EUR/USD Extends Cautious Rebound Despite ECB Upheaval On The Status Of Greek Collateral
On Thursday, the EUR/USD charts showed again some choppy intraday swings. This time there was not one clear driver to explain the different moves. All kinds of rumours on the ECB and its involvement in the Greek debt crisis, mixed US economic data and a mixed performance of the markets of riskier assets (equities higher, commodities mostly lower) provided several, often contradictory signs, for EUR/USD trading.
EUR/USD reached new highs for the current rebound just above the 1.43 mark in Asia. However, the rebound stalled as European equities showed only disappointing gains given the rebound in the US on Wednesday evening. The European markets were also haunted by a quote which was reported as having been said by ECB's Stark. According to this quote ECB's Stark stated that a sovereign debt restructuring would undermine the eligibility of Greek government bonds. This debate brought the EMU debt crisis again in the spotlights. EUR/USD drifted south to the low 1.42 area. At that point, there was market talk of Fund-driven demand for the euro linked to buying of peripheral European bonds. Whatever the reason, EUR/USD came again with striking distance of the 1.43 mark, but a break failed again, even as equities had found a better bid at that time. The US jobless claims were slightly better than expected. This supported the positive sentiment on the equity markets, but it was no help for EUR/USD. On the other hand, the mid-morning data (existing homes sales, Philly Fed survey and leading indicators) were weak. This blocked the topside in equities, but remarkably, EUR/USD succeeded some cautious gains afterwards (due to a decline in US bond yields?). The pair even reached new highs in the 1.4325 area after the close of European markets and closed a rather volatile session at 1.4309, compared to 1.4250 on Wednesday evening.
Just coming back on the recent ECB involvement in the debate on the Greek debt crisis. Of late, we often indicated that the recent developments with respect to the Greek debt crisis had only a limited impact on EUR/USD trading. We don't change this assessment yet. Nevertheless, the way the ECB is taking position in this debate is at least remarkable. If the ECB would indeed continue with its threat that a debt restructuring would make them refusing Greek government bonds as collateral, the ECB talk at some point might become a source of volatility and a negative factor for the euro. We keep a close eye on how this debate between EU politicians and the ECB will develop.
Read more at [http://theportfolioprophet.info/]
Today, the calendar is very thin. There are no important eco data in the US. In Europe, the March current account data and the advance consumer confidence (May) will be published. However, we assume that they will only have very limited impact on EUR/USD trading. So, global sentiment on risk and the ongoing debate on how to handle the Greek debt crisis will probably remain the driver for EUR/USD trading. In the current environment, we wouldn't be surprised to see more choppy, erratic-like trading as was the case yesterday.
Last week, the price swings/declines in EUR/USD were for an important part due to the correction on the commodity markets and its impact on global risk sentiment. China raising the reserve ratio also made investors uncertain on the impact of monetary tightening on global growth. This continued to weigh on risk sentiment and on the euro. We had (and still have) a LT bullish strategy for the EUR/USD cross rate based on the different policy approach between the ECB and the Fed. However, extreme euro long positioning made the cross rate vulnerable to a short-term correction. The recent correction started as the ECB didn't signal a rate hike in June as markets expected. Renewed uncertainty on Greece and the commodity correction reinforced the repositioning in EUR/USD, too. We looked to reinstall EUR/USD long exposure as we don't think that the ECB has profoundly changed its intention to bring its policy rate to more normal levels. The recent sell-off has hurt the short-term technical picture as it dropped below several support areas. EUR/USD reached a correction low at 1.4048 in Asia on Monday morning. From there, the pair is trying to establish a pattern of higher highs and higher lows.
The picture is still fragile, but a bottoming out process might be developing. We reinstalled a cautious buy-on-dips strategy, even as we have to admit that we're not impressed by the force of the rebound until now. A drop below 1.40 would be an indication that the bottoming out process failed (ST stop-loss).
Support comes in at 1.4276 (Break-up hourly), at 1.4249/39 (STMA/Daily envelope), at 1.4194/70 (Reaction low/Breakup hourly), at 1.4120 (reaction low) and at 1.4048 (Reaction low).
