Eur/usd - page 82

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Euro traders left clueless as Draghi threatens nothing

Currency traders were put through their paces during Draghi’s press conference Thursday.

The ECB left its benchmark rates unchanged, failing to grasp the nettle and stimulate the economy by opting for a negative deposit rate. The policy statement did, however, appear to take a step closer to adopting quantitative easing, which Mr. Draghi said culminated this month in a “rich discussion” on the topic. Last month, he said, there was no discussion on the topic. The sensation that a strengthening currency has started to feed through to threateningly lower inflation has shifted opinion around the Eurozone with many suggesting the ECB will ultimately move to buy bonds, much like other central banks in an effort to stimulate growth. Despite the discussion, the ECB failed to announce a move in April. QE might weaken the euro currency, while failure to act might lift the unit. Such failure to act might make the onset of QE inevitable in the future. As a result and as the intraday chart clearly illustrates, traders haven’t got a clue what to do with the euro currency!

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EURUSD Weekly Outlook: At Short, Long Term Crossroads, & What Will Decide Its Fate

  1. Technical Outlook: Weekly Neutral, Daily Bearish, At Clear Technical Crossroads
  2. Fundamental Outlook: Short Term Neutral, Longer Term Bearish
  3. Trader Positioning: Our real time sample shows growing long positions as EURUSD falls-bearish on a weekly basis
  4. Conclusions: Currently at crossroads as strong support of the 1.37 level has held. If it breaks a test of the 1.36 level is likely. If support holds, upside for the coming week limited to around 1.3750 – 80.
  5. Monthly Chart Shows EURUSD at long term crossroads, though likely longer term USD rate advantage suggests the long term downtrend ultimately prevails

First we look at overall risk appetite as portrayed by our sample of global indexes, because the EURUSD has been tracking these fairly well recently.

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weekly outlook: April 7 - 11

The dollar pulled back from five-week highs against the euro on Friday after the release of data showing that the U.S. economy added slightly fewer than expected jobs in March.

EUR/USD ended Friday’s session down 0.12% to 1.3703, after falling to a five-week low of 1.3673 earlier. For the week, the pair lost 0.52%.

The pair is likely to find support at 1.3673 and resistance at 1.3730, Friday’s high.

The Labor Department reported Friday that the U.S. economy added 192,000 jobs in March, below expectations for jobs growth of 200,000. February’s figure was revised up to 197,000 from a previously reported 175,000. The U.S. unemployment rate remained unchanged at 6.7%, compared to expectations for a tick down to 6.6%.

The data disappointed some market expectations for a more robust reading but indicated that the Federal Reserve is likely to stick to the current pace of reductions to its asset purchase program.

The shared currency remained under pressure after the European Central Bank said Thursday it would use unconventional measures if necessary to stave off the risk of deflation in the euro zone.

ECB President Mario Draghi said the governing council was "unanimous" in its commitment to using all unconventional instruments within its mandate to cope with the risk of low inflation becoming entrenched. He added that the bank discussed the possibility of negative deposit rates.

The central bank left rates on hold at a record low 0.25% at its monthly meeting, despite data earlier in the week showing that the annual rate of euro zone inflation slowed to 0.5% in March, the lowest since November 2009.

The ECB targets an inflation rate of just under 2%.

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Mario Draghi goes to Washington to discuss future policy options for the Eurozone

What the Eurozone does about an inflation rate of 0.5% was not resolved last week after the ECB meeting, but we are likely to see the debate continue into this week, which is likely to keep the single currency on its toes. The head of the ECB, Mario Draghi, heads over to Washington for the World Bank and IMF spring meetings, which is always a time for reflective debate and discussion of policy options for the future. The story of last week was that the ECB has been doing work in the area of asset purchases and how such a program would impact inflation. For the Eurozone, it is harder to achieve than for the US for example, with the Eurozone more reliant on the banking sector rather than capital markets for finance. On top of this, there is the issue of many diverse countries and a treaty that explicitly rules out the monetary financing of debt. Note that there are several ECB members scheduled to speak today, so this issue could well be discussed during the day.

