Eur/usd - page 174
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EURUSD continues to consolidate above its 10-day moving average in a very mixed fundamental environment. We have markets trying to simultaneously process an apparent global slowdown (and its rate implications), good employment statistics (in the US), and risk aversion due to a variety of economic and political concerns.
Europe Car Sales Growth Accelerates In September: ACEA
European car sales grew at a faster pace in September, a monthly report released by the European Automobile Manufacturers Association showed Friday.
New passenger car sales increased 6.4 percent in September from last year following a 2.1 percent rise in August. Sales expanded for the thirteenth consecutive month.
Driven by substantial growth in all major markets, sales totaled 1.23 million units in September. Sales surged 26.2 percent in Spain and by 6.3 percent in France. In Germany, car registrations advanced 5.2 percent and gained 3.3 percent in Italy. The U.K. reported an increase of 5.6 percent.
During January to September, the EU market for passenger cars climbed 6.1 percent from the same period of last year mainly helped by the significant expansion in Spain.
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Europe's On The Edge Of Another Financial Meltdown
For stock markets, October – with its fading light, silent leaf fall and first winter chills – is historically the cruellest month. This year is proving no exception. The crashes of 1929, 1987, 2001 and 2008 were all focused on this portentous month. And amid signs of another perfect storm of negatives brewing in the world economy, stocks are again plummeting.
Since the beginning of September, the FTSE 100 has fallen by more than 10 per cent, with much of the drop concentrated in the last week – a level of deterioration that satisfies the official definition of a fully blown stock market correction.
For many European bourses, it has been a great deal worse. Greece is already back in classic bear market territory – scarcely believable so soon after the last one. Not since the peak of the Eurozone crisis in 2011-12 have we seen such manifest panic, and before then, the collapse of Lehman Brothers, six years ago. Nor is it just equities; bond yields too are back at levels that indicate a clear and present danger of deflation and economic depression.
Normally there is a trigger event for such meltdowns, but unless it be the Ebola outbreak in west Africa, this time it’s not entirely clear what. Rather, there has been a steady build-up of worry, culminating in an emerging consensus at last week’s meeting of the International Monetary Fund in Washington that the global recovery is again in danger of stalling.
For some economies, still struggling to climb back to pre-crisis levels of output, prospects are again looking truly desperate. It is as if the last recession never really ended at all, lending weight to those who argue that advanced economies have succumbed to “secular stagnation”, a semi‑permanent state of impaired demand that is unresponsive to even the extreme levels of monetary stimulus of the past several years. Indeed, judged in terms of UK stock market performance, we appear trapped in a 15-year long cycle of decline. The FTSE 100 has never regained its turn-of-the-century peak.
The epicentre of alarm this time is again Europe, where both economic and political risks have climbed steeply in recent weeks. With Europe’s southern economies gripped by conditions reminiscent of the Great Depression in the Thirties, Italy’s Five Star protest movement – in some respects, the equivalent of the UK Independence Party – has promised a referendum on membership of the euro. In Greece, the ultra-Left Syriza has committed to repudiating virtually all aspects of the eurozone austerity programme, even though the country has little chance of regaining access to international debt markets once outside it.
Yet again, the fiscal, monetary and political straitjacket that holds the single currency together is in danger of blowing apart. Just to get this in perspective, it is not yet 2012 in redux, with the explosion in risk premiums that took place back then. Even so, worries about the sustainability of European Monetary Union are back with a vengeance.
Meanwhile, an extraordinarily low inflation reading for September has reinforced fears that the eurozone is on the slippery slope to outright deflation, a condition that if it became established would seem to condemn Europe to a repeat of Japan’s 20-year slump and would further steepen the challenge of getting on top of mountainous public debts. With falling prices come delayed spending and investment decisions, and a steady ratcheting up of existing debt burdens. In such circumstances, eventual default by heavily indebted nations becomes virtually inevitable. It is not a disease any continent would want to fall victim to.