Resistance stands at 1.4340/43 (reaction high/Broken 50 MA) at 1.4370/88 (Daily envelope/38% retracement) and at 1.4443 (Last week high).
The pair is in neutral territory
Read more at [http://sevensummitstrader.info/]
EUR/USD reached new highs for the current rebound just above the 1.43 mark in Asia. However, the rebound stalled as European equities showed only disappointing gains given the rebound in the US on Wednesday evening. The European markets were also haunted by a quote which was reported as having been said by ECB's Stark. According to this quote ECB's Stark stated that a sovereign debt restructuring would undermine the eligibility of Greek government bonds. This debate brought the EMU debt crisis again in the spotlights. EUR/USD drifted south to the low 1.42 area. At that point, there was market talk of Fund-driven demand for the euro linked to buying of peripheral European bonds. Whatever the reason, EUR/USD came again with striking distance of the 1.43 mark, but a break failed again, even as equities had found a better bid at that time. The US jobless claims were slightly better than expected. This supported the positive sentiment on the equity markets, but it was no help for EUR/USD. On the other hand, the mid-morning data (existing homes sales, Philly Fed survey and leading indicators) were weak. This blocked the topside in equities, but remarkably, EUR/USD succeeded some cautious gains afterwards (due to a decline in US bond yields?). The pair even reached new highs in the 1.4325 area after the close of European markets and closed a rather volatile session at 1.4309, compared to 1.4250 on Wednesday evening.
Just coming back on the recent ECB involvement in the debate on the Greek debt crisis. Of late, we often indicated that the recent developments with respect to the Greek debt crisis had only a limited impact on EUR/USD trading. We don't change this assessment yet. Nevertheless, the way the ECB is taking position in this debate is at least remarkable. If the ECB would indeed continue with its threat that a debt restructuring would make them refusing Greek government bonds as collateral, the ECB talk at some point might become a source of volatility and a negative factor for the euro. We keep a close eye on how this debate between EU politicians and the ECB will develop.
Read more at [http://theportfolioprophet.info/]
Today, the calendar is very thin. There are no important eco data in the US. In Europe, the March current account data and the advance consumer confidence (May) will be published. However, we assume that they will only have very limited impact on EUR/USD trading. So, global sentiment on risk and the ongoing debate on how to handle the Greek debt crisis will probably remain the driver for EUR/USD trading. In the current environment, we wouldn't be surprised to see more choppy, erratic-like trading as was the case yesterday.
Last week, the price swings/declines in EUR/USD were for an important part due to the correction on the commodity markets and its impact on global risk sentiment. China raising the reserve ratio also made investors uncertain on the impact of monetary tightening on global growth. This continued to weigh on risk sentiment and on the euro. We had (and still have) a LT bullish strategy for the EUR/USD cross rate based on the different policy approach between the ECB and the Fed. However, extreme euro long positioning made the cross rate vulnerable to a short-term correction. The recent correction started as the ECB didn't signal a rate hike in June as markets expected. Renewed uncertainty on Greece and the commodity correction reinforced the repositioning in EUR/USD, too. We looked to reinstall EUR/USD long exposure as we don't think that the ECB has profoundly changed its intention to bring its policy rate to more normal levels. The recent sell-off has hurt the short-term technical picture as it dropped below several support areas. EUR/USD reached a correction low at 1.4048 in Asia on Monday morning. From there, the pair is trying to establish a pattern of higher highs and higher lows.
The picture is still fragile, but a bottoming out process might be developing. We reinstalled a cautious buy-on-dips strategy, even as we have to admit that we're not impressed by the force of the rebound until now. A drop below 1.40 would be an indication that the bottoming out process failed (ST stop-loss).
Support comes in at 1.4276 (Break-up hourly), at 1.4249/39 (STMA/Daily envelope), at 1.4194/70 (Reaction low/Breakup hourly), at 1.4120 (reaction low) and at 1.4048 (Reaction low).
Resistance stands at 1.4340/43 (reaction high/Broken 50 MA) at 1.4370/88 (Daily envelope/38% retracement) and at 1.4443 (Last week high).
The pair is in neutral territory
Read more at [http://sevensummitstrader.info/]