EurAnalysis | Page 590 | Forex Factory

Options

Go to
Permalinks
Print Thread

Related Instruments

EUR/USD

Similar Threads

EurAnalysis Kindergarten 24 replies

Attachments: EurAnalysis
Exit Attachments

EurAnalysis

  • #11,781
  • Nov 24, 2011 6:39am Nov 24, 2011 6:39am
Quoting sisse
Well I think the issue is about expectations more than a technical reality. One of the key factor for the huge success of the euro after introduced was that it took over 10 years to full implementation.

You surely remember the Maastricht treaty when the Euro idea was set. They had over 10 years to adjust all the technicalities of the process but markets believe it and take it seriously.

Is the same now, if they announce some kind of eurobonds or whatever in the same line (for implementation in 10 years or whatever it doesn't matter) they did with...
Excellent post. This in my view is exactly what is going to happen.
Observation is the path to discovery.
  • #11,782
  • Nov 24, 2011 6:41am Nov 24, 2011 6:41am
Quoting Alorente
The difference is that there is a limit to what the EFSF can purchase. Expanding that limit is not an option at this point. Eurobonds have no such limit, in theory.
Actually, my understanding is that the fine print gives the EFSF the ability to unilaterally increase quotas. Further, I don't know what Europeans do, but I imagine that they have some sort of debt ceiling in place like the US. Which, like the US and the EFSF can be raised if so required. So in this aspect I think Eurobonds are the same as EFSF even if the names of the levers might be different.
Kill the ego, or it will kill the mission.
  • #11,783
  • Nov 24, 2011 6:43am Nov 24, 2011 6:43am
Quoting PipTrapper
Yes I fully understand. The only question is how far the correction will go.
I would not be the least surprised to see another test of the 200SMA on the daily chart at 1.4150, which also coincides with the top of the wedge. Of course, anything can happen and it depends on the hypothetical "announcement".

This whole scenario jibes perfectly with the traditional Santa Claus rally which investors are expecting to happen.
Observation is the path to discovery.
  • #11,784
  • Nov 24, 2011 6:45am Nov 24, 2011 6:45am
Quoting sisse
... I am looking at 1.390xx test before years end as soon as Germany jumps on board ...lol

GL bro. I am flat and done trading for the day.

sisse
Sisse, you think that once Germany approves Eurobonds, we can rally so high? I dont see this event as such strong one. Anyway this solution will be very possibly combined with printing press, so the resulting effect will not be so high, but lets say ,37 - 38. Maybe only 36. It depends on the ground from which EUR shall be bouncing.

T
"I know one thing, that I know nothing." Sokrates
  • #11,785
  • Nov 24, 2011 6:48am Nov 24, 2011 6:48am
Ah I can see PT already asked simmilar question .
"I know one thing, that I know nothing." Sokrates
  • #11,786
  • Nov 24, 2011 6:48am Nov 24, 2011 6:48am
Quoting bumapatria
hey bro r u more of a scalper or a swinger?

just asking
Short and Long Term
Still completing my short term trade - these days made over 20% over after look carefully smaller TF - Overall thanks for Uncle Goldman englightment
If there was easy money lying around,no one would be forcing it into your
  • #11,787
  • Nov 24, 2011 6:51am Nov 24, 2011 6:51am
Quoting Tom_D_Trader
Sisse, you think that once Germany approves Eurobonds, we can rally so high? I dont see this event as such strong one. Anyway this solution will be very possibly combined with printing press, so the resulting effect will not be so high, but lets say ,37 - 38. Maybe only 36. It depends on the ground from which EUR shall be bouncing.

T
Times like these, the Euro is quite happy to rally 2000 pips. Look at December 2008 on the monthly chart and then think that this problem is probably worse than that problem.

EDIT: or collapse... and as for unfinished business... take a look at 1.19
Kill the ego, or it will kill the mission.
  • #11,788
  • Nov 24, 2011 6:55am Nov 24, 2011 6:55am
Quoting Tom_D_Trader
Sisse, you think that once Germany approves Eurobonds, we can rally so high? I dont see this event as such strong one. Anyway this solution will be very possibly combined with printing press, so the resulting effect will not be so high, but lets say ,37 - 38. Maybe only 36. It depends on the ground from which EUR shall be bouncing.

