Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Where is the Bottom in the Euro?

Currencies / Euro Jun 25, 2014 - 02:21 PM GMT

By: Richard_Cox


In the last few weeks, the Euro has reversed a good portion of the gains made during the early parts of this year as the monetary policy outlook at the ECB looks to be changing at a rate that is more aggressive than previously expected.  Looking at specific forex rates, the EUR/USD hit an initial high just below the 1.40 mark before making a violent turn to the downside that has pushed traders to an alternate viewpoint where the shared Euro currency is looking much more attractive as a sell on rallies rather than as a buy on dips.  These trends are being aided by new positives in the US economic, and a good portion of the market is now using the Dollar as a means for exiting long positions in the Euro itself. 

ECB Concerns

“For most of this year, the market has largely ignored the concerns that have been expressed by the European Central Bank and sold the Dollar in anticipation of a broader shift away from safe haven assets,” according to the forex strategy team at ForexAbode. “This has led to significant declines in precious metals ETFs like the SPDR Gold Trust ETF (NYSE:GLD) and the iShares Silver Trust ETF (NYSE:SLV), as well as the PowerShares DB US Dollar Index Bullish ETF (NYSE:UUP).” 

In contrast, the SPDR S&P 500 Trust ETF (NYSE:SPY) has pressed forward to new all-time highs as investors have clearly become much more optimistic about the growth projections for the global economy.  But the trends in the Euro here are telling, give the fact that the Euro tends to fall in line with whatever is happening in the higher yielding currencies.  This is because currency markets tend to work for or against whatever is happening in the US Dollar, and the Euro is often the primary alternative for those that are looking to establish alternative positioning. 

The fact that the Euro has not been able to rally is telling, and shows that markets are much more interested in the concerns at the ECB rather than in the historical trends that are seen in the commonly accepted currency correlations.  Several voting members at the ECB have highlighted weakness in their speeches, and for those closely watching the region’s fundamentals this is hardly surprising.  GDP growth rates for the Eurozone as a whole have been abysmal, barely holding support in positive territory.  The collective unemployment rate still stands at 11.3% and there is emerging evidence that the sovereign debt crisis has not been managed in ways that will allow the region to produce sustainable growth any time soon. 

Relative Performances

All of these factors should be lightning warning signals for those that are heavily exposed to assets that are backed by the value of the Euro.  Relative growth performances and the stated policy stance at the ECB suggest that the currencies counterparts are now in the position to start making long term gains, and it will be important now to watch price activity not only in Dollar-backed assets but in the Guggenheim CurrencyShares Euro Trust (FXE) and the CurrencyShares Japanese Yen Trust ETF (FXY), as well.  A good portion of the expected moves have already be seen in the EUR/USD currency pair, so it might even make more sense to start selling the Euro in favor of one of these other alternatives. 

Shorter term, volatility will likely center around any new commentary that is released by the ECB.  Economic data out of the Eurozone is generally not market moving but we could start to see some expectations given the current market conditions and the reduced liquidity levels that are starting to occur as we head into summer.  We have not really seen extreme Euro moves in the non-Dollar pairs, so there is clear scope for some significant activities in the Euro crosses.  So be aware of these possibilities as we head into next month.

By Richard Cox

© 2014 Richard Cox - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in