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EurAnalysis Kindergarten 24 replies

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EurAnalysis

Hi. I'm not sure its' been discussed here already, but a story doing the rounds today was about a year-end liquidity squeeze due to the ECB asset quality review, which is going to be based on a snapshot of European banks' balance sheets at the end of 2013. Because of this, banks are scrambling for euros, pushing money market rates higher. The 3 month euro/dollar cross currency basis swap has turned +ve on monday for the first time since 2008. This explains, at least in part, the strength and resilience observed in the pair recently....
Quoting ez0770
Hi. I'm not sure its' been discussed here already, but a story doing the rounds today was about a year-end liquidity squeeze due to the ECB asset quality review, which is going to be based on a snapshot of European banks' balance sheets at the end of 2013. Because of this, banks are scrambling for euros, pushing money market rates higher. The 3 month euro/dollar cross currency basis swap has turned +ve on monday for the first time since 2008. This explains, at least in part, the strength and resilience observed in the pair recently....
Yes I knew about this but thanks for posting because I didn't realize that the AQR was going to be based on YE2013 numbers. My understanding was that it would be based on the numbers current at the time of the AQR.

According to the time table below, the AQR is supposedly based on Q4 2013 / Q1 2014 numbers.

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Those who say it cannot be done should not interrupt those who are doing it
Quoting PipTrapper
{quote} Hi Mario. I will try to answer your questions below... I have one more thougth of EURO strength against USD. Because of all that IRAN deal and Oil rich country going to switch deals and price Oill in Euro, Yuan etc makes USD less needed and push USD lower and what's more, 85Bln$/month printing makes USD less value against EUR which is currently not print? Correct. All the above is potentially USD negative. ECB having enormous problems to come up with QE like program cannot just start printers a.ka. liquidity products/programs is then more...
Quoting mario83
If it gets to 1.3750 i try to clear three of them and switch to long finally.

That would/could be a classic.

Little late to the party perhaps....
Quoting TraderPablo
{quote} Quoting mario83 If it gets to 1.3750 i try to clear three of them and switch to long finally. That would/could be a classic. Little late to the party perhaps....
Yes perhaps. Besides flashing "overbought overshoot", there is really not enough happening to drive it... either way.
Those who say it cannot be done should not interrupt those who are doing it
Quoting PipTrapper
{quote} Yes perhaps. Besides flashing "overbought overshoot", there is really not enough happening to drive it... either way.
"overbought overshoot", falls are generally faster than climbs..... tk 1/2 and protect....would not be a bad scenario at this juncture...
Quoting TraderPablo
{quote} "overbought overshoot", falls are generally faster than climbs..... tk 1/2 and protect....would not be a bad scenario at this juncture...
Already done at the top.
As they say, "I'm on it like white on rice"
Those who say it cannot be done should not interrupt those who are doing it
Quoting PipTrapper
{quote} Already done at the top. As they say, "I'm on it like white on rice"
i kno U do..hopefully Mario is listening in...
Quoting TraderPablo
{quote} i kno U do..hopefully Mario is listening in...
Im counting for double top formation / V formation on h4 / daily with target for 1.38 - 1.3840.

So my positions are now 2 short (avg. 1.3730) and 2 longs @ 1.3760.

So my plan is to

1. close at 1.3790 longs and open one more short
2. in case we go downside from here i have SL set at 1.3720 for longs at TP at 1.3650 for shorts.

hoping for the best possible option 1 it will top and finally drop
Quoting ez0770
Hi. I'm not sure its' been discussed here already, but a story doing the rounds today was about a year-end liquidity squeeze due to the ECB asset quality review, which is going to be based on a snapshot of European banks' balance sheets at the end of 2013. Because of this, banks are scrambling for euros, pushing money market rates higher. The 3 month euro/dollar cross currency basis swap has turned +ve on monday for the first time since 2008. This explains, at least in part, the strength and resilience observed in the pair recently....


Not sure if this is the article you are referring to but this was in the FT about a week ago. Given the the fact that EONIA squeezes took EURUSD 300 points higher in January when LTRO repayments started, I wont be shorting this puppy until the new year when EONIA backs down a bit.



