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How The European Energy Crisis Is Affecting The Euro‍The euro-dollar exchange rate captures the value of the euro in terms of U.S. dollars. It’s one of the most widely tracked and significant global currency indicators, given that Europe is a major economic region with a strong currency, and many international financial transactions are denominated in euros. Moreover, the euro has been under pressure in recent months because of renewed concerns about European debt and fears that the European Central Bank may curtail its massive stimulus program too early (Injecting Billions of Euros into Eurozone debt - pandemic-era bond-buying program), which would make it harder for countries like Italy to service their debt. With all this in mind, let’s take a look at why the Euro Declined Against the US Dollar and hit a 20 Year Low recently. The European Energy Crisis Energy is a critical aspect of any economic outlook. As such, it is no surprise that Europe’s energy crisis has exacerbated its economic problems. Europe currently relies on Russia for approximately 50% of its natural gas. Europe’s heavy reliance on Russian gas is a major source of tension between the EU and Russia. The EU has placed sanctions on Russian energy firms, making it difficult for them to acquire equipment and technology they need to develop their energy infrastructure. That has left Europe with few viable options for alternative suppliers. Effects of EU Sanctions against Russian The EU’s Largest Member States Are Suffering The most significant economic problems can be found in Europe’s largest economies: Italy, France, Germany, and Spain. And those four economies are suffering because of the energy crisis, a weak euro, Brexit, and rising interest rates. The euro has been trading at a relatively low level against the U.S. dollar for years. However, the euro’s weakness has recently accelerated, as the European Central Bank adopted a more hawkish tone. That has made it more expensive for other countries to buy euros. Ergo, pushing up borrowing costs for euro-zone countries that are heavily indebted like Italy, France, and Spain. It has also made it more expensive for the European Union’s most powerful economies to service their debt. Political Instability It’s important to mention political instability because it has been an ongoing issue in Europe for years, particularly in countries like Italy, France, and Germany. That’s led to significant political uncertainty that has kept investors away and made it more difficult for these countries to get the strong economic growth they need to deal with their debt problems. The United Kingdom has been a major trading partner with the EU, The political environment surrounding the Brexit has led to significant economic uncertainty. Eurozone Growth Is Stagnant One of the most important economic metrics is GDP growth, which is the rate at which an economy is producing goods and services. Eurozone GDP growth has been relatively low for years, and it recently fell to a 17-year low. That’s largely due to lack of investment in major economies like France, Germany, and Italy, which are the most significant contributors to the eurozone’s GDP. When the energy crisis hit the EU, businesses stopped investing in plant and equipment necessary for growth. As a result, GDP shrank throughout the region. That’s forced the European Central Bank to take strong action, including negative interest rates and quantitative easing. However, those policies have had only limited success, as Europe is still facing an investment drought. European Union Debt Crisis The EU debt crisis emerged in 2010 when major economies like Italy, Spain, and Greece racked up unsustainable debt loads. Although it has faded in recent years, it remains a major issue, particularly for Italy and Spain. That’s because the two countries have large debt loads, and they are suffering from slower growth, making it harder to service that debt. That’s created significant economic uncertainty, as investors have been reluctant to lend to these countries. The European Central Bank has stepped in, making it easier for these countries to borrow, including buying their debt. However, the ECB’s actions have also made it easier for other EU countries to borrow, which has contributed to the rise in interest rates that are hurting France and Germany. ECB Tapering As the energy crisis worsened and economic growth was weak throughout the European Union, the European Central Bank boosted its monetary stimulus to stave off a deeper downturn. That included purchases of billions of euros of assets, including government bonds, per month. That quantitative easing program has been credited with helping Europe’s major economies, particularly Germany, avoid a full-blown economic crisis, as well as keeping the value of the euro low. That has also bolstered economic growth in other EU countries, like France and Italy, that rely on exports to Germany. However, with the energy crisis easing and economic growth gaining momentum, the ECB began to taper its QE program, reducing monthly purchases to just €30 billion. boosting the borrowing costs of the European Union’s larger economies. Oil Price Impact The energy crisis has also driven up the price of oil and other commodities. That has put additional pressure on the EU’s most significant economies, as their industries have been affected by higher prices. That’s particularly true for France and Italy, which have been among the hardest hit by the energy crisis and oil price surge. That’s made it more difficult for those economies to export goods and services, which has contributed to the stagnation of their GDP. Conclusion The European energy crisis has been a major problem for the EU. It has driven up the price of oil and gas, while making it more difficult for countries to import those resources. That has put the EU at an economic disadvantage when compared to other major regions, like the United States. That’s made it harder for the EU to recover from a variety of economic issues, including a low growth rate, high debt levels, and political instability. It remains to be seen if the EU can overcome its energy crisis and get back on track to economic prosperity. EUROZONE INFLATION RATE Important Upcoming Events that will cause volatility in the market
