Eur/usd - page 160
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EUR/USD breaks down to new 14 month low – next levels ahead
The dollar is storming ahead on the FOMC statement and Yellen’s press conference. There was no big news, but the markets snapped every hawkish note, just looking to buy US dollars. As the snowball slides, EUR/USD is falling to a new low.
The previous low of 1.2858 has been breached, with 1.2851 the new low at the time of writing. The move is certainly not finished. Here are the next levels to watch:
1.2840 is minor support: it worked as such in the past. 1..28 is already a stronger level, not only because it’s round, but because the pair bounced off this level in the past.
1.2750 served as a double bottom back in 2013 and is also a strong level. Further away, 1.2660 is a level which saw the beginning of the long term uptrend support, which was broken recently but battled upon afterwards.
On the topside, we have 1.2920, which was the initial support after the Draghi drag, and 1.2960, which was a weak upper limit within the range, ahead of the all important 1.30 level.
The euro has reasons to fall. Basically, the central bank in the euro zone is about to expand its balance sheet at the same time that the Fed is stopping its expansion. This is monetary policy convergence.
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EUR/USD Sep. 18 – Trying to recover from FOMC blow, ahead of TLTRO
EUR/USD trying to find a new balance on lower ground around 1.2870, after it surrendered to the greenback’s strength following Yellen’s comments and dipping into a new 14 month low. There’s no rest for the comment currency, as today we get the results of the first TLTRO – the targeted loans from the ECB. It’s also important to follow the news from Scotland – it has an impact on the euro-zone as well.
Here’s a quick update on technicals, fundamentals and sentiment moving the pair.
Asian session: The pair managed to claw its way back up above the previous low of 1.2860..
Current range: 1.2860 to 1.2920
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ECB allots 82.6 billion euros in first TLTRO, lower than expected
TLTRO only €82.6 billion – EUR/USD eventually slides – higher chance of big ABS, QE
While the estimate certainly differed, an uptake of only 82.6 billion euros is quite low. This means that banks were somewhat shy to take money, and that the ECB balance sheet is expanding only slowly and that there is a better chance of a bigger ABS and full blown QE.
The initial reaction was a higher euro, but the is now sliding. — more coming
Mario Draghi can be disappointed by the outcome: the banks don’t want his money.
But, if the outcome of this poor auction means a lower value of the euro, he may be smiling quietly inside, as this pushes inflation higher without having to do too much.
Estimates of around €150 billion were thrown into the air towards the event, but the ranges were quite wild.
EUR/USD was recovering from the FOMC blow and trading around 1.2885 before the publication. — more coming
The ECB announces the results of the first Targeted Long Term Refinancing Operations (TLTRO), which are basically cheap loans to banks on the condition that they lend the money to the real economy. The measures were announced in June. A second installment of the TLTRO will be announced in December.
Since then, the ECB cut again and announced another measure of enhancing its balance sheet, via the ABS program.
Support awaits at 1.2860, followed by 1.2835. Resistance is at 1.2920.
source
EURUSD fell after initially trying to rally during yesterday session, sending this market just below the 1.29 level. After the Fed monetary policy statement the Euro lost value against the Dollar, but could not break down below the 1.28 key level. A move above the 1.30 level is extraordinarily bullish, just as a move below the 1.28 level would be extraordinarily bearish.
Banks' First ECB TLTRO Take Up Disappoints
Banks took up less-than-expected amount of funds at the European Central Bank's first targeted longer term refinancing operation, damping hopes of the success of the measure that was aimed to boost liquidity to help revive lending to small businesses and households.
With the poor take-up of TLTRO funds, question remains whether the ECB's proposed measure of purchasing covered bonds and asset-backed securities will help it to achieve its goal of expanding the central bank's balance sheet to EUR 1 trillion.
The ECB announced Thursday the results of its first TLTRO in which 255 banks were allotted EUR 82.60 billion, which was below the EUR 100 - EUR 150 billion predicted by analysts.
"The take-up in the first TLTRO is disappointing and will raise further doubts about the feasibility of the ECB's intention to increase its balance sheet by around EUR 1 trillion," ING Bank Economist Martin van Vliet said.
"Perhaps banks first want to see the details of the ECB's covered bond and ABS purchase programmes, which will be unveiled early next month, before pledging these assets as collateral in an TLTRO."
This was the first TLTRO tender and was announced on Tuesday. A second operation will be held on December 11. The total funds on offer under eight TLTRO operations are EUR 400 billion.
The allotment was full at a fixed rate of 0.15 percent and the maturity date is September 26, 2018.
ECB President Mario Draghi had announced two TLTRO auctions for this year in June, along with an interest rate cut as sticky low inflation threatens to derail the fragile recovery in the euro area.
This month Draghi again lowered interest rates, taking the key refinancing rate to a record low 0.05 percent. He also unveiled programs to purchase private debt securities such as asset-backed securities and covered bank bonds.
Last week, Draghi said a decisive rise in investment was essential to bring inflation near the ECB's target of 'below, but close to 2 percent' and to kick-start the economy and to bring down unemployment.
"The fact that banks have borrowed relatively little suggests that they have little intention of increasing their lending, either because of their own risk aversion, a lack of demand for loans, or most likely both," Capital Economics Economist Jennifer McKeown said.
Mckeown said banks are unlikely to borrow significantly more than what they did this week in the December 11 TLTRO auction and the quarterly operations thereafter that will carry stricter conditions.
"A broader programme of asset purchases, or quantitative easing, will be needed to get the economy going and avert the risk of deflation," the economist added.
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Dollar traded at lower against almost all G10 peers.
The market is looking forward to the referendum in Scotland.
The market positioning is also very much in favor of a "no". This means that the market reaction to a "no" would be much smaller than the reaction to "yes", that would probably be dramatic.
thanks for the news
EURUSD broke higher during the course of yesterday session, bouncing off from 1.2835 the lows from the Wednesday session. This market is in a consolidation area and therefore somewhere closer to the 1.30 level we will find enough resistance to turn things back around and start selling. If this area starts to show real selling pressure, do not hesitate to take a short-term position to the downside. On the other hand, if the pair gets above the 1.30 level, we should see this market heading to the 1.32 level given enough time.
Euro zone current account 18.7B vs. 16.5B forecast
The euro zone’s current account rose more-than-expected last month, industry data showed on Friday.
In a report, European Central Bank said that Euro zone current account rose to a seasonally adjusted 18.7B, from 18.6B in the preceding month whose figure was revised up from 13.1B.
Analysts had expected Euro zone current account to rise to 16.5B last month.