Eurozone liquidity is getting tight
Izabella Kaminska




Izabella Kaminska joined FT Alphaville in October 2008. Before that she worked as a producer at CNBC, a natural gas reporter at Platts and an associate editor of BP's internal magazine.
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Icap’s Chris Clark alerts us on Friday to the fact that European liquidity markets are already preparing themselves for a potential liquidity squeeze come the end of the year.
As he notes:
Month-ends have become increasingly significant events for the Eurozone repo markets over the second half of this year as levels of excess liquidity have diminished and market rates have slowly edged higher. This Thanksgivings Day/November month-end liquidity hump has proved a tricky one for the market to manoeuvre, but already attention is focusing on the impending year-end as evidence stacks up to suggest funding might be problematic for some.

The table below gives an indication of the shift in 1-month GC rates on Thursday morning as the end-date pushed over into the new year. The word “indication” is doing quite a bit of work in that last sentence – establishing mid-prices has been very difficult lately as there appears very little willingness in the market to show any bid into the year-turn, even against the high quality paper. There is some hope that this is all at least partly due to the Thanksgivings Day slowdown and some bid activity might creep in next week. We’ll see.
Italian GC seems most stressed, the 11bp shift in the 1-month rate says as much, but there is no sign yet of any particular stress in that market and the lack of bids into January are also seen across core GC curves.
http://ftalphaville.ft.com/files/201...t-16.28.15.png
What’s also interesting notes Clark, is that Thursday’s ECB 1-week liquidity absorbing operation failed to attract enough bids to fully sterilise the bank’s SMP (Securities Markets Programme) holdings. He notes, this is something we have typically only seen around the year end.
As he writes:
Not only is it unusual to see shortfalls in November, this week’s shortfall was the largest seen since the draining operations began in May 2010. As the second chart below illustrates, the narrower interest rate corridor, which has lowered the maximum acceptable bid to 0.25% may have helped put pressure on the tender. The pressure certainly seems to be building.
http://ftalphaville.ft.com/files/201...t-16.31.54.png
It would probably be too speculative to link Monte dei Paschi’s recent troubles to this year’s LTRO repayment frenzy — a.k.a the ECB’s very own tapering equivalent — but we’re going to put the idea out there anyway.
Related links:

Twitter: @TrendersGame
Quoting Citiboy
{quote} Not sure if this is the article you are referring to but this was in the FT about a week ago. Given the the fact that EONIA squeezes took EURUSD 300 points higher in January when LTRO repayments started, I wont be shorting this puppy until the new year when EONIA backs down a bit. Eurozone liquidity is getting tight Izabella Kaminska Izabella Kaminska joined FT Alphaville in...


very interesting - thanks for sharing
Quoting Citiboy
{quote} Not sure if this is the article you are referring to but this was in the FT about a week ago. Given the the fact that EONIA squeezes took EURUSD 300 points higher in January when LTRO repayments started, I wont be shorting this puppy until the new year when EONIA backs down a bit. Eurozone liquidity is getting tight Izabella Kaminska Izabella Kaminska joined FT Alphaville in...
This is the story I was referring to:

Banks scramble for euros as year-end nears - RTRS
10-Dec-2013 19:58
Three-month eurodollar cross currency swaps turn positive Banks withholding cash worsen liquidity squeeze

