News & Analysis at your fingertips.

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.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
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
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
Gold
Bearish
GBP/USD
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
USD/JPY
Bearish
More View more
Real Time News
  • Technical analysis of charts aims to identify patterns and market trends by utilizing differing forms of technical chart types and other chart functions. Learn about the top three technical analysis tools here: https://t.co/KDjIjLdTSk https://t.co/5VzSt5Ak7R
  • The Federal Reserve System (the Fed) was founded in 1913 by the United States Congress. The Fed’s actions and policies have a major impact on currency value, affecting many trades involving the US Dollar. Learn more about the Fed here: https://t.co/ADSC4sIHrP https://t.co/Jkv0onMyZw
  • Why is JPY called a safe haven? What are some factors in its favor this quarter? Get your free forecast here: https://t.co/mzeJ5x73N3 #DailyFXGuides https://t.co/S4bwgGZxmw
  • Traders utilize varying time frames to speculate in the forex market. The two most common are long- and short-term-time frames which transmits through to trend and trigger charts. Learn more about time-frame analysis here: https://t.co/9S5tXIs3SX https://t.co/T3W8CIg5iy
  • Forex sentiment analysis can be a useful tool to help traders understand and act on price behavior. Learn how to get the most out of understanding trader sentiment here: https://t.co/rJznrXkcYz https://t.co/FPgZ5gkgrM
  • Key levels in forex tend to draw attention to traders in the market. These are psychological prices which tie into the human psyche and way of thinking. Learn about psychological levels here: https://t.co/8A1QhwMVKo https://t.co/E0KhcKHrOf
  • For some reason an old story has popped up - many apologies.... https://t.co/jHjQxyFRXM
  • The US dollar is unloved, oversold and at lows last seen over 30-months ago. At the moment there seems to be very little reason to buy the greenback. Get your $USD market update from @nickcawley1 here:https://t.co/VY3SLs35cp https://t.co/w5ljByv9cf
  • Trading Forex is not a shortcut to instant wealth, excessive leverage can magnify losses, and sentiment is a powerful indicator. Learn about these principles in depth here: https://t.co/lZFM8youtX https://t.co/CpqePQYF4E
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here: https://t.co/Yl9vM7kO6a https://t.co/Rg2YGZCUCr
Euro Stimulus Withdrawal Rally Vulnerable to Risk Trends, ECB

Euro Stimulus Withdrawal Rally Vulnerable to Risk Trends, ECB

2013-02-02 03:57:00
John Kicklighter, Chief Strategist
Euro_Stimulus_Withdrawal_Rally_Vulnerable_to_Risk_Trends_ECB_body_Picture_5.png, Euro Stimulus Withdrawal Rally Vulnerable to Risk Trends, ECB

Euro Stimulus Withdrawal Rally Vulnerable to Risk Trends, ECB

Fundamental Forecast for the Euro: Neutral

Despite a conspicuous string of disconcerting headlines and economic releases, the euro put in for the best performance amongst the FX benchmarks this past week. While both the 15-month high for EURGBP and nearly three-year high for EURJPY are remarkable, it is still the EURUSD that stands out in the market. The 1.3 percent climb for this most liquid pair easily cleared the 1.3500 level that stood as the mid-point of the 2011 (high) to 2012 (low) range. After six consecutive months of rally, when will this pair show some exhaustion? That is a determination for fundamentals.

There is a reason that the Euro has been able to ignore pressing issues like expectations of a 2013 recession for the regional economy, lingering fiscal risks in Spain (amongst others) and troubled liquidity health. All of those issues have become almost normal in the past three years as the markets have reacted to crisis and then to policy officials’ efforts to forestall crisis. What is novel – especially given the escalation of the so-called ‘currency war’ – is the European Central Bank’s (ECB) unusual reduction of its balance sheet.

Increasing stimulus means injecting more currency into the money system and lowering market rates. Though this supports growth and lending, it also diminishes a currency’s return potential. And, on that point, we know that the Federal Reserve is adding $85 billion per month in stimulus while the Bank of Japan has vowed 13-trillion-yen (roughly €100 billion) moves come the beginning of 2014. In contrast, the ECB has maintained only a threat of buying a potentially unlimited amount of government debt through the Outright Monetary Transactions (OMT) program should vague conditions be met.

That relative position alone may have kept EURUSD and other euro crosses steady, but we have seen the shared currency surge because that steady policy has turned into a tightening one after the Long-Term Refinancing Operation (LTRO) early repayment threshold was met. Last week, European banks paid back more than €137 billion of the more than €1 trillion they took in liquidity assistance starting in December 2011. Such a big reduction runs the risk of putting the European banking system into a dangerous position should global investor confidence fade, but the €3.5 billion pledged repayment in the coming week speaks to a more restrained pace that helps avoid disaster.

There is no driver that is currently more influential for the FX market now than balance sheet adjustment and the impact it has on both speculative interests and yields. With other global counterparts looking to flood the markets, confidence is bolstered. While in Europe, an easing policy boosts rates and attracts that cheap capital generated within its trade partners. But there are risks that the euro faces.

Without doubt, the most prominent and omnipresent risk to the EURUSD’s run (as it is to equity indexes, speculative commodities, high-yield bond funds and Treasury yields) is risk appetite. It is the belief that risk has been drained from the global financial system as much as the Eurozone that is reversing the flow of capital that had previously fled the impending doom so many had fears. It has also made the anemic yields the region has to offer acceptable. Yet, that oblivious yield search can easily come crashing down and bring the euro with it.

A swing in risk appetite is the most immediate and ever-present threat to a sustained euro advance. The second most urgent threat – though it carries a lower probability of occurring – is the ECB rate decision. With Eurozone inflation cooling to 2.0 percent and the economy heading into another year of recession, the ECB may respond to the ill-advised liquidity drain in LTRO with further easing that offset austerity efforts. A rate cut (or sign of future rate cut) would a sharp, but not lasting impact. An active stimulus program would last.

And, finally, the third factor that could pull the Euro down moving forward is a revived appreciation (fear) of the region’s financial and economic troubles moving forward. On that front, we have seen plenty of headwinds, but so far little corresponding fear. - JK

--- Written by: John Kicklighter, Chief Strategist for DailyFX.com

To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at http://www.twitter.com/JohnKicklighter

Sign up for John’s email distribution list, here.

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

DISCLOSURES