We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Wall Street
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bearish
GBP/USD
Bearish
USD/JPY
Mixed
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
More View more
Real Time News
  • China legislator votes to adopt Hong Kong Security Bill
  • Indices Update: As of 07:00, these are your best and worst performers based on the London trading schedule: Germany 30: 0.93% FTSE 100: 0.87% France 40: 0.85% Wall Street: 0.80% US 500: 0.30% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/7ReTMJsowa
  • As political tensions between the US and China increase, $gld is picking up a safe-haven bid ahead of the long weekend and may look to press higher. Get your $XAUUSD market update from @nickcawley1 here: https://t.co/boUn4vyfCO https://t.co/n0V7y3bjks
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.01%, while traders in US 500 are at opposite extremes with 77.61%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/nHiTp6tABc
  • #Yuan has been underperforming its #ASEAN peers (SGD, IDR, PHP, MYR) as US-China tensions have been resurfacing (over Hong Kong), as expected. Notice how #USD is flat as the #HangSeng fell. To learn more about CNY-ASEAN trends, check out my special here - https://www.dailyfx.com/forex/fundamental/article/special_report/2020/04/17/Yuan-SGD-IDR-MYR-PHP-China-ASEAN-FX-Price-Trends-Since-2008.html?CHID=9&QPID=917702&utm_source=Twitter&utm_medium=Dubrovsky&utm_campaign=twr https://t.co/Dr0BHzuHQQ
  • Forex Update: As of 04:00, these are your best and worst performers based on the London trading schedule: 🇪🇺EUR: -0.00% 🇨🇭CHF: -0.04% 🇬🇧GBP: -0.05% 🇳🇿NZD: -0.12% 🇨🇦CAD: -0.14% 🇦🇺AUD: -0.37% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/HdkFaCg7sp
  • Indices Update: As of 04:00, these are your best and worst performers based on the London trading schedule: Germany 30: 0.79% France 40: 0.78% FTSE 100: 0.72% Wall Street: 0.58% US 500: 0.17% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/tSax36Fh1j
  • So far this week, #CAD has been the best-performing #G10 FX versus #USD this week with +0.62% spot-returns while #JPY has been the worst with -1.12% [delayed] -BBG
  • A close below the low end of the aforementioned trading zone reflects a stronger bearish momentum and may send USD/CAD towards 1.3511. Get your $USDCAD technical analysis from @malkudsi here: https://t.co/NnyNajRjE9 https://t.co/f7fv8EX89F
  • My trading video for today: '$USDCNH Hits Series Record but Neither $AUDUSD nor S&P 500 Follow' https://www.dailyfx.com/forex/video/daily_news_report/2020/05/28/USDCNH-Hits-Series-Record-but-Neither-AUDUSD-nor-SP-500-Follow.html?ref-author=Kicklighter&QPID=917719&CHID=9
Euro at Historical Midpoint Needs Collapse in Risk Appetite to Proceed

Euro at Historical Midpoint Needs Collapse in Risk Appetite to Proceed

2012-07-14 03:00:00
John Kicklighter, Chief Strategist
Share:
Euro_at_Historical_Midpoint_Needs_Collapse_in_Risk_Appetite_to_Proceed_body_Picture_5.png, Euro at Historical Midpoint Needs Collapse in Risk Appetite to Proceed

Fundamental Forecast for the Euro: Neutral

There is no shortage of fundamental justification for the Euro to extend its painful collapse, but history has taught us that the market will decide what is important and what isn’t. This past week, EURUSD slumped to its lowest level in two years – a region that notably aligns to the midpoint of the pair’s historical range (roughly 1.2135). From a purely fundamental point of view, we could point to the failed promises of the EU Summit and erosion of confidence in the region’s ability to stabilize its financial sector as the source of this malaise. Yet, the headlines were more sparse (compared to the lead up to the Summit two weeks ago) and price action didn’t line up to the news that did cross the wires. Through the past week, EURUSD’s looked far more like the S&P 500 futures’ performance than a self-guided event driver.

Historically, the correlation between the world’s most liquid currency pair (EURUSD) and my favored measure for risk appetite (the naturally long-biased and stimulus-supported S&P 500) has been pretty strong. This is due in no little part to the greenback’s position as an ultimate liquidity provider and the euro’s position as the center of the world’s greatest financial threat. However, the balance of sentiment moving forward will more likely guide the health of the European financial system rather than the other way around. That means that the round of open-ended and detail-deficient vows made at the EU Summit will stand as yet another successful bid to buy time – rather than solve the underlying issue.

In general risk trends, we can measure the market’s tolerance for taking on otherwise questionable European assets. Given EURUSD’s position just above its historical midpoint and the floor of a long-term technical congestion pattern, it makes sense that a strong fundamental push is needed if we are to eventually move below 1.2000. Looking for the heavy-hitting catalysts moving forward, there is a notable lack of big-ticket items like a preliminary GDP reading to guide global growth expectations or a critical policy gathering that could cater to stimulus hopes. That leaves the market open to find its own way without distractions or catalysts to sidetrack it. On tap, we have updates to IMF growth forecasts on Monday. There is some lingering hope that Bernanke can broach the topic of QE3 at his Congressional testimony Tuesday and Wednesday – another source of disappointment if it fails to make an appearance. Perhaps one of the most influential (but disparagingly vague) developments is the build of the 2Q US corporate earnings season. Any opportunity to impress upon the market that collective expectations for returns were set too high is an open invitation to unwind.

Though the general state of sentiment across the global markets can have greater sway over the euro’s health next week, we shouldn’t tune out the fundamental event risk on the Euro’s docket. Given the dubious, long-term health of the Euro Zone itself; developments that undermine the bid to win stability can further expose the region to troubling shifts in global currents. Perhaps the most compelling event risk is the EU Finance Ministers’ meeting on Friday. This is supposedly a follow up to the July 9 meeting to discuss the implementation of the direct rescue of sovereigns through the ESM, details on Spain’s rescue and revisiting Greece’s terms. Yet, after two failed efforts to hammer out the specifics, expectations are likely low. On Wednesday, the EU will release a report on the Euro Zone’s public finances. This can either offer a rude awakening or (more likely) it will put an optimistic twist on poor figures – leading the market to write it off. Also of note is a round of bond auctions. Greece, Portugal (its second since reentering the market since its bailout), Spain and Italy are all scheduled to sell debt. Though they have not be heavy market moving events, they have steadily tracked out deteriorating confidence.

As we weigh fundamental reality versus the capricious appetites of speculators, it is worth considering alternative complications in capital flows. A theory for the euro that has recently gained considerable traction is that deterioration in regional financial conditions and/or drop in risk appetite, leads European banks to repatriate capital from foreign investors. A Bank of America research report illustrated a more than 40 percent drop in Euro-banks holdings of foreign assets since 2008. This could prove a permanent buffer to selling pressure – thought it wouldn’t likely fully offset it. For now, I am a fundamental bear with technical and speculative reservations for follow through. - JK

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.