T
My view is that markets don't like uncertainty (most of us like controlled volatility). Euro will have problems going down if it is in panic mode and not in macro fundamental reasons. So each panic leg will have a mania buy on free money (as seen every single time the last 2 years)

A solution from Germany will definitively trigger a short term knee jerk reaction to the upside. Only when this EZ debt panic circuit is closed, euro can find its market value based on the real underlyings of both sides.

If we take debt out of it and only consider, rate differential, inflation and macroeconomic factors I would put the euro right now on the 1.27xx area (based on my FA chart notes). With debt fear and rumours, etc, etc overruling most factors I have an untested 1.39xx (highs 7x / 9x area on the handle) before anything else.

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #11,789
  • Nov 24, 2011 6:56am Nov 24, 2011 6:56am
Quoting AaronWard
Actually, my understanding is that the fine print gives the EFSF the ability to unilaterally increase quotas. Further, I don't know what Europeans do, but I imagine that they have some sort of debt ceiling in place like the US. Which, like the US and the EFSF can be raised if so required. So in this aspect I think Eurobonds are the same as EFSF even if the names of the levers might be different.
The Europeans do not have a specific debt limit in terms of Euros, but more of a EZ membership requirement of a limit of 60% of GDP. Interestingly enough, even Germany exceeded that so called limit as their debt to GDP ratio was somewhere in the neighborhood of 83% in 2010. I shudder to think what it will be for 2011, worse yet 2012

Attached Image (click to enlarge)
Click to Enlarge Name: EZdebt2010.jpg Size: 215 KB
Those who say it cannot be done should not interrupt those who are doing it
  • #11,790
  • Nov 24, 2011 6:57am Nov 24, 2011 6:57am
The way I figure this, the resulting interest rate for eurobonds should be somewhere in the neighborhood of 3.5 to 4%. Germany would be paying 2% or 3% higher rates, but the lower rates paid by most other EZ countries would stimulate their economies and alleviate their deficits. Since the EZ is Germany´s main export market, this would help them also. Another point to consider is that politically, a higher interest rate would be a positive for millions of German savers, especially the elderly, who happen to be the largest voting block. It is a win/win for everyone involved and it is politically easy to implement. When you compare it to the alternative which is economic and political harakiri, I feel the choice is clear.
Observation is the path to discovery.
  • #11,791
  • Nov 24, 2011 6:59am Nov 24, 2011 6:59am
Quoting Alorente
I would not be the least surprised to see another test of the 200SMA on the daily chart at 1.4150, which also coincides with the top of the wedge. Of course, anything can happen and it depends on the hypothetical "announcement".

This whole scenario jibes perfectly with the traditional Santa Claus rally which investors are expecting to happen.
Yes the SP500 has for the most part had a Santa Claus rally, but the Euro has not followed it since before 2008
Those who say it cannot be done should not interrupt those who are doing it
  • #11,792
  • Nov 24, 2011 7:03am Nov 24, 2011 7:03am
Quoting BullsVsBears
Here we goooooooo!
How far do we go ... do we have any further event left on the calender to push EUR @ 1.343x today to hit my Sell Order?
  • #11,793
  • Nov 24, 2011 7:04am Nov 24, 2011 7:04am
Quoting Tom_D_Trader
Sisse, you think that once Germany approves Eurobonds, we can rally so high? ...
Actually, now, when I think of it.

When ECB starts to print, does it devaluate EUR? In the long term for sure. But how about short term? Free money will boost equity and bond markets, resulting in strenght.

So in fact combination of printing press and stabilization bonds (haha, this new name is great) could in fact really bring us to ,39 only to collapse down.

Hmm, I need some time to chew all this, by brain is getting information overflow.

Btw, I am kinda sad none of you expanded on my beautifull conspirational theory of Draghi working for GS .

T
"I know one thing, that I know nothing." Sokrates
  • #11,794
  • Nov 24, 2011 7:07am Nov 24, 2011 7:07am
Quoting Tom_D_Trader

Btw, I am kinda sad none of you expanded on my beautifull conspirational theory of Draghi working for GS .