Elsewhere, in the wake of the US employment report on Friday, we have seen the strong performance of emerging market FX continue, with the dollar bloc (CAD, AUD, NZD) also throwing in a strong performance. The Aussie itself finds itself just below the 0.93 level, having been the main surprise of the first quarter. CAD is trading one month highs vs. the dollar, whilst the kiwi is recovering after the weakness seen earlier last week. The bottom line is that the US labour market data on Friday put a sprinkling of risk appetite back into the market, even if equities don’t agree.

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ECB’s Nowotny says further rate cuts have not been ruled out

  • ECB following inflation closely but sees no immediate need to act
  • ECB assumes recovery will reduce deflation risk
  • says there’s no sequencing to further ECB action. all possible steps to be considered
  • personal preference for unconventional measures is strengthening ABS market

EURUSD a tad firmer at 1.3714 on the “no immediate need to act” rider. EURJPY up to 141.50. EURGBP 0.8278

 
theNews:
What the Eurozone does about an inflation rate of 0.5% was not resolved last week after the ECB meeting, but we are likely to see the debate continue into this week, which is likely to keep the single currency on its toes. The head of the ECB, Mario Draghi, heads over to Washington for the World Bank and IMF spring meetings, which is always a time for reflective debate and discussion of policy options for the future. The story of last week was that the ECB has been doing work in the area of asset purchases and how such a program would impact inflation. For the Eurozone, it is harder to achieve than for the US for example, with the Eurozone more reliant on the banking sector rather than capital markets for finance. On top of this, there is the issue of many diverse countries and a treaty that explicitly rules out the monetary financing of debt. Note that there are several ECB members scheduled to speak today, so this issue could well be discussed during the day.

Elsewhere, in the wake of the US employment report on Friday, we have seen the strong performance of emerging market FX continue, with the dollar bloc (CAD, AUD, NZD) also throwing in a strong performance. The Aussie itself finds itself just below the 0.93 level, having been the main surprise of the first quarter. CAD is trading one month highs vs. the dollar, whilst the kiwi is recovering after the weakness seen earlier last week. The bottom line is that the US labour market data on Friday put a sprinkling of risk appetite back into the market, even if equities don’t agree.

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He is going for instructions from his employer :):)

 

ECB's Mersch Calls For Less Stringent Regulations On Asset Backed Securities

The regulations concerning asset-backed securities should not lock credit to small and medium sized enterprises, Yves Mersch, Executive Board of the European Central Bank said Monday.

"Not all EU securitisations deserve the stigma attached to them for the past few years," he said in London. The central bank feels that EU asset-backed securities are being treated inappropriately by present regulations and proposals.

It is important that the EU moves ahead swiftly in addressing inconsistencies in the treatment of high quality securitisation, the banker said.

If the Bank of England and the ECB were to put forward a joint statement on this issue at the forthcoming IMF Spring Meetings, it would underline the European determination to decisively move forward, Mersch noted.

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EUR/USD recovering on lack of urgency for QE

EUR/USD is now challenging the minor resistance line of 1.3740, recovering from the lows it has seen late last week when Draghi laid his heavy hand on the common currency.

A series of ECB speakers did not leave the notion that Quantitative Easing is really on the table and some even suggested that it is not even in the nearby table. The euro does have room to rise before ECB members will become worried once again about the exchange rate.

European Central Bank Vitor Constancio said that “extraordinary policy cannot be considered lightly”. This sums up the long list of speakers from the Frankfurt based institution. It is quite unclear if the ECB is ready to introduce QE and even harder to assess how this will actually work.

Another member, Yves Mersch, went to greater length by saying that QE is a theatrical idea. Well, if it exists only theory for the European Bank and it continues being reality for the Fed, BOE and BOJ, the single currency “loses” in the currency wars by not participating in them.

So, after opening the week around the previous levels of 1.37, above the swing low of 1.3670, EUR/USD is struggling with minor resistance at 1.3740. Further lines are 1.38 and 1.3830 to the topside and 1.3650 on the downside. For more, see the EURUSD forecast.

Yet it is important to note that Draghi did not talk solely about QE, but also mentioned other things. Most importantly, he upped the rhetoric ante regarding the exchange rate.

