Euro Weekly Trend Line Under Attack
Marc Chandler | Jul 20, 2014 02:39AM ET
This Great Graphic, created on Bloomberg, is a weekly bar chart of the euro. In July 2012, the euro approached the $1.20 level, the lowest level since it bottomed in 2010 just below $1.1880. Last July, the euro slipped toward $1.2750.
The trend line that connects the two events comes in near $1.3470 next week. This is just below the low for the year set in February.
A key issue is whether this trend is violated. Technical considerations warn that this is indeed the risk. Although, we expect the dollar to strengthen over time, we are suspicious of a break now. The flows into Europe may be shifting away from peripheral sovereign bonds and equities toward bank loan portfolios and mortgage related securities. Meanwhile the May current account surplus of 19.5 bln euros reported earlier today brings the 12-month cumulative surplus to 2.3% of GDP compared with 2.0% of GDP in the 12-months through May 2013.
On the US side of the equation, despite a cacophony of voices, the key signal from Yellen is that there is still significant slack in the labor market, inflation reports are still noisy, and while there are some excess evident in some asset markets, the Fed will maintain its course. It will finish tapering in October and the first rate hike is most likely still some way off. Yellen accepts and wants investors to accept the fact that despite vast amount of information that is available, the Fed's ability to forecast the economy is far from flawless. As economic activity unfolds, the Fed's stance will evolve. The judgment of the Federal Reserve is superior to blindly following some rule-based formula that is to be the best in all times and under all conditions.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.