T
One can only speculate what goes on in the background. I am sure there are discussions and persuasions but in the end, the people in charge do not have dictatorial powers. Draghi is only one vote out of many ECB council members.
Those who say it cannot be done should not interrupt those who are doing it
  • #11,795
  • Nov 24, 2011 7:12am Nov 24, 2011 7:12am
Quoting Tom_D_Trader
...
Btw, I am kinda sad none of you expanded on my beautifull conspirational theory of Draghi working for GS .

T
Isn't it the Sheep-dog-man picture? I became thoughtful about the stand-alone sheep
  • #11,796
  • Nov 24, 2011 7:13am Nov 24, 2011 7:13am
Quoting PipTrapper
The Europeans do not have a specific debt...
Rofl Czech republic 38%. What a fraud. We have oficially like 40%, yet unoficially like 80%. We are hiding it in municipal funds. Pst, dont tell anyone .

Well that was kinda a joke pointing out to the fact that all nations have lots of hidden debt.

T
"I know one thing, that I know nothing." Sokrates
  • #11,797
  • Nov 24, 2011 7:13am Nov 24, 2011 7:13am
Quoting Alorente
The way I figure this, the resulting interest rate for eurobonds should be somewhere in the neighborhood of 3.5 to 4%. Germany would be paying 2% or 3% higher rates, but the lower rates paid by most other EZ countries would stimulate their economies and alleviate their deficits. Since the EZ is Germany´s main export market, this would help them also. Another point to consider is that politically, a higher interest rate would be a positive for millions of German savers, especially the elderly, who happen to be the largest voting block. It is a win/win...
Agree. V good post. Ironically, the bond convergence happened to the upside. Markets have cleared the path for that +/- "aligning" all bonds (obviously defaulted Greece is out of the equation with or without eurobonds).

However, the main problem is, that is very hard to sell to the Germans, Dutch, Finnish, etc that they will be better off paying higher rates and even harder that they may be punished for any mismanagement of other countries in the future. That's the harakiri politicians in those countries are trying to avoid at all cost but as you said options are almost null for an alternative.

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #11,798
  • Nov 24, 2011 7:14am Nov 24, 2011 7:14am
Quoting PipTrapper
The Europeans do not have a specific debt limit in terms of Euros, but more of a EZ membership requirement of a limit of 60% of GDP. Interestingly enough, even Germany exceeded that so called limit as their debt to GDP ratio was somewhere in the neighborhood of 83% in 2010. I shudder to think what it will be for 2011, worse yet 2012

Attachment
The European debt ceiling is like a third world stop light. A polite suggestion which everybody ignores. And a place where casualties are numerous.
Kill the ego, or it will kill the mission.
  • #11,799
  • Nov 24, 2011 7:20am Nov 24, 2011 7:20am
Quoting Alorente
...It is a win/win for everyone involved and it is politically easy to implement. When you compare it to the alternative which is economic and political harakiri, I feel the choice is clear.
Ah, comparative advantages of single open market. I like that idea. Thats my favourite system organization.

T
"I know one thing, that I know nothing." Sokrates
  • #11,800
  • Nov 24, 2011 7:22am Nov 24, 2011 7:22am
Quoting sisse
Agree. V good post. Ironically, the bond convergence happened to the upside. Markets have cleared the path for that +/- "aligning" all bonds (obviously defaulted Greece is out of the equation with or without eurobonds).

However, the main problem is, that is very hard to sell to the Germans, Dutch, Finnish, etc that they will be better off paying higher rates and even harder that they may be punished for any mismanagement of other countries in the future. That's the harakiri politicians in those countries are trying to avoid at all cost but as...
The tradeoff for the Germans accepting eurobonds will be much stricter meddling and controls of peripheral countries´ economic policies, so I don´t think it will be that difficult a sell. I really believe cynically that the Germans know this is the end game, but are making the PIIGS sweat it out so they can get a much more forceful deal in the end...
Observation is the path to discovery.
13 traders viewing now