So, if EUR/USD continues rising, the same ECB members that pushed it higher can certainly send it back down.

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EUR/USD April 8 – Gains Continue As ECB Keeps Options Open

EUR/USD continues to point upwards on Tuesday, as the pair trades in the mid-1.37 range in the European session. The euro received some help as ECB policymakers said non-conventional easing measures are possible. It’s another quiet day on the release front. In the Eurozone, the French trade deficit narrowed last month, dropping to its lowest level in more than three years. In the US, today’s highlight is JOLTS Job Openings. The markets are expecting a slight improvement in the March reading.

  • ECB says all options on the table: While the ECB did not make policy changes last week, the accompanying statement and press conference by Draghi were dovish: QE and a negative rate are on the table. On Tuesday, ECB policymaker Yves Mersch said that ECB officials were working on a QE scheme in order to combat deflationary pressures, but there was no immediate need for such a program. Meanwhile, Bundesbank President Jens Weidmann said that monetary policy alone will not solve the Eurozone’s economic problems, saying that political leaders must undertake fiscal and other reforms.
  • NFP improves but misses estimate: Nonfarm Payrolls, one of the most important economic indicators, rose nicely last in March, climbing to 192 thousand, compared to 175 thousand a month earlier. However, the markets were looking for more, with the estimate standing at 199 thousand. Unemployment Claims also missed the mark, as it edged up to 6.7%. The estimate stood at 6.6%. Although these numbers were not as strong as hoped, the Federal Reserve is expected to continue trimming QE when it meets at the end of April. These tapers mark a vote of confidence in the US economy by the Federal Reserve, and are dollar-positive.
  • German numbers point upwards: German data continues to beat expectations, as the Eurozone’s largest economy continues to post respectable numbers. Industrial Production dropped to 0.4%, down from 0.8% a month earlier, but this edged above the estimate of 0.3%. Last week, German Retail Sales, Unemployment Change and Factory Orders all beat their estimates, as the Eurozone’s number one economy appears headed in the right direction.
  • Yellen talks dovish: Last week, Fed chair Janet Yellen said the US economy is on the right track but still has a ways to go. Yellen said that inflation and employment levels needed to improve considerably, and the Federal Reserve would continue to provide monetary stimulus for some time. Currently, the Fed is purchasing $55 billion in assets each month under its QE scheme. There have been three tapers to QE so far, and Yellen plans to wind up the program in the fall, provided that the US economy does not run into any serious turbulence. At the same time, the Federal Reserve has stated that it has no plans to raise interest rates until sometime in 2015. The taper pace and the rate hike pace depend a lot on jobs data.

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Euro extends gains against weaker dollar

The euro rose to its highest level in four days against the broadly weaker dollar on Tuesday as the dollar remained under pressure ahead of Wednesday’s Federal Reserve minutes.

EUR/USD hit highs of 1.3808, the strongest since April 2 and was last up 0.36% to 1.3791.

The pair was likely to find support at 1.3736, the session low and near-term resistance at 1.3819, the high of April 2.

The dollar came under heavy selling pressure as investors awaited Wednesday’s minutes of the Fed’s March meeting for further indications on the future direction of monetary policy.

Last week’s U.S. payrolls report came in slightly below expectations, while Fed Chair Janet Yellen said recently that slack in labor markets showed accommodative policies will still be needed for some time.

Demand for the euro continued to be underpinned after comments by European Central Bank officials on Monday tempered expectations for quantitative easing.

Last week the ECB left the door open to further stimulus measures, saying that unconventional monetary policy instruments may be necessary to avert the risk of ongoing low inflation in the euro zone.

On Tuesday, the International Monetary Fund said the ECB should consider all unconventional measures, including quantitative easing, and should implement them as soon as they are ready.

In its quarterly World Economic Outlook report, the IMF said it expects the global economy to grow by 3.6% this year, and 3.9% in 2015, both 0.1 percentage point lower than in January.

The fund said it expects the euro zone economy to expand by 1.2% this year and 1.5% in 2015, both 0.1 percentage point higher than i

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