Pivot: 1.425
Our preference: Long positions above 1.425 with targets @ 1.435 & 1.4425 in extension.
Alternative scenario: Below 1.425 look for further downside with 1.421 & 1.415 as targets.
Comment: the pair has rebounded on its support and is shaping a bullish flag.
Key levels
1.4455
1.4425
1.435
1.4289 last
1.425
1.421
1.415
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Showing posts with label Euro. Show all posts
Showing posts with label Euro. Show all posts
ECB Executive Board member Bini-Smaghi said Greece would not receive the next loan package if it does not meet EU/IMF conditions. The Dutch finance minister said additional aid for Greece should be preceded by further reform and privatisations.
Greek opposition leader Samaras said that the party rejects Greece new austerity plan, while Greek Prime Minister Papandreou later said he agrees with some of the opposition's proposals but said broad political consensus is a national imperative.
The German IFO numbers signal that growth has peaked, despite the unchanged headline number. Expectations continue to decline, whereas this was offset by yet another improvement in current conditions. The details of German GDP were not so encouraging, especially following yesterday's weak PMI data. If core numbers from Germany start to disappoint, the euro could suffer some further downside.
Moody's said that Italy and Belgium were also likely to come under pressure if Greece defaults while Portugal and Ireland would be at risk of a multi-notch downgrade. The agency said Spain is not in the same category but would likely still face significant market pressure.
ECB Governing Council member Noyer said Greece has no alternative to implementing the EU-IMF programme "completely and entirely," and must use privatization to cut debt. ECB Executive Board member Stark says all euro creditors are `justified' in expecting their money back.
The euro staged a modest recovery during the Asia session after a failed attempt to break back below 1.40, While Eur/Chf also climbed back, helped higher by some warnings from the SNB about the deflationary risks associated with a stronger Swiss franc, and about its willingness to act if necessary.
Greek Finance Minister Papaconstantinou implied that if Greece does not receive the next quarterly tranche of cash it will be unable to honour its financial obligations. Imagining the likely consequences, he said "the country will halt payments" adding that "wages, pensions - all the state's expenses will not be paid." Papaconstantinou also revealed that the IMF has made it "absolutely clear" that it cannot disburse the next payment without a guarantee that European funding will be made available to Greece next year. This requirement potentially introduces further delay.
Greece announced plans to privatise several state assets. It also revealed its intention to impose fresh fiscal austerity measures designed to save a further 6 bln Euros. Further details are due to be announced next week, and presented to parliament in early June.
Fitch affirmed Belgium's credit rating at AA+ but lowered the outlook to negative from stable, citing heightened political risk. The agency said Belgium would likely be downgraded if it misses official deficit targets.
S&P provided some clarification on its decision to lower the outlook on Italy's rating to negative from stable on Friday. The agency said it does not expect Italy to seek financial assistance from the EU or from the IMF "due to the absence of imbalances". S&P also acknowledged that Italian banks, unlike those in Greece, Ireland, Portugal, or Spain, have made little use of ECB liquidity.
ECB President Trichet disappointed markets at yesterday's press conference, only noting that the ECB would "closely monitor" developments, and said risks were 'balanced'. As a result, the Eruo declined sharply against the dollar and across the board. A July rate hike is still expected, but investors are now expressing a greater sense of caution. In hindsight, Trichet stressed twice last month that right now he wasn't seeing second round effects in the Euro-zone, which did knock the Euro, and yesterday's stance should not have come as such a surprise. Nevertheless, the ECB will remain more hawkish relative to the Fed and this may continue to support the Euro in the immediate future.
The Yen climbed back above the key 80.00 level during the Asia session without any obvious assistance from the Ministry of Finance. In fact, Economy Minister Yosano reiterated remarks made yesterday by Finance Minister Noda, describing the latest price action as being largely due to dollar weakness rather than yen strength. This suggests some reluctance to intervene at current levels by the BoJ.
The dollar initially strengthened against the EUR and the AUD after the Monetary Authority of Singapore tightened policy by less than expected. However, the dollar's gains were quickly erased at the end of the Asia session when local media sources unofficially released a batch of China data ahead of time. CPI was slightly stronger than expected which raises the risk of further policy tightening. However, new loan growth and retail sales were strong, suggesting little sign of a slowdown in China and helping to boost global risk appetite. The Beige Book and retail sales data helped the dollar briefly. The Beige Book noted the economy is expanding, with widespread gains in February and March along with upbeat reports on the near-term outlook.
