Home / ECB

EURUSD Dragged Towards 1.34 on QE Continuity

By Razvan Mihai Leave a Comment

Last week the FOMC statement showed that Federal Reserve officials are still on the Quantitative Easing side. It seems that the QE is expected to be shut down only if the unemployment rate will drop to 6.5% or if the inflation rate will rise 0.5% above the medium target. Keeping in mind that the United States has an unemployment rate at 7.4% we can say that it might take a while until the end of the program or at least until the tapering. On Thursday the unemployment claims surprised with a value of 326K (under estimates) while on Friday the Non-Farm Payrolls came at 162K, with 20K lower than the forecast.

On Thursday the ECB maintained the interest rate a record low 0.50%. The main ideas from Draghi’s press conference were:  the ECB will continue to keep low interest rates and high liquidity, will keep the door open for new rate cuts and forecast a slow recovery at the end of the year and in 2014.

The latest economic releases for the Euro Area were mainly above expectations: a lower unemployment rate, higher PMIs for both manufacturing and services sectors and better industrial production for Germany.

eurusd-dragged-towards-1.34-06.07.2013

Chart: EURUSD, Weekly

Looking at the EURUSD we can see that the pressure is now on the upper line of a symmetrical triangle. Last week was a Doji candle above 1.3200. If this week will close above 1.3345, last week’s high we might see a rally toward 1.34 or why not even higher to 1.35. A false breakout above 1.34 could signal a reversal.

Filed Under: Forex Analysis Tagged With: , , , , ,

EURUSD Was Not Yet Ready for…

By Razvan Mihai Leave a Comment

In the first week of June, Mario Draghi said that ECB will keep the interest rates at record low for an extended period of time and there are arguments for it to be cut even more. In the same week, on Friday the Non-Farm Payrolls surprised the market with a value above all forecasts. The dollar got stronger and stronger, managing to get the EURUSD quotation under 1.2800.

The story does not end here. Last week, the second week of the month, were published the FOMC Meeting Minutes and Ben Bernanke had a speech titled “A Century of US Central Banking: Goals, Frameworks, and Accountability”. Investors were disappointed to see that, in the minutes, there was no date from which Fed will start tapering the monetary easing program. The full attention was moved to Ben’s speech, but nothing was said about any dates. This time the dollar started to lose and in several hours EURUSD got back over 300 pips.

Next week Ben Bernanke will testify on the Semiannual Monetary Policy Report before the House Financial Services Committee, in Washington DC

eurusd-was-not-ready-for-a-breakout-14.07.2013

Chart: EURUSD, Daily

Looking at the price action of EURUSD we can say that it wasn’t ready to break out from the consolidation pattern, which is actually a symmetrical triangle.  The lower boundary is around 1.28 level while the upper one sits at 1.34. The main axis, as it can be seen on the chart, is 1.3200. This level seems to be the equilibrium one.

If the price breaks above 1.32 we can expect for it to test the upper line of the triangle, while if it drops or remains under the pressure rises on the lower line of the pattern.  This currency pair will remain sensible to the economic data published from the United States and will the volatility will increase during the speeches of Mario Draghi and Ben Bernanke.

Filed Under: Forex Analysis Tagged With: , , , , ,

What Caused Euro to Fall under 1.2800?

By Razvan Mihai Leave a Comment

After the ECB press conference from last week and the good NFP for the United States, yesterday the Trade Balance and Industrial Production fell for Germany.

While already to the ground the Euro Area and the Euro currency take other kicks. Today it was announced that Greece will get the aid and everything seemed to be cooling down, Italy was downgraded to BBB from BBB+ by S&P.

The downgrade came after Asmussen brought other bad news for the Euro Area and knocked the Euro under 1.2800 with the US dollar. The German economist said that he would not rule out a new LTRO and that ECB forward guidance goes beyond 12 months.

euro-kicked-to-the-ground-09.07.2013-1

Chart: EURUSD, H4

The price for the EURUSD currency pair seemed to be stabilizing under 1.2900 level.  It did not last more than a day because after the statements of Asmussen and the downgrade of Italy the price fell fast under 1.2800 and hit a very good demand area at 1.2745. From here we can see a second reaction of appreciation.

The 14 periods RSI has drawn a positive divergence. This could be a signal that buyers will not give up right now, and that they now have backup.  From 19 of June the price has moved inside two equal downward channels.  At this point a drop under 1.2740 would be a signal that the price could accelerate on the downside. If the price will manage to get back up and break the trend line then we might see an interesting outcome.

Filed Under: Forex Analysis Tagged With: , , ,

How Did The EURUSD Dropp 1.48% Last Week?

By Razvan Mihai Leave a Comment

A really important week has passed for the EURUSD currency pair. As we know, in the first week of the month the ECB has the monetary statement and the press conference and the Non-Farm Payrolls is published for the United States.

At this press conference Mario Draghi pointed some things regarding the positioning of the ECB in what concerns the economy of the Euro Zone:

  • Euro Area growth risks remain on the downside
  • Inflation risks are broadly balanced, inflation rates may be volatile throughout the year
  • Economy should recover at subdued pace
  • 0.50% interest rate was maintained, but it is not the lower bound
  • The rates to stay low for extended period of time
  • ECB keeps an open mind on negative deposit rates

If this wasn’t enough, S&P lowered Portugal’s outlook to negative from stable. The country’s current grade is BB and rating company sees one in three chance of ratings cut within the next 12 months, and the also see a deficit about 5.8% of the GDP for 2013.

For the United States the story is a bit different. Several weeks ago Ben Bernanke said that the Federal Reserve is preparing for tapering the Quantitative Easing Program by the end of 2013, and stop it in 2014. The conditions for these measures were that the economy to head towards their forecast and the unemployment rate to drop to or under 7%.

One day after the ECB’s press conference, the Non-Farm Payrolls was published. It surprised the market with a value of 195K vs. 165K expected, and the previous value revised to 195K. Even though the Unemployment Rate did not come as expected and stagnated at 7.6%, the biggest impact came from the NFP.

eurusd-at-1.28-support-after-ecb-and-nfp-07.07.2013-1

Chart: EURUSD, Daily

This week Euro dropped almost 1.5%. The biggest fall took place on Thursday and Friday. The speech of Mario Draghi did not encourage the investors to buy euros and the dollar continued its trend. Next day, the economic data showed an improvement in the US labor market, the dollar continued to appreciate.

From the technical point of view EURUSD got to a good support area, formed by 1.28 level and a trend line. The probability for the down trend to continue it is quite high. If this area will fall the next good support it is at 1.2650. Before a breakout we could see a bounce back to 1.29 or somewhere near 1.30.

Filed Under: Weekly Wrap Up Tagged With: , , ,