FOREXYARD: Forex News Blog | |
- Weekly Fundamental Forex Preview – European Debt Crisis Comes to Head
- Euro Declines at Technical Level after Current Account Data
- Bank of Japan Interest Rate Decision
- ECB Resists Greek Debt Restructuring
| Weekly Fundamental Forex Preview – European Debt Crisis Comes to Head Posted: 20 May 2011 07:56 AM PDT
Weekend risk is back on the table as Spain returns to the headlines. Traders worry Socialists in Spain will be defeated in both local and regional elections and has created unease for euro bulls. A new government in Spain might be more inclined to reveal government financial inconsistencies and previous shortfalls in the Spanish budgets. European regulators had previously built a wall around Spain while focusing on the indebted nations of Greece, Portugal, and Ireland. This could thrust Spain back into the limelight should a new local government expose excessive debts. A new government may also feel the need to enact new austerity measures in order to counter the higher debts in an attempt to win back market confidence for Spanish public finances. Both Spanish and Greek bond spreads over their German counterparts have ballooned today and the euro has come off of its weekly highs at a significant technical level. Media reports this week have focused on the confrontation between Greece and the ECB following the declaration by the central bank to not accept Greek sovereign debt in return for liquidity measures should a restructuring take place. A resumption of the European debt crisis should favor the rebound in the dollar going forward as many forex macro traders would view contagion into Spain as a new chapter in the saga. Read more forex trading news on our forex blog. |
| Euro Declines at Technical Level after Current Account Data Posted: 20 May 2011 05:29 AM PDT
EU current account data combined with the EUR/USD reaching a key technical level led to the euro being sold during Friday's European trading session. The euro pulled back from its highest level this week across the board after headline current account numbers for the month of March were above expectations, coming in at -4.7B. Data for the month of February was revised higher to -6.5B from -7.2B. Economists had forecasted the current account to be reported at -5.7B. While the headline value was better than expectations, a troubling sign is the drop-off in net portfolio inflows, falling to 77B from 97.3B. Rising sovereign debt yields for the peripheral nations may have deterred new investors from purchasing higher amounts of European assets. This week's rebound in the euro came to a halt and should not come as a surprise given the rise in tensions over the European debt crisis. The selling that occurred today may be an attempt by traders to sell this week's rally combined with a technical level for euro longs to reduce exposure. EU current account data combined with the EUR/USD reaching a key technical level led to the euro being sold during Friday's European trading session. The EUR/USD reached as high as 1.4255 a level that coincides with the 50-day moving average as well as the May 12th high. The pair fell as low as 1.4210 before rebounding to 1.4230. Support for the EUR/USD is found in a range between 1.4020 from the March 28th low and 1.4050 from last week's low. The euro was also lower in the crosses with the EUR/GBP and the EUR/CHF moving through short term support levels. Support for the EUR/GBP is located at 0.8690, the bottom of the short term consolidation pattern off of the May lows. EUR/CHF has support at 1.2480. A breach here could take the pair lower to 1.2400. Read more forex trading news on our forex blog. |
| Bank of Japan Interest Rate Decision Posted: 19 May 2011 12:21 PM PDT
The dollar traded lower during the New York trading session but still within defined price ranges as markets look for a new catalyst to continue the bullish run in the dollar. Later this evening the Bank of Japan will release their interest rate decision that could include additional monetary policy easing measures. Forex rates for the dollar were mixed but overall weakness was seen after US economic data releases. Weekly unemployment claims were better than forecasted and initially the dollar benefited from the surprising jobs data. However, dollar sentiment was thwarted after the release of weaker than expected existing home sales and a significantly lower Philly Fed Manufacturing Index. The EUR/USD traded as high as 1.4322 after rising from a low of 1.4194 during the European session. Cable held its gains after strong retail sales numbers and looks to end the day near its high at 1.6229 from 1.6179. The USD/JPY fell back from a high of 82.22 to trade at its opening day price of 81.55 following the disappointing US manufacturing data. US equities were flat with the S&P 500 up only 0.07% and crude oil traded back below the $100 mark. Forex macro news will be out later tonight with the release of the Japanese overnight call rate. No change is due to the interest rate but calls have been made for the BoJ to introduce new easing measures to assist both the recovery from the earthquake and tsunami as well as the decline in growth rates. Yesterday's Japanese GDP numbers showed the economy is currently in a recessionary mode. While the disaster did little to help the economy, the data shows the decline in growth rates had its beginnings prior to the earthquake and tsunami. New easing measures by the Bank of Japan could send the USD/JPY higher to the retracement levels from the April to May move at 82.50 followed by 83.25. Read more forex trading news on our forex blog. |
| ECB Resists Greek Debt Restructuring Posted: 19 May 2011 10:37 AM PDT
Lines are being drawn in the fight over how to handle the Greek fiscal crisis. The ECB and Greece are wrangling over a potential restructuring of Greek debt or an increase of financial aid to the country in return for further spending cuts and asset sales. Following comments from ECB executive board member Jürgen Stark, the ECB has chosen its side against a haircut. An article from the FT Alphaville highlights Stark's comments as the ECB would cease to accept Greek bonds as collateral for loans to Greek banks should Greece choose to restructure its sovereign debt. Stark was quoted as saying, "Sovereign-debt restructuring would undermine the eligibility of Greek government bonds." Earlier comments in the week from EU officials warned a restructuring would be detrimental to the Greek banking system. Greek banks receive roughly 90B euros from the ECB in liquidity provisions. Following these comments the ECB is intensifying its fight against a restructuring of Greek sovereign debt. It is no surprise that the ECB does not support a haircut for Greek bonds as the ECB is rumored to have 40-50B euros worth of Greek debentures on its books that it purchased when the markets for European sovereign debt income markets locked up and there was no counterparty left to take the other side of trades. Thus a haircut on Greek sovereigns would be detrimental to the balance sheet of the ECB and consequentially impact European banking liquidity. It is also not in the interest of Greece to shut off this source of liquidity as this would force Greek banks to turn to the central bank of Greece for liquidity, an ultimately less efficient and more expensive source of funding. The threat of the ECB to withdraw its support for the Greek banking system should Greece decide to restructure its sovereign debt is a threat that should be taken seriously and throws the ECB and all its clout behind other alternatives to solve the Greek fiscal crisis. Read more forex trading news on our forex blog. |
| You are subscribed to email updates from Forex Trading Education : Forex Trading Blog by FOREXYARD To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google Inc., 20 West Kinzie, Chicago IL USA 60610 | |
No comments:
Post a Comment