Forexwatchman
Sergeant
- Messages
- 198
After a very uneventful day yesterday the market exploded back to life today during both the European and NY sessions. The trading day began with serious market jitters over a multitude of problems: European stocks went down sharply (FTSE and DAX around 2%), oil off around 2 bucks, worries over health of euro zone banks, worries over France’s AAA rating, worries over China’s growth, worries over BP oil spill. Risk aversion remains very high.
With regards to the health of the euro banks I just mentioned, the European Central Bank sent announced last night that banks in the eurozone nations faced having to write off another €195 billion in bad loans over the next 18 months. In what it predicted would be “a second wave” of loan losses, the ECB forecast a fresh flood of red ink for eurozone banks that have already written off €238 billion (£200 billion) since the banking crisis began. The Wall Street Journal reports that the U.S. now intends to urge Europe to disclose publicly the results of bank stress tests as a way to calm jitters over health of the continent’s financial system.
France was also a concern today when François Baroin, the French Budget Minister, told local television stations that holding on to the country’s AAA rating would be a “stretch”. The rating does not look to be in immediate danger of a downgrade, but the comments came only two days after Fitch downgraded Spain’s credit rating amid concerns about its economic growth.
On a more euro positive note, French finance minister Lagarde says that exporters were initially complaining about EUR/USD at 1.4500 but they are not complaining now so the lower euro must be working for them. This is going to continue to be an important variable in the recovery of the EZ since a cheaper euro should mean a larger market share for euro zone exporters. Also German jobless total in May (seasonally adjusted) fell 45k, better than median forcast of 20k. Unemployment rate also fell to 7.7%, better than expected 7.8%. Also Italy appears to have things under control for now. According to the Italian Treasury, the January-May deficit stands at 50.1 bln from 56.2 bln for the same period last year. The May 2010 figures even includes 2.9 bln in funding for Greece. I'd call that an impressive feat for them, and it certainly takes the cross hairs off of them for the near term. Lastly, Euro zone April unemployment 10.1% Up from 10% in March, highest rate since June 1998.
The EUR/USD finally found some strong bids at the daily S3 (1.2113) and began a rapid rebound back above the previous European session open once New York woke up. We got as far as 1.2355 before the short covering rally sputtered out, and it doesn't appear to be anything other than that for right now. If we close above 1.2340 (the hourly downtrend line drawn from May 10 high of 1.3092 and May 28th 1.2453 high) then more topside action should be in store for tomorrow. Here's some possible levels of support on the pullbacks from 1.2111/1.2354: 1.2297 is 23.6% 1.2261 is 38.2% 1.2232 is 50% 1.2204 is 61.8%. I don't think it is entirely out of the question that we should see more momentum upwards through the rest of today's session, but look for the opposite to happen for tomorrow's Asian and European sessions. It seems to be here lately that whatever the market does during the New York session, it then reverses during the Asian sessions. I am continuing to watch my downtrend line on the hourly charts. This recent rally respected that line very well so it will provide another sell entry if retested again, but look for a continuation upwards if it is broken today.
With regards to the health of the euro banks I just mentioned, the European Central Bank sent announced last night that banks in the eurozone nations faced having to write off another €195 billion in bad loans over the next 18 months. In what it predicted would be “a second wave” of loan losses, the ECB forecast a fresh flood of red ink for eurozone banks that have already written off €238 billion (£200 billion) since the banking crisis began. The Wall Street Journal reports that the U.S. now intends to urge Europe to disclose publicly the results of bank stress tests as a way to calm jitters over health of the continent’s financial system.
France was also a concern today when François Baroin, the French Budget Minister, told local television stations that holding on to the country’s AAA rating would be a “stretch”. The rating does not look to be in immediate danger of a downgrade, but the comments came only two days after Fitch downgraded Spain’s credit rating amid concerns about its economic growth.
On a more euro positive note, French finance minister Lagarde says that exporters were initially complaining about EUR/USD at 1.4500 but they are not complaining now so the lower euro must be working for them. This is going to continue to be an important variable in the recovery of the EZ since a cheaper euro should mean a larger market share for euro zone exporters. Also German jobless total in May (seasonally adjusted) fell 45k, better than median forcast of 20k. Unemployment rate also fell to 7.7%, better than expected 7.8%. Also Italy appears to have things under control for now. According to the Italian Treasury, the January-May deficit stands at 50.1 bln from 56.2 bln for the same period last year. The May 2010 figures even includes 2.9 bln in funding for Greece. I'd call that an impressive feat for them, and it certainly takes the cross hairs off of them for the near term. Lastly, Euro zone April unemployment 10.1% Up from 10% in March, highest rate since June 1998.
The EUR/USD finally found some strong bids at the daily S3 (1.2113) and began a rapid rebound back above the previous European session open once New York woke up. We got as far as 1.2355 before the short covering rally sputtered out, and it doesn't appear to be anything other than that for right now. If we close above 1.2340 (the hourly downtrend line drawn from May 10 high of 1.3092 and May 28th 1.2453 high) then more topside action should be in store for tomorrow. Here's some possible levels of support on the pullbacks from 1.2111/1.2354: 1.2297 is 23.6% 1.2261 is 38.2% 1.2232 is 50% 1.2204 is 61.8%. I don't think it is entirely out of the question that we should see more momentum upwards through the rest of today's session, but look for the opposite to happen for tomorrow's Asian and European sessions. It seems to be here lately that whatever the market does during the New York session, it then reverses during the Asian sessions. I am continuing to watch my downtrend line on the hourly charts. This recent rally respected that line very well so it will provide another sell entry if retested again, but look for a continuation upwards if it is broken today.