Euro Crashes On ECB Coeure Statement May 20, 2015
Front Loading QE And Long Term Negative Rate Statement Sends Euro Tumbling
The Euro started its nose dive yesterday on the ECB member Coeure statement saying they would be doing more QE faster which should weaken the Euro but more important was the part about having an extended period of negative interest rates showing that even though they are low on available assets to buy they will keep it up even if it means the banks will now start paying you to take out a loan in Europe. The statement from an article this morning sums it up rather well.
When US Macro data started to crumble after QE3 ended last year, and with it US equities, The Fed unleashed Jim Bullard to suggest that QE4 was possible if things deteriorated… and in that moment, everything broke. The last few months have seen expectations of a European recovery dashed as macro data has disappointed greatly – now weaker on the year. So what is Draghi to do? Easy – Fed playbook: unleash Benoit Coeure to suggest moar QE sooner and maintain the illusion of future success in stock prices (even as data collapses)…
However now that the ECB is following the Fed play book and the Fed is getting more Japanese (BOJ) by the minute. Its only a matter of time before we are all Japanese. Joke ha ha.
Yesterday also had a very good Boom Bust episode with Steve Keen and Peter Schiff interviews. These guys usually have it spot on even if timing is off a bit. I admit I was surprised what lengths the powers that be would take to maintain their grip so I personally gave up on timing the correction. They can only fight the law of gravity for so long.
EUR/USD Dives 200+ Pips
The second push on the EUR/USD came with a tape bomb yesterday dropping it well over 200 pips so I will be slightly bias for the next push down today. However the run is well beyond what we normally expect for a three push move so I will be open for a long if they want to flush out some weak shorts before running it down. I am holding the bias downward because the attempt to try and close some of the inefficient move failed miserably before pushing lower. The best level to short is at 1.1158 but they may only hit the Asian highs if the conviction is strong enough. I will be open for the long from the lows at 1.1120 but will need enough to show they have no interest in pushing it lower.
GBP/USD Runs Extended Push Down
The move on the GBP/USd took some time after the ECB comments to get rolling. I figured it would follow suit with the EU but needed the disappointing CPI data to get them rolling. Today I will still have a small bias for the short but as with the EU they could be running a short squeeze first. The best level to short is at 1.5519 but popping the break out traders to the Asian highs would be best to see for a set up. I will be open for the long at 1.5460 but hope to already be short on a test that low.
EUR/JPY Tumbles On Euro Weakness
The EUR/JPY was hit hard along with the all the Euro crosses even though it didnt continue like the EU being held up by some Yen weakness late in the day. The same goes for this pair in that I will still be bias for the next push but not treating it as a short only scenario typical of when we are looking to see the third push. This slight hourly conviction isnt enough to convince me they will be testing upward first so I will be open for the short at the Asian highs during London. If they cant manage to pull it back further then the probability of the test higher goes up. The best potential long is at the lows around 134.06 but again I prefer to be short if it tests that low.
Forex News Today
News releases are slow today. The UK has the BOE meeting minutes along with the vote counts. I highly doubt the minutes will be any different than the latest rhetoric but if by chance there is a change in the vote count they will run the GBP around. Considering they have been rather quiet I dont expect it but its possible.
The US also has the FOMC Minutes. This could be interesting if they started discussing the weak macro data in the US. If so then the big boys will likely take that as a hint on any rate hike. Or lack of being more accurate. Otherwise if they were still touting the recovery then the USD strength should hold.
Asian session traders have the Chinese HSBC Manufacturing PMI data that could get the Aussie running. Its expected to improve but still be below 50. Any disappointment will be AUD negative while any pop above 50 even more positive. My thoughts are there is a higher chance for a disappointment considering recent Chinese data.
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