by EQTSHARES
30
The Demise of Euro Is Not Greatly ExaggeratedCME:6E1! The U.S. dollar reached 1:1 parity with Euro on Tuesday for the first time in 20 years. Wall Street may tell you that the common currency for 19 European countries has been hammered by economic woes, high inflation, and an energy supply crisis brought by the Russia-Ukraine conflict. I have a very straight-forward answer to the depreciation of the Euro. It is in a simple mathematical formula. In economics, Interest rate parity (IRP) states that the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate. The formula for IRP is: F0=S0× , where: F0=Forward Rate, S0=Spot Rate; ic=Interest rate in country c; ib=Interest rate in country b Inputs : The Fed raised rates three times from 0.0%-0.25% to current target of 1.50%-1.75% (ib). Meanwhile, the European Central Bank (ECB) maintains a deposit rate of -0.5% (ic). Before the first Fed rate hike in March, the Euro/USD spot rate was 1.04 (S0). Output : Plug the data into the IRP formula, you will get a forward rate of 1.017 (F0). This matches the observed exchange rate after the June rate hike. New Output : The market expects the Fed to raise another 75 bps on July 26th-27th. If we replace 1.75% with 2.50% in ib, the new Euro/USD forward rate would be 1.0096 (F1). Let’s explain this in plain English: An investor has the option of investing in either U.S. dollar or Euro. With higher rate, dollar asset produces a higher return. To make Euro more attractive, the investor would need more euros per unit of U.S. dollar. Therefore, Euro depreciates against the dollar. This is the logic behind IRP. It is called the Law of One Price . If we believe that the Fed would keep raising interest rates, and it would do so at a faster pace than the ECB, then Euro would continue to fall. By how much? You could try to work out your own estimate by plugging in different Fed and ECB interest rates at the IRP formula. I recognize that many factors would impact exchange rates. A framework using IRP is a simplified but effective way to construct a FX trading strategy. All the other factors can be viewed as variables influencing the rate decisions. Asides from the mathematical approach, we could consider a country’s currency to be reflective of its economic strength. Looking back at the last two decades since Euro’s inception, the European Union, and the Euro Zone in particular, has been outpaced by the United States in terms of GDP. Taking the GDP in 2000 as a baseline index 100, the U.S. has now reached 155, while the EU (excluding Britain) is at 133, and the Euro zone at 128, according to an analysis by the Economist. Whether it was the Subprime crisis in 2008, or the debt crisis in 2010, it took the EU economy much longer to recover comparing to the United States. Brexit raised a red flag of the long-term viability of a political and economic union of independent countries. If history is a guide, I can’t find a good case where one common currency existed among multiple nations for an extended period of time. Exceptions could only be found between an empire and its colonies. Europe would strive, but would a common currency need to be there? A short position in CME Euro-FX futures (6E) is a way to express this bearish view. The March (6EH3) contract may be a good choice. It was settled at 1.02415 on July 12th. There are five Fed meetings between now and contract expiration. Each rate-setting decision could potentially shock the Euro into further decline, in my opinion. Each contract has a notional value of €125,000. CME requires an initial margin of $2,400. For a short position, a decline (increase) of 1 basis point (0.01%) in the exchange rate of Euro will result in $12.50 in gain (loss) in your account balance. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME:6E1!Short
by JimHuangChicago
2
This Signal in Bond Yields Will Predict the Next Recession.After one of the most unexpected years, I thought I should take a step back and look at macroeconomics a little bit, at one specific chart that I've been watching. That is the German Government 10-Year Bond Yield (DE10Y). I've been anticipating a signal in that chart that will indicate massive shift in global market trends and will bring us closer to the next imminent recession. That signal is the breaking of the decades-long descending wedge. The momentum is still bearish, and this week the price got rejected at the upper line of the wedge. If this continues downards, then the economy remains in the same state. Central banks are printing currency at an unprecedented rate, and inflation is showing on commodoties and stocks and everything else. Governments are sinking more into debt, and the best place to put your money remains the stock market. That is until this wedge breaks. Because when it does, the bond yields will accelerate upwards. It will become more costly to borrow money. And the economy will slow down again. But this time, it is slowing down while everyone is extremely leveraged and deep in debt. We want to maximize our profit but we do not want to be caught in that state. That is why I pay attention to this chart and the DXY. There are many charts that can indicate the same outcome, but I choose to focus on one only that does the job. Now according to some Fibonacci levels, I predict another touch in October 2021. By then, perhaps the majority of zombie companies will have declared bankruptcy. Is it too soon for that? Will government regulation delay that even further? No idea. Too many factors to watch. So let's keep watching this one key chart.
