Eur/usd - page 465
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Euro Net Short Positions Increased
EUR
While the market is not as short as was the case at the beginning of the year when the bearish bets against the single currency amounted to 160k, the underlying trend is fairly clear and it is likely to prevail in the coming weeks/months.
We expect EUR/USD to lean towards the 1.06 level over the 6m horizon as the Brexit vote may undermine economic activity in the Eurozone and may also have political implications for the EU.
The downside pressure on the euro will be also exerted by the monetary policy divergence as the ECB is likely to increase its monetary policy stimulus and the Fed may end this year with a measured interest rate hike in December.
The sungle currency marked a slight increase the US Dollar on Monday. The pair added 21 pips at a closing price of 1.0993. After a volatile session, the price broke the first resistance at 1.0980. Next target appears to be the resistance at 1.1100.
Yesterday the EURUSD initially fell but found enough support at 1.0970 to reverse and closed near the high of the day, although closed within Fridays range, which suggests being slightly on the bullish side of neutral.
The pair continues to trade below the 10, 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 1.1159 (resistance), the 200-day moving average at 1.1125 (resistance), a daily resistance at 1.1097, the 10-day moving average at 1.1026 (resistance) and daily support 1.0900.
Italy racing to secure private bailout for Monte Paschi - FT
Twice-bailed out Monte Paschi is on the ropes. Italian officials have been trying to convince the EU to allow a public bailout but the EU has been strident on bail-in rules.
The deadline for a deal surrounds Friday's stress test results or the open on Monday. The company is expected to fail and a bailout would hope to eliminate €10B in non-performing loans.
The FT reports that Renzi is desperate for a private deal in order to avoid a bail-in that would force the conversion of junior bonds into debt.
How likely does this sound?:
To boost its capital, Monte Paschi would launch a rights issue of up to €5bn, its third in three years and worth more than five times its current market value. However, analysts believe this fund raising would be difficult given the bank's reputation for scorching investors capital.
Analysts say Italian banks need at least €30B.EUR: Opposing Factors; Where To Target?
Despite the obvious concern regarding Brexit-related headwinds impacting the Eurozone economy, the ECB isn’t in a rush to ease policy further. Indeed, with little left in the toolkit and the impact of the most recent corporate purchase programme yet to work its way through the system, it makes sense to wait for evidence that the Eurozone is being materially impacted by the outcome of the UK vote before acting.
Monetary hawks like Lautenschlaeger and Weidmann remain reluctant to agree to further action. However, as we move towards the end of Q3, any signs of a Brexit-related slowdown, likely accompanied by ongoing banking sector uncertainty, could see US/ EU rate spreads moving back towards earlier extremes, exerting downside pressure on the euro (Chart 3).
Although inflation expectations have rebounded from post-Brexit lows below 1.25%, they remain materially lower than the ECB’s target threshold and could tip the central bank into further stimulus at future meetings.
The ongoing presence of a large current account surplus and the risk of banking sector repatriation flows, to support weak balance sheets, will limit the extent of any euro depreciation.
However, we still expect EURUSD to dip to 1.06 by the end of September on the back of broad US dollar strength.
The single currency recorded a slight decline against the US dollar on Tuesday. The session started at 1.0994 and closed at 1.0985. The graphics continue to develop under the moving averages, while the relative strength index remained on neutral territory. If the downward trend continues we may expect a break of the support at 1.0980.
Yesterday the EURUSD tried to rally but found enough resistance at the 10-day moving average to reverse and closed near the low of the day, although closed within the previous day range, which suggests being slightly on the bearish side of neutral.
The pair continues to trade below the 10, 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 1.1156 (resistance), the 200-day moving average at 1.1126 (resistance), a daily resistance at 1.1097, the 10-day moving average at 1.1013 (resistance) and daily support 1.0900.
The single currency marked an increase against the US dollar on Wednesday. The session started at 1.0985 and closed 72 pips higher. The intraday high was reached at 1.0961 and the low at 1.1064. If the keep the direction, we mayn expect a test of first resistance at 1.1100.