Will Euro Take Out April Highs Thursday?

Discussion in 'Forex' started by highlifejoker, Jun 30, 2008.

  1. Will the EUro take out the highs this week after the euro central bank meeting? Found this article seeming to say so:


    week may prove to be the most important week of the year for the Euro currency futures. The European Central Bank is meeting on Thursday, July 3rd and the Non Farm Payrolls number will also be released on Thursday, due to the Fourth of July U.S. holiday on Friday.

    The consensus of almost all economists is that the European Central Bank will raise rates at least 1/4 of a percent. What makes this meeting so important is, Jean-Claude Trinchet, President of the Central Bank, is being forced to take sides in the rate hike decision for the first time due to a division in the 21 member council.

    The President is said to be backing the pro-increase group. This has the potential to set off a series of rate increases, which will help some European economies while hurting others. In comments made to Bloomberg, Morgan Stanley's Chief European Economist Eric Chaney said, "The region faces its biggest test since 1992."

    Regardless of the true cross border economic effects of the pending rate hike or series of same, rate increases are bullish for the currency. In addition to this significant meeting and potential rate increases in the Euro Zone, the Non Farm Payrolls are being released on the same day in the United States.

    As you know, NFP, in and of itself, can rock the currency markets. NFP is expected to be lower on the release which is bearish for the US Dollar, and by default bullish for the Euro since the USD is what the Euro currency futures are calculated upon.


    As you can see from the chart, the Euro future has been
  2. Actually, I know think the premise of that article is totally wrong.

    The Euro will likely get destroyed on thursday or not move much at all, since everything is all ready price in. I trade euro, its getting hurt bad bad right now, in serious troubled mode. Long term top is in.

  3. I'm going to agree with highlifejoker here. The euro is overshot.
  4. TraDaToR


    I hope you're right, guys. I trade US futures but live in Europe.

    I had a hedge in place that I covered watching the top formation.

    I will reestablish a hedge if it goes to 1.6
  5. Hey tradator, read my post about PPI. The 25 bp point increase is already well priced in, and I would say that so is mention of additional rate hikes. If Trichet doesn't say anything about establishing a "series" or something to the effect that he's going to continue increasing the rates, the Euro is going to sell off, it could drop as low as 1.53 if the US NFPs aren't that bad.
  6. Trichet got played by Weber. If they start hiking and increase multiple times from here over 5% you can kiss the European economy good bye for 2009-2011. If the ECB were serious about reaching their fantasy inflation target for headline inflation of 2% they have to hike to 6% by next year. There is no way they will reduce inflation to 2% without destroying jobs and driving millions into unemployment. The European job market is too inflexible and rigid.

    What could have been a mild slowdown for Europe as consumers - on average - are not knee-deep in debt ... would end up being a very deep and severe long-term destruction of economic growth.

    This is 1990/91 redux as the Bundesbank hiked like paranoid dogmatics haunted by visions of the Weimar Republic in the light of German reunification. They ended up inducing a severe recession in 1991/92/93 while the US recovered rather quickly from their housing bust.
  7. +1
  8. Indeed, thank you for the great insight Makloda. Do you have any thoughts on how the price action on EUR/USD will play out after the rate announcement?
  9. I know you didn't ask me, but I see a blow off coming on EUR that will spike it through 1.60, and then a collapse.
  10. FWIW, this seems a likely scenario to me as well.
    #10     Jul 3, 2008