TVC:DE10Y
by TechNerdOmar
Time to short the EuroThe current dead cat bounce in the Euro is impressive but is also an opportunity to open a short position in the EUR/USD pair. Price is getting squeezed between the rising support line drawn from 2000 and the falling resistance from the top of July 2008. Good places to increase the short position gradually is right now at 1.128, then the top of the falling resistance channel at 1.15, and finally the .236 Fib line at 1.165. Your stoploss should be decided based on taste, but 1.20 seems reasonable. The initial target is 1.04. Further targets can be determined once we reach the first one, targets as tempting as 0.82. As it stands, this trade has a 1.7 to 2.5 risk reward ratio based on how you position your short entries. I have to say I'm not much of a currency expert, but this my simple prediction from what I see.
Short
by TechNerdOmar
2
Euro gains faith of investors durring Corona Virus.E.U successfully overcomed the challenge of coronavirus unpredictable first strike. Even with the threat of italy and spain leaving the union, E.U stand united and finded the soloutin. That win against the pandemic gived faith to the investors who remained stand by the europeans. Also the elections of november for the next US president, the black live matters movement and the treatment of Trump's government for the pandemic shows an unstable economic enviroment.
by PanosLivieratos
Last resistance standingIrrational decision were made by the central banks which decided to float the markets with as much money as necessary and started even to buy junk bonds. So the signs for the markets are bullish even we have the biggest human made crisis since the great depression. The S&P made a real comeback based on price action and stands now in front of the last resistance before entering the bull market again in my opinion. I wouldn’t be surprised if we see the last resistance breaking. But never the less you have to be prepared for both cases and historical speaking it was never a great idea to bet against the central banks. But overall be careful with long-term investing in this kind of market environment, where the whole investing sector is driven by new COVID-19 numbers and statements of the central banks. Let's wait and see how it plays out...
CME_MINI:ES1!
by macrolukas
The collapse of EU has begunEurope can't afford much according to its bureaucrats. There has been a vote over "do we spend lots in 2021-2027 or nots" and big surprise 4 of the few countries that are net contributors to the EU are strongly agaisnt it, they have been called the "frugal 4" (Sweden Austria Netherlands Finland). And another huge surprise: "The Beja summit Joint Declaration was signed by 15 of the 17 “Friends of Cohesion”: Bulgaria, Cyprus, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia, and Spain." Wow all of the countries that are net recipients (except belgium luxembourg and croatia) all call for stronger EU budget. Didn't see that coming. So on one side you got suckers paying more taxes and getting nothing out of it, and on the other side countries that get free stuff and want more of it. "Friends of cohesion". They think germany france italy the netherlands are suckers that send free money to them, and believe they are entitled to more. What a ridiculous name. It's a little too advanced for the majority I think but if it wasn't that would be a strong source of memes. And the name is so biased "friends of cohesion" "the good guys that are racists". Why not call them "crappy poor countries with no pride that will lower themselves to beg"? Who is going to pay more for the EU? French farmers? Got to look into this, I think they have no choice but to take the deal Boris Johnson wants... Great days ahead for the UK. And now, Erdogan said he was tired of keeping refugees in and paying for them, and said a few days ago that if Europe did not do more he would open the gates. And he followed that very shortly by opening da gates. The gates are open. Refugees (including syrians that look alot like subsaharan africans) are already walking in. Greece police have fired tear gaz on them, but they are coming through anyway. Can europe take them in? There is obviously a limit. Simple math. Can europe take 1000 quadrillions people in? No there is not even enough air to breathe. So here, we have mathematically proven it was not possible. How many can EU take in? thousands? millions? tens of millions? What is the limit? How big is the burden? Europe is now controlled by 2 powers which are france and germany, with italy lagging behind a bit to be a 3rd big one. Are we going to see a Frexit? Will it take 10 million migrants raping and burning for the french to want a frexit? And then Europe belongs to germany & italy just like in 40 :D Brainwashed normies can believe what they want, these sheep have been slaves for more than 200 years and they have been pointless expendable npc figurants in the history of civilisation, so who cares what they think, it is simple logic and math that europe is going down. There is no magic only rational thought. How EURUSD reacts in the immediate future well that is uncertain, it is not efficient, price movement will depend on what very imperfect people think. If europeans start to turn their back on the euro and go bitcoin THEN alot of "champions of averageness" will REALLY start to care. @GertJanEU director general of the eu commission is explaining on Twitter the problem and answers to it. 500 millions of people impacted potentially dramatically, 1700 followers, 10 likes per post. kek. Lmao what people care most about, the climate obvious hoax, has to be cut out of the budget. :) Quoting him " On timing: we have a not-so-good solution, a bad solution & a very bad solution. We're already late. A deal on contingency would need mini MFF negotiations, deliver an outdated budget & likely to fail. The #EU may only be left with #CAP, humanitarian aid and foreign policy. " SHORT IT TO THE GROUND THE SHIP IS GOING DOWN.