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EUR / USD fell yesterday to level 1.2700 coinciding with the MM50 periods.
At this level reacted and recovered to the levels of 1.2800.
The short term trend is positive and if the pair breaks the barrier of 1.2900 could lead to the 1.3000 major psychological level.
I don't think price will move much away from the psychological resistance 1.2800 today, have a great weekend
EUR/USD erases gains as UoM report beats expectations
The euro erased gains against the U.S. dollar on Friday, after data showed that U.S. consumer sentiment rose the most since July 2007 this month.
EUR/USD pulled away from 1.2836, the session high, to hit 1.2765 during U.S. morning trade, down 0.34%.
The pair was likely to find support at 1.2623, the low of October 15 and resistance at 1.2886, the high of October 15.
In a preliminary report, the University of Michigan said its consumer sentiment index rose to a seven-year high of 86.4 this month from 84.6 in September. Analysts had expected the index to slip to 84.1 in October.
Earlier Friday, official data showed that U.S. building permits rose 1.5% to 1.018 million units last month, disappointing expectations for an increase of 2.8% to 1.0.29 million units, after a 5.1% drop to 1.003 million units in August.
The report also showed that U.S. housing starts rose 6.3% in September to 1.017 million units, beating expectations for a 4.8% gain. Housing starts for August were revised to a 12.8% fall from a previously estimated 14.4% decline.
Meanwhile, the euro remained under pressure amid growing concerns over the threat of deflation in the euro zone after revised data on Thursday showed that bloc's consumer price inflation rose by 0.3% in September, in line with expectations.
The rate has now been below 1% for 12 straight months, well under the European Central Bank's target of near but just under 2%.
The euro was also lower against the pound, with EUR/GBP edging down 0.21% to 0.7945.
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ECB Officials Call for Bold Measures
European Central Bank officials fanned across Europe Friday to deliver a common message to governments that bold measures are needed to reform their economies, raise productivity and improve the eurozone’s anemic growth outlook.
The remarks from several members of the ECB’s 24-member governing council underscored the bank’s recent campaign to accelerate the debate in Europe on how to get the struggling eurozone economy on the right track without relying on the ECB’s easy-money policies.
“The biggest bottleneck for growth in the euro area is not monetary policy, nor is it the lack of fiscal stimulus: it is the structural barriers that impede competition, innovation and productivity,” Bundesbank President Jens Weidmann said at a conference in Riga, Latvia, one of several ECB officials to speak Friday.
His comments were echoed by ECB executive board member Benoît Coeuré, who warned at the same conference that “talking vaguely about structural reforms, but not doing them, is the worst of all worlds.”
“While in ’normal’ times it might be acceptable to reform one sector at a time, in crisis times it is not. Fairness must be a priority. And the best way to align vested interests is to reform them all at once,” Mr. Coeuré said.
The message from Mr. Coeuré, said RBS strategist Alberto Gallo, “was clear: more reforms, please.”
“The ECB is reiterating its main message to governments,” Mr. Gallo said in a research note.
Friday’s comments came amid mounting concerns about the eurozone’s growth prospects and the ability of central bankers and governments to come up with a shared strategy to address these risks. The worries in Europe were a central topic of last weekend’s meetings of the International Monetary Fund, which brought together finance and central bank officials from around the world.
The eurozone economy stalled in the second quarter, and recent figures on industrial product suggest the currency bloc barely grew, at best, during the third quarter. With the eurozone’s roughly $13 trillion accounting for nearly a fifth of world output, the global economy will struggle to get into a higher gear until Europeans solve their growth puzzle.
Annual inflation, meanwhile, was just 0.3% in the eurozone last month, far below the 2% rate that the ECB and other major central banks consider optimal.
The ECB responded in June and September with rate cuts, cheap bank loans and planned purchases of asset backed securities and covered bonds. The aim of the measures is to raise Europe’s money supply and spur new lending and spending. Mr. Coeuré said Friday that the ECB would begin these purchases “within the next days.”
