Eur/usd - page 462
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The single currency marked a decrease on Friday and erased most of its weekly gains. The euro depreciated by 49 pips to a closing price of 1.1068. The pair continues to move in the range defined by the levels at 1.1185 and 1.1020, as negative attitudes prevail.
On the last Friday’s session the EURUSD initially rose but found enough selling pressure to give back to the market all its gains and closed in the red, near the low of the day and managed to close below Thursday’s range, suggesting a strong bearish momentum.
The pair managed to close below the 10 and 200-day moving averages that should now act as dynamic resistances and continues to trade below the 50-day moving average that is acting as dynamic resistance.
The key levels to watch are: The 50-day moving average at 1.1186 (resistance), the 200-day moving average at 1.1109 (resistance), a daily resistance at 1.1097, the 10-day moving average at 1.1069 (resistance) and daily support 1.0900.
ECB will lower the threshold for bond purchases - RBC
RBC looks for euro weakness
The ECB is running out of bonds to buy with so much of the bond universe yielding less than zero.
At the start of the month, a Reuters report said the ECB wasn't considering abandoning its capital key and that the hurdle for a move was high, however RBC says it's only a matter of time.
The say "the medium-term upkeep and efficacy of the program" is in question because the central bank can't buy bunds.
A trigger would be a weak set of Eurozone PMIs, which are due Friday.
Here is a video from Friday on the technical outlook for the euro.
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A Paradigm Shift Is Underway For EUR: How To Trade It?
The correlation between the currencies and equities of European countries has increased sharply since the Brexit vote (Chart of the day). This may be due to the perception that unpredictable European politics make for inconsistent capital markets, causing investors to shift their allocations elsewhere.
Indeed, we find evidence of European outflows benefitting emerging markets. In our view, the rise in cross-asset correlation may signal a paradigm shift for EUR. For international investors, strong positive FX correlation to equities implies accepting greater volatility to hold European assets. From a risk-management perspective, hedging currency exposure when owning positively correlated assets can improve volatility-adjusted returns. This suggests that EUR puts should command a greater premium than is currently implied by the market, which is why we see value in buying risk reversals.
Mispriced options skew When we highlighted EUR as behaving like a “safe haven” last August, we simultaneously identified selling EURUSD skew as an attractive trade. Since then longdated skew flipped from favoring EUR puts to EUR calls (Chart 3). However, we now see an attractive opportunity in buying EURUSD skew.
Going forward, we expect EUR to trade like a risky currency. We now expect EUR depreciation to be associated with higher volatility events. On the other hand, should EUR appreciate, the European Central Bank could be more active in suppressing further strength, dampening volatility in scenarios where EUR strengthens.
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The single currency started the week with a moderate growth of 28 pips to 1.1074. The daily movement marked a one-week low at the level of 1.1037, then the price has recovered to 1.1083. EUR/USD continues to trade within a familiar zone once a day as a breakthrough of levels at 1.1185 or 1.1020 will indicate the prevailing sentiment.
Yesterday EURUSD rose with a narrow range and closed near the high of the day, in addition managed to closed within the previous day range, creating an inside day pattern plus suggests being slightly on the bullish side of neutral.
The pair managed to close above the 10-day moving average that should now act as dynamic support and continues to trade below the 50 and the 200-day moving averages that are acting as dynamic resistances.
The key levels to watch are: The 50-day moving average at 1.1180 (resistance), the 200-day moving average at 1.1113 (resistance), a daily resistance at 1.1097, the 10-day moving average at 1.1065 (support) and daily support 1.0900.
Draghi to focus on QE tweaks and bank troubles in press conference - report
ECB sources cited in newswire report on Draghi
A QE 'tweak' could be a relatively big event and hurt the euro. The ECB has pushed back against calls for loosening its capital key but it's running out of bond supply. Some loosening of standards would give them more options and drive down Eurozone yields (and the euro) but it depends on the details. But from the sound of this, it's certainty on the table.