Some relitive info I found
Silent bulls in charge - leaving the bears just to be bewildered
Euro strength is a puzzle to many. We have had weeks with worrying economic data causing forecast for a Euro-zone economic recovery to be delayed. We have seen Euro-zone confidence indexes peaking. We have had crisis in Cyprus setting possible precedence for bank deposits and credit regulations unheard of. We have had Italian elections where 6 weeks after they took place, the country still has no government. Still – the EURUSD is holding well. Any attempts to sell the pair lower meet support levels in tight layers and of substantial volume.
So what is it that prevents EURUSD from cracking down?
There are mainly two reasons:
1) For two of the major currencies – and those for which the EURO is an investment alternative – the currency printing machines go on full speed. Bank of Japan will increase their balance sheet by 45% throughout the rest of this year and for the Federal Reserve it looks to be an increase of 25%. What they do is to buy their own debt or those of mortgage holders and provide the market with cheap funding – cash at almost no cost. That the cost is low also means that the attraction is low. In addition – the cash is provided through printing of JPY and USD – which simply means that there will be lots more of currencies that already have low attraction. In reality it means that no one wants them.
2) USD used to be the reserve currency and the main asset class among currencies held by central banks and sovereign wealth funds. Three years ago many of those investors wanted to rebalance their currency portfolios with a lower weighting in USD and a higher weighting in other currencies – the EURO being one of the beneficiaries. Then we got the Euro-zone crisis and doubts to whether the Euro had a long-term future. Prudent as central banks and sovereign wealth funds are, the delayed their purchases of Euro and held on to the USD. But in reality this was just a delayed switch for which the three years that has passed has seen substantial purchases of Euro being put on hold until the uncertainty surrounding the currency became more clarified. Our estimate is that there is likely an interest to buy 500-750 billion Euros against USD – purchases that were meant for 2010-2013 but for reasons known to us all simply were not done.
While the Euro-zone has a long way to go before crisis are history, doubts about the currency’s future existence are likely pretty remote. In five years it might not be the same currency as it is today as some countries might leave. But if they do – the reborn currency is likely going to be one which is stronger and more solid than the one we have today. As such – for long-term investors like central banks and sovereign wealth funds – the confidence level missing throughout 2010-2013 – is likely back and I would think that these investors throughout the last 6 months have been among the silent bulls we seldom see but are there with a big long-term interest.
They are buying EURUSD which are not coming back to the market in a long time and likely not before Euro-zone economic problems and crisis are history and the EURUSD is well above 1.50. That might take a long time. But time is what these investors have a lot of. They are not stressed, they don’t chase the price but they are likely in on any dips for EURUSD of significance.
The sellers are the short-term bears who think that all the negative news for EURUSD cannot mean anything but a lower value. And they go short just to experience that the market absorbs their selling with no particularly falls for the pair. In the end they have to cover their shorts as the intended price impact did not materialize. And those shorts are covered from someone already being short and not from the ones who voluntarily bought the pair – hence the EURUSD goes up.
Bewildered? You shouldn’t be if 500-750 billion Euros are to be switched this way.
FROM TOR
Silent bulls in charge - leaving the bears just to be bewildered
Euro strength is a puzzle to many. We have had weeks with worrying economic data causing forecast for a Euro-zone economic recovery to be delayed. We have seen Euro-zone confidence indexes peaking. We have had crisis in Cyprus setting possible precedence for bank deposits and credit regulations unheard of. We have had Italian elections where 6 weeks after they took place, the country still has no government. Still – the EURUSD is holding well. Any attempts to sell the pair lower meet support levels in tight layers and of substantial volume.
So what is it that prevents EURUSD from cracking down?
There are mainly two reasons:
1) For two of the major currencies – and those for which the EURO is an investment alternative – the currency printing machines go on full speed. Bank of Japan will increase their balance sheet by 45% throughout the rest of this year and for the Federal Reserve it looks to be an increase of 25%. What they do is to buy their own debt or those of mortgage holders and provide the market with cheap funding – cash at almost no cost. That the cost is low also means that the attraction is low. In addition – the cash is provided through printing of JPY and USD – which simply means that there will be lots more of currencies that already have low attraction. In reality it means that no one wants them.
2) USD used to be the reserve currency and the main asset class among currencies held by central banks and sovereign wealth funds. Three years ago many of those investors wanted to rebalance their currency portfolios with a lower weighting in USD and a higher weighting in other currencies – the EURO being one of the beneficiaries. Then we got the Euro-zone crisis and doubts to whether the Euro had a long-term future. Prudent as central banks and sovereign wealth funds are, the delayed their purchases of Euro and held on to the USD. But in reality this was just a delayed switch for which the three years that has passed has seen substantial purchases of Euro being put on hold until the uncertainty surrounding the currency became more clarified. Our estimate is that there is likely an interest to buy 500-750 billion Euros against USD – purchases that were meant for 2010-2013 but for reasons known to us all simply were not done.
While the Euro-zone has a long way to go before crisis are history, doubts about the currency’s future existence are likely pretty remote. In five years it might not be the same currency as it is today as some countries might leave. But if they do – the reborn currency is likely going to be one which is stronger and more solid than the one we have today. As such – for long-term investors like central banks and sovereign wealth funds – the confidence level missing throughout 2010-2013 – is likely back and I would think that these investors throughout the last 6 months have been among the silent bulls we seldom see but are there with a big long-term interest.
They are buying EURUSD which are not coming back to the market in a long time and likely not before Euro-zone economic problems and crisis are history and the EURUSD is well above 1.50. That might take a long time. But time is what these investors have a lot of. They are not stressed, they don’t chase the price but they are likely in on any dips for EURUSD of significance.
The sellers are the short-term bears who think that all the negative news for EURUSD cannot mean anything but a lower value. And they go short just to experience that the market absorbs their selling with no particularly falls for the pair. In the end they have to cover their shorts as the intended price impact did not materialize. And those shorts are covered from someone already being short and not from the ones who voluntarily bought the pair – hence the EURUSD goes up.
Bewildered? You shouldn’t be if 500-750 billion Euros are to be switched this way.
FROM TOR
:
!?! 
Got almost the same. 