By Emelia Sithole-Matarise
LONDON, Dec 10 (Reuters) - European banks are paying a higher premium to swap dollars for euros in money markets, reflecting a squeeze on liquidity as the year-end approaches and as banks stash cash before a European Central Bank review.
The three-month euro/dollar cross currency basis swaps EURCBS3M=ICAP turned positive for the first time since 2008 on Monday. The cost of swapping dollar-denominated interest payments into euros was last at 2.75 basis points. Hitherto, banks have paid a premium to swap euros for dollars.
Excess cash in the euro financial system has been dwindling in recent months, pushing up short-term money market rates, as banks repay cheap three-year loans handed out by the ECB at the height of the debt crisis in 2011 and 2012.
Exacerbating tight conditions in money markets, banks are also holding on to cash in anticipation of the ECB's "Asset Quality Review", which will assess whether banks have properly valued loans in key areas of their business.
The flip in the basis swap shows euro zone banks are now paying the lowest cost since 2008, when the financial crisis exploded, to swap euro payments into dollars.
Money markets are still flush with dollars with the U.S. Federal Reserve yet to trim its monetary stimulus.
"Driving this 'euro premium' we presume are the same factors driving euro interbank rates higher into year-end," said Chris Turner, head of currency strategy at ING.
"Euro zone commercial banks, facing a snapshot of their balance sheets being taken as of 31 December 2013 for the Asset Quality Review, are continuing to de-leverage."
The grind higher in money market rates pushed the euro to a six-week high against the dollar EUR= of $1.3795 on Tuesday. The rise in market rates accelerated after the ECB gave no hint last week that it would soon ease monetary policy further after cutting its main refinancing rate in November.FRX/
After the bank kept rates on hold last Thursday, ECB President Mario Draghi said he was satisfied with levels in the money markets.
Resurgent borrowing costs could hurt a fragile economic recovery in the euro zone. While other ECB officials have reiterated the ECB still has steps it can take, such as cutting its overnight deposit rate below zero if needed, the increasing tensions in money markets reflect some scepticism.


MARKET SCEPTICISM
Many in the market say taking overnight deposit rate into negative territory, effectively charging banks to park their cash with the ECB, could prove counterproductive and tighten money market conditions even more as banks seek to reduce the excess cash they hold and seek to pass on their extra costs.
Another dose of cheap long-term loans for banks looked less imminent too while banks were still paying back the 1 trillion euros in financing they got at the peak of the debt crisis.
"There's some scepticism in the market as to just how many effective monetary policy options the ECB really does have at its disposal," said ICAP strategist Chris Clark.
"Heading into 2014, unless the ECB is willing to take rather dramatic or inventive action, we are probably unlikely to see any easing in money market rates."
Quoting mario83
{quote} Im counting for double top formation / V formation on h4 / daily with target for 1.38 - 1.3840. So my positions are now 2 short (avg. 1.3730) and 2 longs @ 1.3760. So my plan is to 1. close at 1.3790 longs and open one more short 2. in case we go downside from here i have SL set at 1.3720 for longs at TP at 1.3650 for shorts. hoping for the best possible option 1 it will top and finally drop
not a bad strategy and spread...just dont get stuck on wrong side
FTSE – Britain's main share index fell in thin, choppy trade on Tuesday, led by a late selloff in travel operator Tui Travel and hit by concerns about a reduction of U.S. monetary stimulus. Look for the UK index to take a noticeable fall in the coming days as nervous investors flee equities.

EUR/USD – The dollar wobbled near a six-week low against a basket of currencies on Wednesday, hampered by a growing view that the Federal Reserve needs more positive economic data before it decides to start reducing its monetary stimulus. Look for the dollar to rebound against the Euro to end the week.

FB- Facebook shares gained 3% in active trading on Tuesday. Look for profit taking in the stock Wednesday following both the recent run up and the drastic insider selling by the ex CEO.
Good Morning PT,

Elliott Wave on H4
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Quoting Schickeria
Good Morning PT, Elliott Wave on H4 {image}
Thanks yes I have that on my radar already, but I am not confident about it.
I need to see price with daily close below 1.3733
Those who say it cannot be done should not interrupt those who are doing it
This H&S gives the prefect target for a small correction to 1.37 before going to 1.3825

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"Frankly, I don't see markets; I see risks, rewards, and money." Larry Hite
Quoting AlienOvichO
This H&S gives the prefect target for a small correction to 1.37 before going to 1.3825 {image}
December low volume. The vultures are circling the stops. We retail traders don't stand much of a chance here. Don't trust the techs right now. For this market you need crystal balls and gambling skills.
Those who say it cannot be done should not interrupt those who are doing it
Quoting PipTrapper
{quote} December low volume. The vultures are circling the stops. We retail traders don't stand much of a chance here. Don't trust the techs right now. For this market you need crystal balls and gambling skills.
I think brass balls would be more useful right now.
Student of the Markets
Quoting dchristi
{quote} I think brass balls would be more useful right now.
Same thing
Those who say it cannot be done should not interrupt those who are doing it
Quoting dchristi
{quote} I think brass balls would be more useful right now.
Would you like some from Santa????
Short Euro and remaining that way. That's just the way it is !
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