In Europe, ECB rhetoric levels seemed to increase over the past 24 hours. Belgium's Central Bank Governor Coene, referring to the recent ECB press conference, said that "Trichet gave a signal that the ECB hike was not a one-off" and it should "not be seen as a totally isolated decision". ECB Executive Board member Stark said that raising short term interest rates would not have much of an effect on economies in the Eurozone's periphery, implying once again that the economic difficulties on the periphery are no obstacle to future hikes. Greek Finance Minister Papaconstantinou said a debt restructuring would shut Greece out of the debt markets for a long time, while German Finance Minister Schaeuble said he is awaiting "a detailed analysis on the debt sustainability of Greece" and that if this report concludes that sustainability is in doubt "something must be done about it."
The EURUSD remained steady above the 1.44 level following last week’s ECB rate hike of 25 bp, as widely expected, while the US dollar was unchanged US government shutdown was avoided with the agreement on a deficit consolidation plan. Operations will continue as normal until the end of September although public spending cuts were revised to around $38 bln. US economic calendar contains no major data today, except the speeches of several Fed presidents including Evans, Dudley and Yellen.
In Asia, Machine orders in Japan declined more than expectations during March, indicating that Japanese companies were concerned about the strength of recovery, following the devastating earthquake and Tsunami. The governor of Bank of Japan Shirawaka said that the economy will face a strong downward pressure after the catastrophe due to slowdown in corporate output, while the Bank has committed up to 1 trillion yen in 1 year loans, for the companies affected by this natural disaster.
The ECB hiked the refinance rate by 25bp as expected, but the tone of the press conference was not enough to push market participants' expectations too far in either direction. Although ECB President Trichet did not indicate that yesterday's rate hike was the first in a series, he did once again say that the ECB will act as needed and that interest rates remain exceptionally low. He added that it is paramount to avoid second-round effects and that the ECB will do all in order to ensure price stability. Rate expectations have stayed stable following his comments. Along with stable risk sentiment, this is keeping the euro well supported, where it traded slightly above the 1.4400 mark during the Asian Session.
Eurozone finance ministers are holding an informal meeting in Hungary and they are expected to discuss the pending aid package for Portugal, though a formal request still needs to be extended by Portugal. The meeting should not yield much, as the package will take a couple of weeks to craft, and the press cited a senior EU source saying that the plan will be agreed before the June 5 election. German Deputy Finance Minister Hoyer said that the Portugal decision to take EU aid is right and responsible, and that without the EFSF, Portugal and Eurozone could have been very much at risk.
Portugal formally requested EU assistance following a bill auction that showed borrowing costs continue to rise. Prime Minister Socrates said the country needs help to guarantee its financing needs and the Portuguese opposition leader supported the request for aid. No details were announced but EU officials said the request was "responsible" and would be processed quickly. The ECB's policy announcement is due, where the consensus is a 25bp rate hike. At the ECB press conference due 45 minutes after the policy announcement, it is expected from Trichet to announce a series of rate hikes, a claim he has made during previous meetings. However, his other remarks will be closely followed to see if current market expectations of future rate hikes are justified.
AUDUSD hit a new post-float high of 1.0482 after another stronger-than-expected employment report. Employment in March grew by +37.8k (cons. +24.0k), while the unemployment rate unexpectedly fell to 4.9% (prev. 5.0%). This data has fuelled speculation that the next RBA hike will come in August.
Today’s main focus will be BoE rate announcement, followed by the ECB meeting, while the US session will see the release of Canadian Building Permits and US Unemployment Claims.
Yesterday Portugal's sovereign debt was cut to Baa1 from A3 by Moody's, keeping Portugal on review for further downgrades, citing upward revisions of Portugal's deficit and concerns over fiscal consolidation and structural reform. The euro retreated mildly on the announcement, but remains largely driven by ECB rate hike anticipations for the moment.