But while these purchases have yet to even begin, financial markets are clamoring for the ECB to do more, primarily by purchasing large amounts of government bonds to reduce interest rates and cheapen the euro.
But the comments Friday suggest some on the ECB’s governing council remain skeptical of this policy, which was used extensively in the U.S., U.K. and Japan.
Mr. Weidmann noted that much of the weakening in eurozone inflation has been due to falling energy prices and the effects of reform efforts in parts of the region, forces that are largely outside the realm of monetary policy.
He reiterated his criticism of the ECB’s asset-backed securities program, saying it transfers risks from financial institutions to the central banks and, ultimately, taxpayers.
“This would run counter to everything we have striven to achieve in banking regulation over the last years,” he said.
The top central banker in neighboring Austria, Ewald Nowotny, signaled the situation in Europe isn’t dire enough to require a more beefed-up response by the ECB. “It is not as if the ECB needs to open up the emergency toolbox,” he told journalists on the sidelines of an investor trade show in Vienna.
Meanwhile, ECB executive board member Yves Mersch offered a fresh argument against major asset purchases by the ECB: they may widen the gap between rich and poor.
“Nonconventional monetary policy, in particular large-scale asset purchases, seem to widen income inequality, although this is challenging to quantify,” Mr. Mersch said at a conference in Zurich, although he noted these side-effects sometimes have to be tolerated.
The influences of monetary policies on wealth distribution “are one more reason to recognize that the nonstandard measures we have introduced have to be temporary,” he said.
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Coeure Says ECB To Start Asset Purchases Within Days
The European Central Bank will start buying private sector assets within next few days, Executive Board member Benoit Coeure said Friday.
The Eurozone is still in a recovery path, he told reporters. "We expect growth to be positive in the third quarter and the fourth quarter in the eurozone," he added.
In a speech to Economic conference in Riga, Latvia, Coeure said achieving sustainable economic growth is always about both demand and supply.
Bundesbank President Jens Weidmann said the biggest bottleneck for growth in the euro area is not monetary policy, nor is it the lack of fiscal stimulus." "It is the structural barriers that impede competition, innovation and productivity," he said.
Eurozone is not in recession and have positive growth rates, ECB Governing Council member Ewald Nowotny told reporters in Vienna. "It is not as if the ECB has to open the emergency pharmacy now."
Executive Board member Yves Mersch said non-conventional monetary policy, in particular large scale asset purchases seem to widen income inequality.
"Still, a central bank with a clear mandate to safeguard price stability needs to act forcefully when push comes to shove," Mersch told a Corporate Credit Conference in Zurich.
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EUR/USD forecast for the week of October 20, 2014
The EUR/USD pair broke out during the course of the week, climbing above the 1.28 handle. However, we could not keep the gains from that move, and we turned back around to form a massive shooting star. That shooting star suggests that the market is going to drop down to the 1.25 level yet again, and as a result we think that ultimately this market will break down below that level and head to the 1.20 level given enough time. On the other hand, if we can break above the 1.30 level, we would be buyers.
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EUR/USD Forecast Oct. 20-24
EUR/USD had a wild week, where the weakness of the dollar beat the weakness of the euro and sent the pair higher in exciting market action. PMIs and the EU Economic Summit are set to stand out. Here is an outlook on the highlights of this week and an updated technical analysis for EUR/USD.
Pessimism among German businesses as reflected by ZEW, a plunge in industrial output, a cut of German forecasts and spiking peripheral yields all weighed on the euro. Data later improved with a small upgrade of core CPI, but the driver of the pair’s gains came from the other side of the pond. First it was weakness in US retail sales that sparked an exaggerated sell off, and then it was FOMC member James Bullard that suggested no end to QE that hit the dollar. Markets ignored the best jobless claims in over a decade. Will the dollar sell off send the pair to 1.30?
* All times are GMT
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