Recap
Cyprus's week of fame is over. The pair dipped down briefly to 1.2850 and closed the week by recovering about half of it's opening gap at 1.2988. It's currently quoting 1.3040 and has nearly touched 1.3050 on the Cyprus bailout package news, as of midnight Sunday EST.
Cyprus's week of fame is over. The pair dipped down briefly to 1.2850 and closed the week by recovering about half of it's opening gap at 1.2988. It's currently quoting 1.3040 and has nearly touched 1.3050 on the Cyprus bailout package news, as of midnight Sunday EST.
The week was dominated by Cyprus, but there was some key data points that should not be glossed over. The EZ service PMIs all came in well below estimates - France's economy continues it's stunning contraction, and even Germany's service PMI was barely expansionary. Manufacturing indicators across the EZ were also dismal and price indices continue to show less inflation than projected. Rate cut anyone...?
Where From Here
As we called the neutral positioning on Friday for a weekend gap/break to the upside on positive Cyprus news, we are sitting long and looking for a spot to close out and return to shorting the pair based on the poor fundamental situation and the likelihood of an ECB rate cut. I'm favoring 1.3125 as a reversal point, but I feel the relief rally risks running out of steam before then. This week is relatively light on EZ data, so watch USD data releases for possible catalysts. I will be looking to find a decent exit by Tuesday's USD durable goods release.
As we called the neutral positioning on Friday for a weekend gap/break to the upside on positive Cyprus news, we are sitting long and looking for a spot to close out and return to shorting the pair based on the poor fundamental situation and the likelihood of an ECB rate cut. I'm favoring 1.3125 as a reversal point, but I feel the relief rally risks running out of steam before then. This week is relatively light on EZ data, so watch USD data releases for possible catalysts. I will be looking to find a decent exit by Tuesday's USD durable goods release.
Mon
Everyone's favorite PhD economist, Benny Bernanke is on the docket for a speech on Monday at the London School of Economics at 13:15 EST. I can't see anything new happening here, except maybe more of a discussion of Benny's new QE Tool: the ratchet. In case anyone missed last week's Fed monetary policy event, the Fed will employ use of the ratchet to dial down QE as conditions improve (or dial up if they headfake... hmmm). I'd expect the EURUSD to close NY somewhere within 25 pips of the session high.
Everyone's favorite PhD economist, Benny Bernanke is on the docket for a speech on Monday at the London School of Economics at 13:15 EST. I can't see anything new happening here, except maybe more of a discussion of Benny's new QE Tool: the ratchet. In case anyone missed last week's Fed monetary policy event, the Fed will employ use of the ratchet to dial down QE as conditions improve (or dial up if they headfake... hmmm). I'd expect the EURUSD to close NY somewhere within 25 pips of the session high.
Tue
USD durable goods for Feb at 8:30 EST is the big USD data release for the week. Given the extreme recent volatility in this figure over the past 6 months, plus the sharp decline in Jan, it seems like this release has potential to create waves. Expectations are for a 2.5% increase. Given the govt spending reductions, the recent FedEx earnings miss and the Walmart February "disaster" situation, I would favor a miss here. But on the other hand, retail sales, which are more of a lagging indicator beat estimates soundly last week, so I remain cautious with my bearish sentiment. If these numbers come in line or better, I think this is a solid signal to short EURUSD.
USD durable goods for Feb at 8:30 EST is the big USD data release for the week. Given the extreme recent volatility in this figure over the past 6 months, plus the sharp decline in Jan, it seems like this release has potential to create waves. Expectations are for a 2.5% increase. Given the govt spending reductions, the recent FedEx earnings miss and the Walmart February "disaster" situation, I would favor a miss here. But on the other hand, retail sales, which are more of a lagging indicator beat estimates soundly last week, so I remain cautious with my bearish sentiment. If these numbers come in line or better, I think this is a solid signal to short EURUSD.
Wed
<too tired to finish right now>
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