The FOMC minutes from the March 15th meeting confirmed what recent Fed speeches have suggested - a mild divergence of opinion is starting to emerge on the FOMC. The FOMC minutes revealed that some members felt the risks to inflation had shifted to the upside, although "almost all" Fed officials saw no need to taper asset purchases as QE2 nears an end. The minutes repeated that the recovery is gaining traction and overall reflected the recent shift in views from several Fed officials in recent weeks.
SNB Governing Board member Danthine again referred to the SNB's current policy issue. He repeated that, if the SNB only had to consider the real estate market and the domestic economy, then it would certainly hike interest rates. But given that different conditions are being experienced by Switzerland's exporters, there is limited scope for monetary policy adjustment. Taking the whole economy (domestic and export) into account, Danthine said the current setting of monetary policy is appropriate.
May 3 -- The euro fell for the first time in four days against the dollar on concern a 110 billion-euro ($146 billion) bailout package for Greece will fail to win support from some of the region’s governments.
Europe’s common currency slumped versus most of its 16 major counterparts as German Chancellor Angela Merkel began making a public case for her citizens to aid Greece. The pound fell as polls signaled neither of the U.K.’s two biggest parties will gain a governing majority in this week’s election.
“The euro is just patently overvalued,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York, who predicts a decline to $1.30 this month. “My complaint is that the package requires some extremely harsh austerity measures that simply won’t be put into place.”
The euro dropped 0.8 percent to $1.3191 at 1:19 p.m. in New York from $1.3294 last week, after earlier touching $1.3361, the strongest level since April 27. The 16-nation currency traded at 124.94 yen from 124.78. The dollar was at 94.70 yen from 93.85 yen.
Mexico’s peso rose as the European Union and International Monetary Fund’s approval yesterday for the Greece aid package for Greece boosting demand for higher-yielding, emerging-market assets.
Loan Approval Timeline
EU leaders are scheduled to meet on May 7 to discuss the timeline of parliamentary approval for loans to Greece. Germany is due to debate the plan on the same day.
“The euro fell because the package hasn’t been approved yet and there’s dissension in the ranks,” said Jessica Hoversen, a Chicago-based analyst at the futures broker MF Global Holdings Ltd. “The real fear is that Greece won’t be able to make the budget cuts.”
Aid for Greece is of “enormous” importance, Merkel told reporters in Berlin today after convening a special meeting of her Cabinet that approved loans for Greece of as much as 22.4 billion euros ($30 billion) over three years.
“It doesn’t only mean that we help Greece, but that we stabilize the euro as a whole, which helps people in Germany,” Merkel said.
The chancellor canceled two campaign rallies today in North Rhine-Westphalia, where polls show her party struggling to retain power at a May 9 vote, to give back-to-back interviews on N24, ZDF and ARD television channels.
Required Cuts
Greece’s three-year financial lifeline requires the nation to cut its budget deficit below the EU limit of 3 percent of gross domestic product by the end of 2014, a year later than originally planned. The deficit was 13.6 percent last year, the region’s second-largest after Ireland. The austerity measures include a second set of wage cuts for public workers and a three-year freeze on pensions.
“There’s never been a country that’s undertaken to save so much and there’s never been a country that’s succeeded in saving so much,” said Lutz Karpowitz, a currency strategist at Commerzbank AG in Frankfurt. “It’s very, very negative.”
Unions in Greece representing more than 500,000 civil servants called a 48-hour strike starting May 4 to protest what they have called “savage” budget cuts. Local government workers called a strike for today. Teachers are also on strike from tomorrow and a general strike, the third this year, is planned for May 5.
‘Terrific Recession’
“For Greece, this means terrific austerity and terrific recession,” Marc Faber, publisher of the Gloom, Boom & Doom report, said in a Bloomberg Television interview in Hong Kong. “The euro will remain weak, and there’ll be more bailouts,”
Futures traders are more bearish than ever on the euro, suggesting further declines ahead for Europe’s shared currency. Hedge funds and other large speculators raised net wagers on a euro drop by 25 percent to 89,013 contracts in the week ended April 27, Commodity Futures Trading Commission data show.
The euro has depreciated 7.6 percent against the dollar this year, including last week’s 0.7 percent loss, on concern the sovereign debt crisis will slow Europe’s economy.
Mexico’s peso rose 0.5 percent to 12.2509 per U.S. dollar from 12.3109 on April 30. The peso has strengthened 6.7 percent in 2010, the best performer against the dollar of the 16 major currencies tracked by Bloomberg.
