Eur/usd - page 235
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EUR/USD: Euro Hovers Near Decade Lows, NFP in Focus
The euro hovers near $1.10 on Friday, in the aftermath of the European Central Bank (ECB)'s announcement that quantitative easing (QE) will start on Monday. Moreover, the euro is undermined by a stronger greenback as investors eye US jobs data later in the session.
The euro fell as low as $1.0986 in the previous session, its lowest since September 2003. During overnight trade the euro pared back some of its losses but remains in negative territory, down 0.02% at $1.1022.
"With the ECB buying more bonds than are being issued, this is a huge EUR negative. All roads at present lead to a weaker EUR and an outperforming equity market," Chris Weston wrote in a research note on Friday.
On the other hand, the US dollar index has already rallied for eight months in a row, which is the best run it has ever had. The fundamentals still suggest the run has further to go despite the USD having rallied 32% since May 2011.
"Our year-end EUR/USD forecast of 1.0500 is starting to look conservative but we will await the outcome of the NFP data and the FOMC meeting on 18th March before deciding whether we need to lower our projections further still," European head of markets research at Bank of Tokyo-Mitsubishi UFJ, Derek Halpenny, said in a research note.
Highly anticipated US employment figures are expected to show the unemployment rate to tick down to 5.6% in February and for the economy to add 235,000 new non-farm payrolls.
ECB and Draghi
The main driver behind the EUR/USD sell off on Thursday was Draghi unveiling details of the quantitative easing program, which is set to start on Monday, March 9.
"From an FX perspective the crucial comment from Draghi was his commitment to buy sovereign debt with negative yields down to the level of the ECB deposit rate; minus 0.20%. This helped fuel EUR/USD selling this afternoon," Halpenny added.
The ECB left the benchmark lending rate at 0.05%. The deposit rate will stay at -0.20%, effectively charging lenders for holding their deposits with the central bank. Meanwhile, the marginal lending facility rate (which shows the rate for overnight credit to banks from the Eurosystem) remained at 0.30%.
The bank also said that it expects inflation to return to 1.8% target in 2017. In the meantime, growth forecasts for 2015 and 2016 have been upwardly revised, with expectations for GDP to rise by 2.1% in 2017.
EUR/USD: Euro Remains Under $1.10 After GDP, All Eyes on NFP
The euro zone grew 0.3% in the fourth quarter on a quarter-on-quarter basis, in line with analysts' expectations, while the yearly change printed 0.9%, also meeting predictions. Both numbers stayed at their previous levels, Eurostat informed on Friday.
The pair did not react and was trading below the $1.10 barrier as the main focus remains on the NFP report.
The greenback was bid higher ahead of the US non-farm payrolls (NFP) release on Friday and investors are anticipating a strong report for the month of February. The EUR/USD pair broke below the psychological support at $1.10, which failed to provide any major obstacle for bears. The pair was seen around 0.5% lower during European trading on Friday.
The report is expected to reveal that the US economy will add 235,000 jobs and might influence the Fed to drop its "patient" wording at its next meeting later in March, which would indicate that the central bank is ready to raise rates soon, probably in the summer of 2015.
"While we have well-known dove Charles Evans calling for a delay in rates hikes until 2016, we would place a lot more weight on the comments from San Francisco Fed President Williams (voter this year) who stated yesterday that there would be a "serious discussion" about raising interest rates around mid-year. Coming from the same Fed bank as Chair Yellen, his views may be more reflective of what Chair Yellen is currently thinking. Of course, what will be crucial over whether "patient" is dropped from the statement and whether we do get a rate increase by mid-year is the state of the labor market. Today's non-farm payrolls data should confirm a still healthy jobs market with only a moderate slowdown from the 257k gain recorded in January. However, 1 million jobs have been created in the last three months and more subdued growth could be evident today," analysts at Bank of Tokyo-Mitsubishi wrote in a research note on Friday.
ECB and Draghi
The main driver behind the EUR/USD sell-off on Thursday was Draghi unveiling details of the quantitative easing program, which is set to start on Monday, March 9.
"From an FX perspective the crucial comment from Draghi was his commitment to buy sovereign debt with negative yields down to the level of the ECB deposit rate; minus 0.20%. This helped fuel EUR/USD selling this afternoon," the Bank of Tokyo-Mitsubishi UFJ's Derek Halpenny added.
The ECB left the benchmark lending rate at 0.05%. The deposit rate will stay at -0.20%, effectively charging lenders for holding their deposits with the central bank. Meanwhile, the marginal lending facility rate (which shows the rate for overnight credit to banks from the Eurosystem) remained at 0.30%.
The bank also said that it expects inflation to return to 1.8% target in 2017. In the meantime, growth forecasts for 2015 and 2016 have been upwardly revised, with expectations for GDP to rise by 2.1% in 2017.
