance figures, and industrial output numbers are among the indicators released this week. Here is an outlook on the highlights of this week and an updated technical analysis for EUR/USD, now on lower ground.
The ECB fired its guns: a surprising rate cut in all rates (including a deeper negative deposit rate) and an announcement about a “sizable” ABS program. While Draghi is avoiding government bonds, it is clear that the balance sheet is about to grow significantly, and this is euro-negative. Elsewhere in zone, forward looking PMIs did not really shine in the euro-zone, while German figures looked good. In the US, the economy gained only 142K jobs in August, but the miss in the NFP did not have a big impact on the greenback, as the US economy looks good in general. What’s next for the pair?
Updates:
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EUR/USD weekly outlook: September 8 - 12
The euro pulled back from 14-month lows against the dollar on Friday after data showed that the rate of U.S. job creation slowed in August, indicating that interest rates will remain on hold at record lows for longer.
The Labor Department reported that that U.S. economy added 142,000 jobs last month, disappointing expectations for jobs growth of 225,000. July’s figure was revised up to 212,000.
The unemployment rate ticked down to 6.1% from 6.2% in July.
The report eased concerns that the recovery in the U.S. economy is progressing so rapidly that the Federal Reserve will be forced to raise rates sooner prevent the economy from overheating.
EUR/USD hit session highs of 1.2988 following the release of the jobs report, but then retraced most of those gains to settle at 1.2951, trading 0.05% higher late Friday.
The dollar remained supported after other economic reports earlier in the week indicated that the U.S. recovery is still on track. Data on Tuesday showed that the country’s manufacturing sector expanded at the fastest rate in more than three years in August.
The Fed is expected to wind up its asset purchase program in October and to start raising interest rates sometime in mid-2015. In contrast, the European Central Bank looks likely to stick to a looser monetary policy stance.
The pair fell 1.6% on Thursday; the largest one day drop in almost three years after the ECB cut rates to record lows and announced fresh stimulus measures in an attempt to shore up slowing growth and inflation in the region.
ECB President Mario Draghi said the decision came after long term inflation expectations deteriorated in August.
The ECB cut its forecast for growth this year to 0.9% down from 1.0% previously and cut the forecast for 2015 to 1.6% from 1.7%
The bank also lowered its inflation forecast for this year to 0.6% from 0.7% in June but left its 2015 inflation forecast unchanged at 1.1%.
In the week ahead, investors will be looking ahead to Friday’s U.S. data on retail sales and consumer sentiment for further indications on the strength of the economic recovery.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Tuesday and Wednesday as there are no relevant events on these days.
Monday, September 8
In the euro zone, Germany is to release a report on the trade balance.
Thursday, September 11
The U.S. is to produce the weekly report on initial jobless claims.
Friday, September 12
The euro zone is to release data on industrial production.
The U.S. is to release data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. The U.S. is also to release what will be closely watched preliminary data on consumer sentiment.
Economists hail birth of ‘Draghinomics’
Eurozone officials attending the Ambrosetti forum over the weekend welcomed the European Central Bank’s moves to cut interest rates and signal forthcoming purchases of asset-backed securities, with some private-sector economists suggesting this could herald a new policy mix.
Even though the ECB’s long-term forecasts of moderate recovery remain unchanged, the bank’s board members have grown increasingly worried about the recent downward pressure on prices and the softening of consumer confidence. Its latest moves are designed to stave off deflation and jolt the sluggish eurozone economy back to life.
Nouriel Roubini, professor of economics at New York University, said ECB president Mario Draghi’s remarks at the Jackson Hole meeting of central bankers signalled an important evolution of thinking. Mr Draghi said at the symposium that monetary policy should be supported by increased spending by countries with strong fiscal positions and structural reforms in economies such as France and Italy. Mr Roubini labelled the emerging policy mix “Draghinomics” because of its similarity to the three arrows of Abenomics in Japan.
“Abenomics has three arrows: monetary and fiscal easing and structural reforms. The eurozone is in near deflation and the recovery is not happening. Monetary and fiscal easing cannot resolve the problem on their own. The ECB has recognised that structural and supply-side reforms are fundamental,” Mr Roubini told the Financial Times.
Jyrki Katainen, the European Commission’s vice-president for economic and monetary affairs, said that member states needed to stick to the fiscal discipline that had helped stabilise the currency bloc. But in an interview with the Financial Times, he suggested there was some “fiscal space” in the eurozone as a whole to increase public investment spending. The commission would put renewed emphasis on structural reforms.
“I very much agree with Mario Draghi and what he said that there is a huge need for pursuing structural reforms to improve competitiveness in Europe,” Mr Katainen said, highlighting labour and product market reforms, pension reforms, and liberalising some professional services in various countries. He also said that public spending across the eurozone should be adapted to encourage investment.
One other senior eurozone official attending the Italian forum which gathers together policy makers, business people and academics said: “Structural reforms are key. Those countries that have made these efforts are performing better: Ireland, Spain and Portugal. Italy and France should think a little bit about this.”
Members of the ECB’s governing council applauded Mr Draghi’s performance to the press on Thursday, saying his remarks accurately characterised the debate between policy makers. It was during the press conference following the rate cut announcement that the ECB president acknowledged the council was split for the first time since last November.
Though there was a “comfortable majority” in favour, some members of the council voiced concern that a programme of asset-backed security purchases could lead to the ECB taking too much credit risk away from the banks and on to the central bank’s balance sheet. Arguments for waiting for more data met with resistance from Mr Draghi, who believed urgent action was needed. Others called on the ECB president to go a step further and embark on mass government bond buying.
“Some of our governing council members were in favour of doing more than I have just presented, and some were in favour of doing less,” Mr Draghi said last week, adding that the plan announced “strikes the middle of the road”. Jens Weidmann, the Bundesbank’s president, was one member of the council who wanted less than what was unveiled on Thursday.
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Germany’s Trade Balance 22.2B vs. 16.8B forecast
Germany’s trade balance rose more-than-expected last month, official data showed on Monday.
In a report, Destatis said that Germany’s Trade Balance rose to 22.2B, from 16.4B in the preceding month whose figure was revised up from 16.2B.
Analysts had expected Germany’s Trade Balance to rise to 16.8B last month.
German adjusted exports up 4.7% in July
German exporters exhibited strong gains in July, data published Monday by the country's statistics office showed.
Exports increased by 4.7% on the month in adjusted terms, following June's 0.9% increase. Imports fell 1.8% on the month, after June's robust 4.5% rise.
The seasonally and calendar-adjusted trade surplus came in at 22.2 billion euros ($28.7 billion) in July, beating analysts' expectations of EUR17.0 billion in a Dow Jones Newswires poll.
In absolute, unadjusted numbers, Germany exported goods valued at EUR101.0 billion in July, marking the highest monthly value ever recorded, the statistics office said. In adjusted terms, this number is EUR98.2 billion, also a record, the statistics office said.
The data came on the back of stronger than expected returns from Germany's manufacturing sector. Industrial output grew at a 1.9% pace on the month in July, with a particularly strong gain in the key capital goods sector, which grew by 5.0%. Some analysts took these data to mean that the German economy was starting to rebound following the contraction in the second quarter.
"The strong start of industrial production and factory orders data in Q3 is a strong indication that the German economy bounced back into positive growth territory after the unexpected contraction in Q2," wrote Barclays economist Thomas Harjes in a note Friday.
source
EURUSD initially tried to rally during Friday session, but found resistance at 1.30 level and ended up forming an inside day, which suggests that the market is consolidating and getting ready for another push downward. So selling this market is the only thing that can be done.