“Greece was creating certain pressure for the peso last week because there was still a lot of doubt,” said Rafael Camarena, an economist with Banco Santander SA in Mexico City. “The market today is taking into account that finally a plan to rescue Greece was cemented.”
Britain’s pound dropped for a second day, falling 0.2 percent to $1.5250, as surveys by YouGov Plc and ICM Ltd. today showed Prime Minister Gordon Brown’s Labour Party narrowing the Conservatives’ advantage in popular support and retaking the lead in the forecast number of seats in Parliament. The election will be held on May 6.
Yen Rises Versus Euro as Greek Debt Concern Aids Safety Demand
Labels: Analysis and Forecasts, Euro, YenApril 21 -- The yen rose against the euro for the first time in three days as concerns about debt-stricken Greece boosted demand for Japan’s currency as a refuge.
The euro weakened against 14 of its 16 major counterparts as Greece starts talks today on activating a 45 billion-euro ($60 billion) rescue package. The yen advanced against higher- yielding currencies after Federal Reserve Chairman Ben S. Bernanke yesterday said proposals to give regulators authority to dismantle large financial firms would be “constructive.” “Greece’s ability to resolve its debt problem is an ongoing worry,” said Toshihiko Sakai, head of trading for currencies and financial products at Mitsubishi UFJ Trust & Banking Corp. in Tokyo. “The trend is for the euro to be sold. The yen may also be bought.”
The yen rose to 124.90 per euro as of 9:23 a.m. in Tokyo from 125.24 in New York yesterday. The euro dropped to $1.3413 from $1.3435 after touching $1.3409, the lowest since April 9. Japan’s currency traded at 93.11 per dollar from 93.22. Yesterday it touched 93.39 per dollar, the weakest since April 15.
The euro slid as Greek officials prepare to hammer out deficit-cutting measures they must accept to tap the funds, in talks with the International Monetary Fund, the European Central Bank and the other nations using the euro. Greece’s government needs to raise about 10 billion euros before the end of May and its soaring financing costs are lending urgency to the talks.
Comment: Still struggling under a large Ichimoku ‘cloud’, dipping below horizontal 9 and 26-day moving averages. Expect another attempt at basing against the 1.3400 area.
Strategy: Possibly attempt small longs at 1.3465; stop well below 1.3400. First target 1.3600, then 1.3800/1.3840.
The euro will drop by the middle of next year to $1.19, a level last seen in March 2006, as government debt forces the European Central Bank to keep benchmark rates at record lows, according to BNP Paribas SA.
The 16-nation currency has fallen 4.6 percent versus the dollar this year on concern Greece will be unable to finance a budget deficit that is more than four times the European Union’s limit of 3 percent of gross domestic product. The median forecast of analysts in a Bloomberg survey is for the euro to trade at $1.33 in 2011.
“A program of severe fiscal consolidation is required, which will result in significant deflationary pressure,” currency strategists at BNP Paribas wrote in a note to clients today. “The ECB is still a long way from hiking interest rates, with a rise in the refinancing rate from the current 1 percent unlikely until the second half of 2011.”
The common currency rose to a three-week high of $1.3692 on April 12 after European governments offered Greece over the weekend a rescue package worth as much as 45 billion euros ($61 billion).
Germany’s parliament will probably be given a vote on any financial aid for Greece, the Finance Ministry said today, risking a showdown with lawmakers. Greek Prime Minister George Papandreou may be forced to activate the emergency-aid package within two weeks, Fitch Ratings Director Christopher Pryce said.
“We expect any euro recovery to remain limited,” the BNP analysts wrote. “Many uncertainties regarding the aid package for Greece remain, which is likely to keep international investors cautious about committing funds to European asset markets.”
The ECB will raise its benchmark interest rate by a quarter-percentage point to 1.25 percent during the first quarter of 2011, according to the weighted average of economists in a Bloomberg survey. The Federal Reserve will boost its target by the same amount in the third quarter of 2010, according to the weighted average in a separate Bloomberg survey.
June 19 -- The euro rose against the dollar and the yen after European Union leaders said the 16-nation region is on course for a “sustainable economic recovery.”
