Eur/usd - page 488
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Buying Euro rates undercut by speculators again – what will next week hold for GBP/EUR
The two cent falls on GBP/EUR on Friday are beginning to reflect a concerning pattern for anyone with an upcoming requirement for buying Euros. The silver lining is that next week some form of recovery is expected.
Firstly, it seems that speculators at high street banks are becoming excessively cautious.
These are the players on the currency markets who move enough capital in order to change the average Euro buying levels. Each Friday, they have to choose a stable currency with which to store their profits for the weekend whilst they are away from their desks. With the large question marks still surrounding the UK’s economic and political future, the Pound seriously loses demand during this period. With a loss in in demand its value gets steadily chipped away.
What has become interesting is that this phenomenon called ‘profit taking’ has been happening earlier and earlier each Friday like clockwork since the Leave vote.
Initially, this was taking place around 3-4pm, and now we’re seeing a rush for traders to be ‘first out the door’ with the Pound, by relieving themselves of Sterling as early as 11am. Meaning that anyone with a Euro buying requirement feels the pinch much more sharply.
The obvious conclusion here is that Euro buyers must be wary of Friday’s moving forward. Best really to avoid this particular day all together. But the silver lining is that you do tend to see some recovery on the Monday some of the discarded Pounds are bought up once more whilst they are cheap.
The spotlight is expected to shift away from the Pound at the beginning of next week in any case, allowing some respite on GBP/EUR.
read more
This Can Trigger A Sharp EUR Rally Next Year; How To Position?
The chart below shows net annual long-term (direct and portfolio investment) capital outflows from Japan, in US dollars. The switch from net importer of capital to exporter in 2014 helped weaken the Yen and the Euro. It still provides a lot of fuel for risk assets everywhere.
But if massive capital outflows merely keep EUR/USD in a stifling range, isn’t the risk at some point in the next year, that any hiccup in those flows triggers a sharp Euro rally?
A Euro surge would catch just as many people off guard as the yen move did. The best way to position for this is to be long EUR/GBP.
source
On the last Friday’s session the EURUSD initially fell but found enough support at the 200-day moving average to erase all its losses and closed near the high of the day, however it did not had enough strength to close above Thursday’s range, which suggests being slightly on the bullish side of neutral.
The pair is trading above all three moving averages 10, 50 and the 200-day that are acting as dynamic supports.
The key levels to watch are: a 61.8% Fibonacci retracement at 1.1347 (resistance), a daily resistance at 1.1237, the 200-day moving average at 1.1202 (support), and a daily support at 1.1097.
The single currency marked a modest rise against the US dollar on Friday. The session started at 1.1207 and closed only 19 pips higher. Currently the outlook remains positive with possible test of the next resistance at 1.1286.
Germany IFO business climate Sept 109.5 vs 106.3 exp
German September IFO report 26 Sept 2016
Upbeat report sees euro a tad higher but not exactly flying away as yet. Should help to underpin though.
Full report available here from 09.30 GMT
Euro Could Strengthen if Central Banks Follow BOJ and Change Policy Tactics
At their September policy meeting, the Bank of Japan (BOJ) decided to change their tactics, focusing on strengthening the ‘organs’ of lending in the real economy: banks and other financial institutions, rather than just on interest rates and quantitative easing (QE). Now analysts are asking whether this a template for other central banks to follow – primarily the European Central Bank (ECB).
The traditional method of stimulus adopted by central banks, by way of lowering interest rates or QE may be coming to an end, or at least so think economists at Citibank.
They have proudly announced an end of QE (which itself was developed in Japan) and the dawning of a new age of monetary policy which takes its cue from the model recently developed by the BOJ.
The model focuses on providing support to Japanese banks, who’s profitability has suffered because of the low interest rates they can charge, especially, more recently, on longer-term loans.
This has not just raised concerns about the strength of the banking system but also the ability of pension funds and insurance companies to meet their obligations, since they are primary dealers in long term debt.
“Kuroda recently acknowledged that negative rates had cut into financial institutions’ profits by driving long-term yields lower, while pointing out that borrowing costs for businesses and consumers had also fallen.
“He also expressed concern about expected declines in returns on insurance and pension products, and the impact this could have on people’s confidence,” said a report on Bloomberg.
The strategy has important ramifications for currencies since it does not tend to depreciate them as much as QE or rate cutting.
The replacement of old policy with new, may therefore also spell a period of strength for the yen and the currencies of any other central banks who adopt it.
The Flat Yield Curve
The BOJ set base lending rates, which are currently at -0.1%, with the deposit rate also at a negative (tiered) rate.
This means that not only to banks have to pay the BOJ to deposit money with them, they are also unable to earn interest when they lend money out.
The situation has worsened recently after borrowing costs on long-term loans also fell to very low levels.
Traditionally longer-term loans earn more interest but the low interest environment, in part caused by thre central bank’s own purchases of longer-term debt via QE forced down longer-term rates as well as the already low short-term rates.
This caused a phenomenon called a ‘flat yield curve’.
In order to lift longer-term rates and thereby enable banks to generate more profit the BOJ decided, at their last meeting, to target their bond purchases and sales, so as to lift rates at the ‘longer end’ of the yield curve.
This in effect means buying less longer-dated debt and instead focusing on purchasing shorter-term debt.
This results in the flattened yield curve steepening again.
“The BOJ’s decision to steepen the yield curve showed they are taking into account the situation of financial institutions,” said Takeshi Minami, chief economist at Norinchukin Research Institute, quoted on Bloomberg.
read more
The single currency registered an increase against the US dollar on Monday. The pair opened at 1.1229, the intraday high was marked at 1.1278 and the low at 1.1220. Finally the euro closed at 1.1253 and if bears are strong enough , the first resistance at 1.1286 sseems to be their next target.
Yesterday the EURUSD initially rallied but found enough selling pressure at 1.1279 to give back to the market some of its gains but closed in the green however in the middle of the daily range, although managed to close above the previous day high, which suggests bullish momentum.
The pair is trading above all three moving averages 10, 50 and the 200-day that are acting as dynamic supports.
The key levels to watch are: a 61.8% Fibonacci retracement at 1.1347 (resistance), a daily support at 1.1237, the 200-day moving average at 1.1203 (support), and a daily support at 1.1097.