Currently viewing the tag: "EUR/USD"
View: Sit with trends buying stocks into weakness, bearish UST’s and short EUR/USD
Election-day and markets are typically sedate, more out of habit than anything else. We find it difficult to become overly excited at the outcome whoever wins seeing rather limited room for policy manoeuvre going forward. While much has been written about the positive prospects for the US economy should Romney receive a mandate we’re not convinced it would herald any marked shift in trajectory, certainly a sustainable one. We have no concerns Romney would be a Tea Party-ite, more the moderate he has spent most of his career and the more radical campaign promises should be whittled back accordingly, including many of his tax reform ideas which look incomplete to put it modestly. But he would face similar obstacles to Obama in dealing with the fiscal cliff, particularly if the Democrats remain in control of the Senate and the debt ceiling might even be more of a contentious issue with a Republican at the helm as expectations shift accordingly. There has been much chatter about the impact Romney would have on the dollar, which seems to centre on the hostility towards Bernanke and his QE programmes. While this might mean Bernanke takes the easy way out by standing down when his term expires in January 2014 we doubt it will have any immediate impact on easing with any President likely to be seduced by the prospect of the easy stimulus/scapegoat package.
Full report below…
View: Persist with selling EUR/USD rallies, current move looks stretched, timing the risk
We’ve seen a solid bounce in EUR/USD after a brief penetration of the 1.3000 level this morning, maintaining immediate bullish momentum. While there are doubts surrounding the execution of the ECB’s OMT plan as Spain looks to avoid a formal bailout and the oversight that would accompany this, which is a prerequisite for any central bank support, the onset of QE3 followed by BoJ easing has refocused attention on the influence of central banks on currencies. This is naturally bad for the dollar with the Fed clearly having the most robust/effective track record for keeping the Greenback weak in contrast to Europe where a strong currency is still seen as a sign of confidence in the project rather than a helpful adjustment mechanism. The less said about the Bank of Japan’s ability to guide the JPY weaker the better.
Full report below…
View: EUR/USD to resume mid-term downtrend, add to shorts on any s/t blip higher
Thanks to some encouraging words from Draghi in early August the EUR found decent traction in financial markets, rallying nearly 1.9% in trade weighted terms over the past month. And as ever the improvement has led to a flurry of more bullish EUR calls from analysts, anticipating decisive action from Eurocrats, specifically the ECB where at tomorrow’s meeting the consensus seems to be there will be clarity on the touted bond purchase programme, which would naturally be good for the single currency. Furthermore the market has had the prospect of more QE from the Fed to lean on which in the past has been generally good for that other currency heavyweight (using the term very loosely), reinforcing all this intellectual front running.
Full report below…
View: EUR bounce has frail foundations, sell rallies leaning on EUR/USD1.2727
EUR price action has looked more constructive in recent weeks, having bounced to the 1.2407 resistance line at the start of the month finally punching through this on Tuesday amid on-going hopes that European officials were ready to be more interventionist in tackling the debt crisis. This speculation had culminated in a Der Spiegel article suggesting the ECB was looking at a plan to cap periphery yields at specified levels which has proven so exciting to participants that even ECB and Buba downplaying has been shrugged off. Indeed, the market is so optimistic that German 2-year yields brushed back into positive territory this morning as EUR/USD itself trades in the 1.2450/60’s, shrugging off a weaker equity market performance on the back of more worrying data out of Asia, specifically the Japanese trade numbers which showed an alarming 8.1% y/y drop in exports with sales to China falling at 11.9% and to the EU down an alarming 25.1% from a year earlier.
Full report below…
View: Draghi’s comments should draw EUR/USD back to selling levels, m/t trend bearish
Reading some amusing comments reacting to Draghi yesterday, the best so far being ‘there won’t be a Euro short left once the ECB has finished’ (to paraphrase) which we’ll have to put down to heatstroke. Fundamentally the best adjustment mechanism to help peripheral realignment is a weaker currency. The other ideas such as the confidence the economies will receive from effective fiscal consolidation and the structural reforms that sit alongside this prescription sound nice but are rather ineffective in the shorter-term and overlook the recessionary pressures that are resulting from them, most evident in the Greek death spiral. ECB medicine is likely to be equally ineffective as we know that the central bank itself is one of the key proponents of the austerity model and German opposition to bond buying will continue to obstruct. We don’t think another LTRO would be a game changer or for that matter another rate cut, already justified by the inflation outlook. Perhaps the aim is just to buy time over the summer. Furthermore the kind of firepower needed to really rebuild confidence will continue to lag what is needed, evident in the sums the EFSF has and ESM has to work with.
Full report below…
View: EUR/USD1.1877 the key draw, discipline is to keep selling rallies
Euro price action has been a little flat over the past few days, failing to find momentum following the breach of the 1.2288 support level last week which marked the low point of early June. This has been despite generally negative news flow out of the region too, specifically the issues surrounding the Spanish bank bailout which is covered off rather well here (http://bit.ly/Ngd8Zq) and new round of self-defeating austerity announced by PM Rajoy this morning. This looks a little unusual in our eyes given that these developments create more questions than answers in terms of the banking bailout and further budget cuts/tax increase are likely to only deepen the Spanish recession and we know where that spiral goes. Furthermore there remain doubts about the ESM, currently caught up in the German Constitutional Court among other places, and the ECB’s tone continues to be standoffish, suggesting the crisis will continue to run with obviously negative implications for the EUR.
Full report below…
View: Key EUR/USD1.1700/1.2000 long-term pivot zone now the draw
EUR/USD’s decline continues at a rather precipitous pace, the rally in the early part of the week snuffed out as soon as first resistance was hit at 1.2825, and following the weak German Ifo number on Thursday morning the pair slid to new multi-month lows sub 1.2520 before bouncing. And to make matters worse the flash PMI’s continue to point to an imploding regional economy, the Eurozone composite miss at 45.9 vs. 46.6 consensus the weakest read since June 2009, oh dear. It would be even worse were it not for a still resilient German services PMI number (52.2 from 52.0). At least this data moved with trend, the reversal in Ifo is more serious in that it shows that the resilient survey data which some have been clinging to is finally beginning to catch up with weak German real economy data, something we’ve discussed previously.
Full report below…
View: Close Short Bono, short EUR/USD, tighten DAX stop. EUR/JPY longs appealing
The market moves of the past week have been interesting, particularly the performance of Eurozone assets which once again have proven rather resilient to local pressures even as global markets sold off on the back of these very drivers. We have a few positions looking for a worsening of things here but they are not really performing as expected, in fact Spanish 10-year bond yields are now off 17bps from the recent intra-day highs and spreads to bunds have tightened back to (a still stressed) 475bps. While mid-term the path is to higher yields, at this point taking profits on shorts might be prudent and we close our short recommendation from May 3rd accordingly at 6.19% (+37bps).
Full report below…
View: EUR/GBP shorts working well, EUR/USD ‘consolidation’ comes with downside bias
As confirmed by this morning’s PMI releases things in the Eurozone are a mess. Not only did the headline manufacturing number for the region as a whole disappoint at 45.9 vs. the 46.0 flash estimate released last week but the Spanish (43.5) and Italy (43.8) figures reinforced the notion that these economies are still weakening at a rate of knots. It’s no surprise to see the EUR react negatively to these series, yesterday’s US ISM manufacturing release having already begun to create some momentum behind the dollar. This is rather helpful to our FX ideas, expressed via shorts in both EUR/USD, our 1.3280 stop surviving pressure earlier in the week (for clarity all our stops are daily closes unless otherwise specified, for example hard stop would be intra-day), and short EUR/GBP view.
Full report below…