Europe’s currency pared a weekly loss versus the greenback after the EU leaders said “further budgetary stimulus would not be warranted,” in the draft of a statement to be approved today. The Australian and New Zealand dollars and the Norwegian krone rose the most against the yen and the U.S. currency as Asian stocks headed for their biggest advance in a week after U.S. reports yesterday showed an index of leading economic indicators rose for a second month and a regional factory gauge increased.
“We have seen some encouraging news about the global economy in the last 24 hours,” said Danica Hampton, a currency strategist in Wellington at Bank of New Zealand Ltd., the nation’s third-largest bank. “There’s been some relatively promising data out of the U.S. This is helping underpin” currencies against the yen.
The euro advanced to $1.3944 as of 6:46 a.m. in London from $1.3900 in New York yesterday. The European currency climbed to 134.79 yen from 134.17. The yen fell to 96.68 per dollar from 96.47. It dropped 0.9 percent to 77.69 against Australia’s dollar and lost 0.5 percent to 61.84 to the New Zealand dollar.
The Federal Reserve Bank of Philadelphia said yesterday its general economic index climbed to minus 2.2 from minus 22.6 in May. The Conference Board’s index of U.S. leading economic indicators rose more than forecast in May for the second month.
EURUSD
The corrective cycle to as low as 1.3805 seem over and the euro returned on the upside zone, trying to breach above the 1.4100 mark at the time of this writing. Positive momentum regained strength on yesterday's 250 points climb. Intra-day support is now formed at 1.4050/60 backed by 1.4000 and 1.3950/60. Upside barriers are emerging at 1.4135 - 61.8% of 1.4340-1.3805 and 1.4175/00. More notable barrier is set by the recent top side at 1.4340. Current quote is 1.4095 @06:15 GMT
Support levels: 1.4050/60, 1.4000 and 1.3950/60
Resistance levels: 1.4135/50, 1.4175/00, 1.4250 and 1.4340
Market sentiment: long-term : bearish, mid-term : bullish, short-term : bullish
Yesterday recommended trade: short at 1.4035, initial stop at 1.4085, objective at 1.3965. Adjust stop to breakeven on +30 pips (at 1.4005) if reached : 0 (closed at breakeven)
AUDUSD
The Aussie dollar is approaching the minor resistance at ..8120 - the single one which stands in between until the recent top at .8260, therefore a breach above .8120 will most likely open .8260 for a test within the upcoming sessions. Both daily and hourly studies are bullish and the upside is favored as long as the support levels at .7990/00 and .7900 are intact. Current quote is .8078 @06:15 GMT
Support levels: .8050, .7990/00 and .7900
Resistance levels: .8120, .8200 and .8260
Market sentiment: long-term : bearish, mid-term : bullish, short-term : bullish
Yesterday recommended trade: long at .7765, initial stop at .7715, objective at .7825. Adjust stop to breakeven on +30 pips (at .7795) if reached : 0 (entry not reached)
EURCHF
Flat movement continues as the pair keeps trading into an extended "holiday range", establishing a fresh multi-week low daily range on yesterday - 35 points. Current quote is 1.5169 @06:15 GMT
Support levels: 1.5145/50, 1.5100/10, 1.5050 and 1.5000/10
Resistance levels: 1.5225/30, 1.5300 and 1.5350
Market sentiment: long-term : bearish, mid-term : bearish, short-term : neutral
Yesterday recommended trade: stand aside
June 9 -- Goldman Sachs Group Inc. advised buying the euro versus the dollar as risk aversion eases, prices of commodities rebound and talk of alternative reserve currencies undermine confidence in the greenback.
“The dollar has appreciated recently on the back of higher risk aversion,” the Goldman Sachs foreign-exchange research team wrote in a note to clients. “We think this offers a good entry point to go long the euro against the U.S. dollar.” A long position is a bet the currency will appreciate.
Risk appetite is reviving with the recovery in global growth expectations, leading to higher commodity prices. As the correlation between oil prices and the U.S. dollar re-emerges, “higher commodity prices will lead to a weaker dollar,” the Goldman analysts wrote today.
Goldman recommends taking a long position in the euro against the U.S. dollar “with a stop on a close below 1.3720 for an initial target of 1.45.”
The dollar weakened 0.6 percent to $1.3978 per euro at 9:04 a.m. in New York, from $1.39 yesterday.
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