We have been trading the EUR/USD short since 1.38 took profit into 1.36 but now have re sold the break of this level - target 1.34. In the GBP/USD were short from 1.64 and approaching 1.63 but were oversold so will bank our profit In the commodity currencies, our AUD/USD short is doing well and we are now at new daily lows and in USD/CAD, we are overbought and swing trading short for move to support. Finally in USD/JPY, we have re entered the short side on a break of the mid BB and looking for 103.00 on the downside. Euro Zone - No Recovery in Euro Zone The ECB as widely expected kept rates on hold this month but as I thought Mario Draghi kept interest rate cuts on the table due to dangerously low inflation. Draghi said there are two factors that may prompt the ECB to cut borrowing costs again. One is an unwarranted tightening of the short-term money markets, and the other is a worsening of our medium-term outlook for inflation. The Euro has held up well in recent months but inflation figures from the zone, point to deflationary pressure which will force the ECB to loosen monetary policy and as we note above the ECB have kept this option open but for now, we have some optimism about the economy and the Euro remains firm but the optimism is mostly based around Germany... Euro zone businesses ended the year on a high as new orders surged, but the chasm between a resurgent Germany and wilting France has widened this month” (Reuters) Germany is the only major country in Euro zone doing well – the other big three Spain, Italy and euro zones second largest economy France are all struggling. The French composite PMI fell to a seven-month low of 47.0 which is well below Germany at 55.2. The PMI for the services sector, which makes up the major part of euro zones economy fell to 51.0 from 51.2 against economists predictions for a rise. Services firms cut prices again last month, as they have done for the last two years in order to sell and data on Tuesday is expected to show prices rose across by just 0.9% in November against an ECB Target of 2.0%. The trade surplus for euro zone was 17.2 billion euros ($23.62 billion) in October, compared with 9.6 billion euro surplus in the same period last year which again shows weak domestic demand. The ECB will need to move to stimulate demand or deflation will set in and the zone will face a lost decade like Japan did. The ECB are on hold but they have already said they will use monetary easing if they have to and will move in the next couple of months to do so. Euro zone manufacturing PMI rose to 51.6 last month from Octobers 51.3 but Frances PMI hit a five-month low of 48.4 from 49.1, while Spains manufacturing sector contracted. The problem in the zone is – take Germany out of the picture and its clear why the ECB will move to monetary easing. At present though the perception of the market is the ECB will not move to cut interest rates but economic data will continue to disappoint and put it back on the agenda. The euro zone economy is slowing up - there is a lack of lending, high unemployment, slowing growth across most of the zone and the nations in debt need help. Germany is doing well but the rest of the zone is in deep trouble The ECB will have no choice but to act and try and kick start growth. Lee@ Capital Edge FX
Posted on: Sun, 19 Jan 2014 09:23:35 +0000
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