"The euro broke below the key psychological support level of 1.1000 for the first time since 2003 fuelled by the strong optimism signalled by ECB President Draghi that it would manage to reach its goal of purchasing EUR 60bn worth of assets per month through to September 2016. The acknowledgement that this would involve buying government bonds yielding negative interest rates down to the current deposit rate of -0.20% helped drive the euro lower still. Of course buying negative yielding bonds was inevitable given that around one-quarter of debt yields negative and in Germany specifically yields are negative out to six years. 26% of sovereign debt purchases will come from Germany alone," analysts at Bank of Tokyo-Mitsubishi wrote in a research note on Friday.
source
EURUSD fell during yesterday session and continues making new lows after the European Central Bank (ECB) setting a date for quantitative easing; the program will star on the 9th of March through to September 2016. The pair closed in the middle of the daily range. So the next target for the pair is the 1.078 level.
if the EUR/USD price continue to fall at this rate we might see 1.0000 sooner than we expect.
EUR/USD drops to 11-yr low, as Euro bond market plunges
The euro fell to an 11-year low against the U.S. Dollar for the third consecutive day, as currency traders weighed the divergence that may ensue from the start of a monetary easing program in Europe with a potential interest rate hike in the United States.
EUR/USD closed at 1.0841 at the end of U.S. trading, down 0.0186 or 1.69%. The pair reached a daily-high at 1.0979 early in U.S. morning trading, before dropping 0.01% upon the release of a stronger than expected U.S. jobs report. In 2015, the euro has fallen more than 10% against the U.S. dollar.
On Friday, the euro slipped below 1.09 against the dollar for the first time since 2003. The currency's plunge continues, as the European Central Bank is set to begin its€60 billion a month quantitative easing program on Monday. ECB president Mario Draghi announced on Thursday that the bond buying program will last until September, 2016 or beyond if the central bank does not approach its target inflation rate of 2%.
Bond buying programs, such as quantitative easing, are pursued by policymakers as a way of stimulating the economy by driving up the market price of bonds. When bond prices increase, yields decrease lowering the rates for mortgages and other loans.
One far-reaching implication of printing vast quantities of a currency is that it drives down its value against other currencies on the foreign exchange market. The euro also fell more than 1% against the Yen and 0.85% against the Australian dollar on Friday.
More tellingly, the spread between 10-year U.S. Treasury notes (2.25%) and 10-year German bunds (0.39%) reached its widest margin in 25 years. Since late-January, the yield on 10-year U.S. treasuries are up more than 35%. The lower yield in German bonds, meanwhile, sent Spanish, Italian and Portuguese bonds spiraling to record lows.
The dollar soared against the euro on Friday following the release of positive U.S. employment data. The U.S. added 295,000 jobs in February, according to the U.S. Bureau of Labor Statistics, more than 55,000 above forecasts for the month and January's figure of 239,000. Employment growth, meanwhile, has averaged 288,000 over the last three months, as the current unemployment rate fell from 5.7 to 5.5%.
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EUR/USD forecast for the week of March 9, 2015
The EUR/USD pair fell hard during the course of the week, breaking down below the 1.10 level. With that being the case, it appears that we are now free to go down to the parity level, something that is quite difficult to imagine. However, there is obviously no reason whatsoever to buy this pair, as the Euro continues to struggle overall. With the ECB, suggesting that they are ready to drive down the bond yields to negative terms, the Euro should continue to soften overall and therefore money should flow from Europe to North America.
Rallies should continue to offer selling opportunities in a marketplace that is absolutely anemic. It’s really difficult to imagine a scenario in which we can buy the Euro, and quite frankly if you are patient enough, you should be able to make decent returns shorting this market every time it rallies. The 1.10 level should now be resistance, and most certainly the 1.15 level is. With that being the case, we believe that using short-term charts that show bounces, and then resistance could be ways to start shorting this market from a longer-term perspective as well. Think of it as “fine-tuning” your entries.
Nonetheless, there is absolutely no way whatsoever to go long, and although we are most certainly oversold, with the recent remarks coming out of the European Central Bank, it looks like we are going to continue going lower. In the short-term, as well as the long-term. In other words, the Europeans are willing to absolutely trash their own currency in order to bring down the value. This is a strategy that the Federal Reserve has perfected over the last several decades, and it now appears that the Europeans are trying it as well. We are essentially in a currency war at this point, with the Europeans winning it. However, we are a long way from this trend turning around, as shown buying the massively negative candle for the week and the fact that we close near the bottom of the range, always a very bearish sign.
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Have a great weekend everyone
EUR/USD Forecast Mar. 9-13
EUR/USD was hit hard in the first week of March diving deep below 1.10. The strong US data and a determined Draghi took a heavy toll. What’s next? Here is an outlook for the highlights of this week and an updated technical analysis for EUR/USD.
Draghi revealed details about QE, which starts on March 9th. And while the ECB raised some forecasts, the president made clear that these depend on QE implementation. He also left the door open to extending the program beyond September 2016. Euro-zone data came out generally better than expected: inflation fell by only 0.3%, German retail sales beat and Spanish employment is improving. In the US, data was upbeat as well: the US gained 295K jobs in February, beating expectations. A disappointment came from wages, which are stuck once again. Nevertheless, the dollar just continued advancing against the euro, breaching some interesting historical lines. What’s next?
* All times are GMT
German trade balance Jan EUR+15.9bln vs +19.5bln exp
Euro unfazed by the weaker headline and fall in both imports and exports ( biggest export drop in 5 months)
Buba confirm they started QE
Bundesbank confirm commencement of QE purchases
As of 09.25 CET today report Bloomers
The ECB are also out confirming that QE has started. Here's the action in 10yr Bunds today