Once again the market has given us the biggest clue over potential future price moves in the euro. By and large we’ve stabilised after the big fall from 1.3993 pulled up at 1.2500. The market is short and the fact we haven’t gone lower says that shorts have found their comfort level where they don’t want to overextend themselves by pushing it lower.
The two ECB headlines have shown us something important though. There is a willingness to drive the euro lower but it now needs a real reason to do so. The sellers now need something concrete before they jump in again rather than selling on the sentiment and expectation that got us this far.
To me that reinforces the potentially strong short term bottom and we will need a big headline or action to break it.
We can be caught up in the “where now?” after a big move and it’s these little clues that help us make that decision. There’s plenty of other things in the mix too but from the euro side the market has has shown it’s hand. Today’s moves should have given some encouragement to buyers and will add further strength to the bigger support levels below.
Equity markets are the main driver as earnings continue to roll in.
Apple shares are up 2.1% after upbeat forecasts while Coca-Cola guided but the overall mood is upbeat with S&P futures up 9 points. In Canada, CP Rail missed on the top and bottom line but that hasn’t slowed early Canadian dollar gains.
The big news in Asia-Pacific trading was slight stronger Chinese GDP.
The lone data point to watch is US September existing home sales at 10 am ET (1400 GMT). The SNB’s Zurbruegg also speaks in Geneva two hours later.
Given the backdrop it will be moves in stocks and bonds along with headlines out of Europe (like ECB corporate bond non-buying) that will be the drivers.
Headline ping pong today. EUR/USD bounces to 1.2783
Just looking for the story now.
It’s up on Fast FT and is another “sources” story saying that corporate bond buying will not be on the agenda at the December ECB meeting.
Add it all together and there’s no official denial that it’s being chewed over and we’re unlikely to see any concrete comment from Draghi at the December meeting. We’ll not have to wait that long as the question will obviously come up at the 6th Nov meeting.
Here’s a link to the article which doesn’t offer a lot really.
As for the price moves, it just shows how willing the market is to jump on any QE type headlines, and also there’s not a lot else going on right now.
European stocks have unsurprisingly been knocked back on the news too.
As New York traders enter for the trading day, the forex market is showing that the Australian dollar (AUD) and the New Zealand dollar (NZD) are the strongest currencies. China posted a slightly stronger GDP of 7.3% vs 7.2%. This sent both currencies higher as their economies rely on exports to China for economic growth.
The weakest currencies are the Swiss franc (CHF) and the euro (EUR). The EUR is under pressure on a Reuters report that the ECB is looking to purchase corporate bonds as a way to add liquidity to the market. The ECB denied the report but the markets focus was reminded of the relative weakness of the EUR. In Switzerland, their trade balance came in with a surplus of 2.45 billion. However, both exports (-3.3%) and imports (-7.4%) fell. The CHF is tied to the EUR’s fortune as the SNB continues to pledge that the EURCHF will not go below the 1.2000 level. As a result, if the EURO is under pressure, so too should the CHF.
Forex: The strongest and weakest currencies as NY traders enter for the trading day.
The US dollar is mixed at the New York opening. It is stronger against the EUR and CHF, little changed against the GBP, but down against the JPY, CAD, AUD and NZD.
Stocks and Bonds
Stocks are higher in Europe and in pre-market US trading.
The European stock markets are showing gains this morning (German Dax up 1.36%, Euro Stoxx up 1.53%, UK FTSE up 0.83%) on the additional stimulus idea (more liquidity pushes up stocks). The European stock indices – with the exception of the Spanish Ibex (+1.79% for the year) are showing declines, with the German Dax performing the worst at down 7.57% (see chart below). This is not helping matters in the EU.
The YTD change in global stock markets.
In the US pre-market, stocks are also expected to rise (S&P futures up 0.66%, Nasdaq futures up 0.83%) after Apple earnings -reported after the close last night – were better than expectations.
The bond markets are steady. The 10-year US treasury is at 2.20% vs 2.19% yesterday. German bunds are trading at 0.88% also little changed from yesterday’s levels. Spain and Italian bonds are dipping lower a bit after the sharp run up in last week’s trading.
Doesn’t sound like a whole heap of punishment to me but hey what’s new?
Livesquawk reporting Rtrs sources
- JP Morgan gets hit with EUR 70mln fine
- UBS and Credit Suisse make up the balance
- RBS, who alerted the EU Commission, receives no fine
The euro continues to bleed lower and breaking support at 0.7900. EUR/USD down also to support I highlighted starting around 1.2743. The low there, 1.2745.
There’s been an old S&R level here around 0.7890 so we’ll need to see that taken out for a push lower. If we do then decent support comes in next at 0.7850.
EUR/GBP Daily chart 21 10 2014
At the moment cable is holding up as the euro slides so the pressure is on. Watch for 0.7900 to become resistance ahead of 0.7910 and 0.7920.
Speaking in parliament
BESR fears all gone then ?
Bank of Portugal came to the rescue on Banco Espirito on 4th August on what was deemed to be a one-off case,so let’s hope the fin min’s optimism is well based
Meanwhile EURUSD still moping around 1.2750 with EURGBP posting 0.7890 but still not broken imho with decent bids at 0.7880-85 still to be tested
- Says GDP numbers well within expected growth range
Last night China posted lower GDP but it beat expectations
Further comments on Bloomberg
- Number of factors pressure economy
- External circumstances are complicated
- Takes time to see effects from reforms
- Not complacent on upcoming challenges
The comments are from a statement posted on Chinese government website gov.cn
Forex news from the European morning session 21 October 2014
It’s been a mixed bag of a session but one that has seen the euro take a dive on reports that the ECB is buying corporate bonds and one step closer to QE.
It all started steady enough with USDJPY finding support around 106.25 as the Nikkei closed off its lows and with EURUSD looking wanted above 1.2810 but then as the ECB news drifted through we saw a turn-around and a quick dip from 1.2815 to 1.2785 and ultimately to 1.2751 as I type.
GBPUSD had held up on EURGBP selling having reversed an early move in the opposite direction where it had tested 1.6150 support with EURGBP being bought to 0.7943. Eventually though with 0.7900 holding the euro falls we saw cable give way to post 1.6143 from 1.6165.
USDCHF posted 0.9397 on the early euro strength but needed little encouragement in the end to shadow the subsequent falls and has now been up to 0.9468 with EURCHF steady around 1.2070. USDJPY has rallied to 106.85 but finds offers again with EURJPY now on session lows of 136.15
USDCAD came down to take out the 1.1250 bids to post 1.1242 but has been steady since while AUDUSD has largely looked comfortable above 0.8800 after a brief dip below.NZDUSD has traded tightly around 0.7890 since its retreat from 0.8035
Lots going on then and undoubtedly more to come before the day is out.
- BOJ will continue to monitor how financial market moves impact Japan’s economy and prices
The BOJ has said they will protect the country against volatile moves but we will have to see some very big swings for them to get involved
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