EUR/USD: ECB Quantitative Easing: Not If, But How?

Analysis by: http://growthaces.com

GROWTHACES.COM Forex Trading Strategies:

Taken Positions:

EUR/USD trading strategy: long at 1.1825, target 1.2020, stop-loss 1.1740

GBP/USD trading strategy: long at 1.5145, target 1.5440, stop-loss 1.5080

USD/CHF trading strategy: short at 1.0165, target 0.9990, stop-loss 1.0230

EUR/GBP trading strategy: short at 0.7850, target 0.7700, stop-loss 0.7840

EUR/CHF trading strategy: long at 1.2025, target 1.2090, stop-loss 1.1995

Pending Orders:

USD/CAD trading strategy: buy at 1.1810, target 1.1990, stop-loss 1.1740

Forex Trading Strategies

EUR/USD: ECB Quantitative Easing: Not If, But How?

(Long For 1.2020)

• Richmond Fed President Jeffrey Lacker, a voting member of the FOMC, said drop in oil prices and a strong USD were not impacting his view that inflation expectations would rise toward the central bank’s 2% target. In his opinion key consumer sector has picked up in recent months with the acceleration of household spending and improved employment prospects.
• Ignazio Visco, who sits on the ECB’s Governing Council, said: “If the inflation figures remain very low for too long and the economy hardly grows, we risk being drawn into a downward spiral that will intensify itself on and on.”
• A German member of the European Central Bank’s Executive Board Sabine Lautenschlaeger has called into question the need for the ECB to buy government bonds, saying that the risks currently outweighed any rewards. Her comments join a chorus of criticism in Germany of ECB plans to print fresh money to buy government bonds.
• In our opinion recent comments from the ECB suggests that the decision on quantitative easing is almost a done deal despite German objections. The question is not if the ECB implements the quantitative easing , but how large will be the scale of the programme. In our view quantitative easing has been already priced in the EUR/USD level. That is why we expect profit taking on recent EUR-selling positions and higher EUR/USD levels in the medium term. Lower scale of the programme may disappoint investors and lead to even stronger rise in the EUR/USD.
• Let us remind Friday’s non-farm payroll data. The employment rose 252k in December, following an upward revision to the prior month’s increase, now 353k. The unemployment rate fell to 5.6% from 5.8% in November. The market expected a rise in non-farm payrolls of 240k and a fall of unemployment rate to 5.7%.
• Average weekly hours remained at 34.6, the same as in the previous month, but hourly earnings fell by 0.2% mom vs. median forecast of growth by 0.2% mom and growth of 0.2% mom in November. Friday’s wage numbers questioned why the Federal Reserve should raise interest rates this year in the absence of clear evidence of pressure on inflation. That was why the EUR/USD went higher on Friday after short-lived reaction to slightly better-than-expected non-farm payroll data.
• We closed our previous EUR/USD short position after the non-farm payroll data and shifted to long at 1.1825. We set the target of our trading strategy at 1.2020. The EUR/USD fell back towards 1.1800 today and reached a day’s low at 1.1789.
• Let us take a look at the economic calendar for his week. There are some important macroeconomic releases: Euro zone industrial production, U.S. retail sales (on Wednesday) and U.S. CPI, industrial production and consumer sentiment of the Michigan University (on Friday). The market will be focused also on the ECB’s Draghi speech in Berlin scheduled for Wednesday.

Significant technical analysis’ levels:

Resistance: 1.1897 (high Jan 7), 1.1952 (10-dma), 1.1969 (high Jan 6)

Support: 1.1754 (low Jan 8), 1.1640 (monthly low Nov, 2005), 1.1376 (monthly low Nov, 2003)

USD/CAD Is Getting Ready To Tackle 1.2000

(medium-term outlook remains bullish)

• Canada’s job market shed 4.3k positions after a loss of 10.7k jobs in November, while the unemployment rate remained at 6.6%. The market had expected an increase of 15k jobs. The two months of declines followed big gains in September and October. The labor participation rate, which is of particular interest to the central bank, slipped to 65.9%, the lowest since October 2001. The Bank of Canada said last month the labor market still showed significant slack.
• Disappointment in the headline figures was somewhat tempered by the fact that wages were higher, losses were skewed toward part-time work, and full-time figures were robust.
• Statistics Canada data showed on Friday, the value of Canadian building permits fell by a larger-than-expected 13.8% in November from October. Residential permits decreased by 3.1%, with declines for both single and multi-family dwellings, while non-residential permits shrank by 29.2%.
• A rise in the USD/CAD is the combination of solid U.S. jobs report and weak Canadian figures. In our opinion the medium-term outlook for the USD/CAD is bullish and our trading strategy for this pair is to get long at 1.1810.

Significant technical analysis’ levels:

Resistance: 1.1890 (high Jan 9), 1.1900 (psychological level), 1.1980 (low Apr 16, 2009)

Support: 1.1805 (low Jan 9), 1.1797 (low Jan 8), 1.1765 (10-dma)

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