Short
by MrRenev
5
Eurchf market overview and trade ideasLagarde’s surprisingly dovish presser from the U.S. session spooked EUR bulls and this anti-EUR sentiment carried over to the Asian session. The pair looks like it could retrace above the previous area of interest or around daily pivots R2 or 50% of Fibonacci retracement as because the short term moving average may suggest bullish trend but actually the long term indicate us it remains bearish still on the 1-hour time frame. Another rejection from the previous area of interest or rejection from descending trend line or from any Fibonacci retracement levels as mention above could send the pair beyond the level 1.06999. A break above the 50% Fib, descending trendline, daily pivot levels any and 200 SMA could signal for a move back up to the 1.0790 but to be honest with the current situation of eurozone I feel less supportive for the euro currency after Lagarde told a news conference that risks to growth in the eurozone remained tilted to the downside and which overall tone as dovish for me including other traders I assume plus knowing that today german outlook only doing fine overall but leaving eurozone Manufacturing PMI (Jan) only fine not the service and Markit Composite bull traders got no much reason to boost the euro higher.
Short
by Anatta0
UK Verdict, our recommendations and plansA new version of the Brexit deal has been agreed between the EU and the UK. The pound added about 500 points by the end of the week, bringing the account of its achievements to almost 1000 points. Recall that the UK and the EU, as we predicted, were able to agree on the terms of the deal at the last moment. As a result, at the EU summit on Thursday, this deal was approved by Europe. Another problem appeared - Johnson does not have a majority in Parliament. Accordingly, he had pretty high chances to repeat the fate of his predecessor, Theresa May, who also agreed on the deal, but could not pass it through Parliament. On Saturday, a vote took place, following which the British Parliament ordered Johnson to ask for a 3-month postpone so that parliamentarians could bring its legislation into line with the new realities. Johnson, who says more than once that there will be no postpone. Thus, he was put in a rather uncomfortable position. In general, there is a feeling that such a vote is rather an attempt to publicly humiliate Johnson, rather than a really necessary thing to do. Nevertheless, Johnson sent an unsigned letter to the European Union on Saturday requesting a Brexit delay. At the same time, he sent a couple of letters to the EU (which he did not forget to sign), in one of them he says that he is against the postponement. This week we will continue to look for points for its purchases because the Brexit issue has not been solved yet. Therefore there is still potential for the pound to grow. It is worth noting the weak statistics for the United States and China, which only confirmed what has been clear for a long time: trade war cause real harm to everyone. No breakthroughs were observed regarding the end of them. In this regard, we recommended focusing on finding entry points for the purchase of safe-haven assets. Given the state of financial markets at the beginning of the week, we see no reason to revise our recommendations and this week we will continue to look for points for buying gold and the Japanese yen. As for the euro. Technically you need to buy EURUSD, we recommend doing it with an eye on Thursday. The ECB will announce its decision on the parameters of monetary policy in the Eurozone on Thursday. Most likely, there will be no changes, but given the general weakness of the Eurozone economy, we will not be surprised at the “dovish” comments from the Central Bank or even the expansion of measures to soften the monetary policy, which may well provoke euro sales. The oil market was relatively calm last week. And although the Middle East continues to resemble a powder keg (Turkish military operation in Syria, an attack on an Iranian tanker, etc.), so far the markets are trying to ignore it. Last week, reserves increased by almost 10 million barrels - the maximum value since April 2019. Saudi Aramco has postponed the launch of its long-awaited initial public offering on Sunday. And although there is no direct connection between this event and the state of the oil market, in general, this is a rather bearish signal. As for our position, it is generally unchanged, while oil (WTI brand) is higher than 51.20, we tend to buy oil.
