Fundamentally - of the currency pair #EURUSD
"The ECB is planning a new intervention, prepares us for the reduction of the single currency, but is there any ammo?"
The single European currency continued to decline, currently has departed from its high at 360 points, having one of the three main lines of support. All the fault proved to be the head of the ECB who promised in the event of the need to increase incentives. However, if there is such an opportunity for Mr. Draghi? Recall that the last time, when the went to extra incentives (reduced deposit rate) euro only strengthened.
What can offer the market the ECB?
- The increase in the program of quantitative easing ( ), may increase the monthly purchases of bonds and ABS / extend the life of the program.
This program creates several risks such as:
1) Compression of liquidity on bond markets and shaky stability.
2) Reducing the rate of bond creates negative consequences for the banking sector.
3) Too long program of quantitative easing may be problematic to make out of it.
- Reduction of the deposit rate, we have observed this mistake last time, so the chance that the ECB will do it again is extremely unlikely.
If Mario Draghi will make this mistake, the euro once again waiting for takeoff, as market participants expect a large-scale action by the ECB.
- Resumption of LTRO program, that's the idea, while reducing the deposit rate is the ideal solution for the ECB. Thus Mario Draghi would distribute loans in the euro area and not be afraid that the banks will take the Lombard loans and take the money from the ECB.
We believe that this strategy would be the most best as a risk that the banks will no longer invest in stocks, too high and instability. Investing in government bonds is not eliminated, but again it is money napryavyatsya weak economy periphery, so that it is necessary the ECB. And many will want to lend to the real sector, because the selection has not left much.
We remain bulls for the single currency and despite the fact that we prefer to purchase, we always warn you about turns. Current stabilization of an important psychological mark of the euro gives strength for further growth. speak and fundamental factors in favor of growth:
- A strong balance of payments.
- A large trade surplus.
- The inflow of portfolio investment.
- Reduction of net speculative positions on the euro .
Purchases will be made on 3 levels, the stop is not provided due to the small volumes of purchases and the Japanese yen .
Technical comment: The single European currency continues to trade in an upward range on the and konsalidatsionnom range on the weekly chart. The main resistance is located at the bottom before .
Shopping is recommended from: 1.1000 / 1.1120
Sales should be considered from: 1.1400
CFTC: These continue to please the bulls on the euro , this time traders reduced their positions before - 48.2 k, which is a reflection of the positive mood of market participants to the single European currency.
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