continuation of the EUR/USD analysis

Hello,

 

 

From the memorable ECB conference dated June 5, about which I wrote a quite interesting summary <here> passed a lot of time, exactly one month. Since then, all interest rates regarding the transactions settlement in euro dropped significantly. About the effect of the interest rate market also I wrote one entry. More information along with fundamental analysis EUR/USD <this time - here>.

 

Since that time easy to see that all economic factors indicate a strong appreciation of the U.S. dollar against most currencies. And most of all against the euro.

 

Even investment banks this time are very consistent and indicate a strengthening of the dollar in the coming weeks. More reviews below.

 

In the last recommendation <more information - here> I encouraged to take positions long in the EUR/USD pair which allowed to earn less than 80 pips. Then, in the statement of transactions, number 27 I informed that after reaching the levels should be expected in the coming days back at around the level of 1.3575. And at that moment is approaching this level.

 

To facilitate the understanding of the current situation in the first place I will put the chart.

 

chart 1. technical analysis of EUR/USD, H1, 2014-07-06 

 

The current reflection on the currency pair rather due to technical factors rather than fundamentals. On the chart shows the important level, which should decide on sentiment in the coming week. Therefore, when the quotation is coming to the indicated level should watch the market and at the right time to take a long position. In the case of a strong break of that level should then take into account the possibility of the end of correction and expect new lows in the coming days. It is worth noting that the current yield of the German 2Y is only at the level of 0.16%. The last time these papers were of such low interest rates in May 2013.

 

 

Opinions of the investent banks:

 

Commerzbank

"The market is seeing some fairly choppy trading but remains essentially corrective near term. The Elliott wave count on the daily chart is suggesting a rebound to 1.3770 prior to the next swing lower. Intraday charts are neutral and rallies will find initial resistance at 1.3644, 1.3677/90 (early June high and Fibo)," CB projects.

 

"Our longer term view remains bearish while we are below 1.40, the Elliott wave count on the daily chart is suggesting that rebounds should not exceed the 1.3775 zone," CB adds.

 

UBS

EUR/USD: NEUTRAL. The latest decline brings our focus on support at 1.3584, a breach of which will be negative, triggering a move lower to 1.3477. Resistance is at 1.3700 ahead of 1.3806.

 

Morgan Stanley

Morgan Stanley reiterates its bearish EUR view and expresses that via holding 2 short EUR/USD positions as a short-term and medium-term recommendations.

 

Falling peripheral yields:

"Peripheral bond yields have come down and with the €400 billion TLTRO standing ready to boost commercial bank balance sheets, peripheral bond yields are likely to fall further. However, falling peripheral yields should reduce the attractiveness of this asset class for non-bank investors. Investors will likely look for alternatives and, with cross-currency yield differentials widening in favor of non-EUR currencies, EUR should come under selling pressure," MS argues.

 

Voliatily is a key:

"The level of volatility will decide if EUR is falling slowly or at a brisk pace. Should volatility stay low, carry will remain the dominant theme, suggesting EUR crosses trading moderately lower. Nonetheless, as soon as volatility picks up, EURUSD should trade sharply lower," MS adds.

 

 

regards,

oscarjp

 

 

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