Long
by Trade24Fx
EUR/USD: Week 43 Outlook The EUR/USD saw a full +1.20% rally for the week, which is a pretty large move in currencies. This is as expected off the back of the positive BREXIT momentum. Some analysts are saying that the U.K. should exit as soon as possible as they could potentially make negotiations worse leading to a more favorable deal for the European Union. Over the weekend we saw the extension force its way through the U.K. government’s desk against the will of the Prime Minister of the U.K. and his cohorts. The PM did not agree nor sign the extension letter in protest. This week will reveal how positive, negative, or neutral this will affect markets. Going to the charts, our forecast on the EUR/USD is 80% to 90% complete. We saw the breakout, retest, and continuation headed to our 1.12 target. At his point, we have not changed our forecast as we believe we will see 100% completion of the outlook. THE PLAY: We are on Hold with the EURUSD as it continues its climb to 1.12.
by KingdomRichOffical
Forex Markets Wobble on Italy CrisisThe forex markets waggled after Italy Deputy Prime Minister Matteo Salvini called for a snap election. Salvini urged the prime minister to reconvene parliament to back his claim that the coalition government is no longer solid. The EURUSD pair clocked in some losses after the news broke out. Additionally, stocks and bond markets in the EU zone reacted more furiously. Traders sold off Italian assets swiftly. Italy’s political tensions resulted to wider yield spread between German and Italian bonds. This isn’t welcome news for the common currency, which has already been suffering pressure. Meanwhile, traders are also becoming increasingly dovish. They are betting that the European Central Bank could implement a more aggressive September rate cut, increasing dovish expectations. As of writing, there is a 27% probability of a 20-basis-point cut in ECB’s deposit facility rate. That’s way higher than the previous 12% probability. Snap Elections, Forex Markets to Recover? Salvini’s call for snap election is quite obviously a move to solidify his power. He heads the right-wing popular Lega party. According to Salvini, the failure of the Five Star Movement’s attempt to derail plans for a high-speed rail link was evidence the coalition couldn’t govern. He said Italian needed “certainty,” with a government that “does things, not a ‘Mr. No.’” Salvini is enjoying massive support from opinion polls, being a populist and mainly because of his stance against illegal immigration. The forex markets will probably get over the fiasco speedily, with the euro likely getting back some of its losses. The euro zone also absorbed the French industrial production data for June. The data could be consistent with the dismal pattern in Germany. The dollar index that gauges the buck’s strength against the other currencies barely moved. US President Donald Trump once again lashed out on Twitter against the Federal Reserve. However, it didn’t have much effect on the markets, which recovered quite easily and with barely an inconvenience.
by Financebroker
GBPUSD PENDING BREAKOUT AND RISE!Hi fellow traders! GBPUSD is currently trading around 1.31100. It has the potential to rise all the way up, following the current EU summit taking place right now. If the UK is granted an extension, this will rule the chance of No Deal out, which will allow the £ to strengthen. Hopefully if it is a short one, it would be better as it would allow the UK to leave as early as possible to get rid of the issues regarding the European elections. Taking a look at this pair from a technical perspective, it should look to rise if the pair does break out from the structure drawn. I believe this pair could easily skyrocket towards 1.32000 and beyond if the extension is granted, as it gets rid of business and economic uncertainty for the UK. I think it would still be a good idea to keep a tight stop loss on this pair as we don't know where the news regarding this could go. Fingers crossed there is an extension! Good luck trading. If you read it to all the way down here, thanks for showing some support to this article! Tell me where you think GBPUSD will be heading next! Comment below all your ideas about the future of the Pound! Buy or Sell and why? Additionally, drop me your charts/ideas for it, that'd be great so I can see where you are coming from. I'm a new guy to the FX, Stocks & Crypto market, and I'd appreciate any help people may offer! Please drop a follow/like! I need reputation points!
Long
by TheFinancialTRDR
2
UK Won't Sign the Divorce PapersBut just because the UK is fickle on leaving the EU for the WTO, its still not sure if ready to make the jump. EURUSD in the upcoming week will almost entirely be moved by Brexit, however concerns over a slowdown in European growth may be justified with more weak EU data, particularly in central bank speak on Tuesday, German CPI on Thursday, and unemployment figures on Friday. While these figures are expected to come in mostly unchanged, it could be Draghi's speech on Tuesday that could give investors the most jitters. Meanwhile, the UK is injecting much more fear into the heart of EU investors with the prospect of a no deal Brexit. This not only hurts the UK, but also the EU which imports many goods to the UK. Research conducted by the Eurasia Group suggests that every major EU country stands to lose GDP per capita except for Austria if the UK leaves without a deal. For more analysis, please check out more content at www.anthonylaurence.wordpress.com
Short
by WhiskeyTangoFoxtrot3