ECB keeps rates unchanged.

Trichet to speak at 8:30 AM.

EURUSD moves lower after Trichet says recovery will be uneven

The pair is testing support at the 100 bar MA on the 5 minute chart.  The level comes in at the 1.4297 (blue line in the chart above).  Additional support comes in at 1.4283 where the 200 bar MA (green line) and 38.2% retracement support are both found. Watch these levels.  A move back above the 1.4313/18 level (see prior post for chart) will confirm the downside move is complete.  Expect to see sellers against the level initally however.

ECB Rate Decision due at 7:45 AM. No change expected.

The ECB Rate decision at 7:45 AM.  No rate change is expected. Of note willof course be the comments from ECB Trichet at 8:30. 

In the Eurozone today, the Servive PMI came in at 49.9  expectation of 49.5.  The Retail Sales Report came in at -0.2% MoM (vs +0.1% exp) and -1.8% YoY (vs. -2.2% exp). The prior month was revised higher to 0.0% from -0.2% and -2.0% vs -2.4% YoY. 

From a technical perspective, the EURUSD is up with the weakness in the dollar. There is rumblings in the market that the gold increase yesterday may be a program out of China to diversify out of the dollar. Gold continues to be bought today and this will likely keep that story alive.  The pair has resistance against the trendline at the 1.4352 level.  Above that is another trendline at 1.4392.  The high for 2009 comes in at 1.4447.   On the downside, the pair moved back above the 100 and 200 hour MA along with the 50% retracment level at the 1.4291 area. The market will ultimately need to stay above these levels today. 

Before that level is the 1.4313 to 1.4318 level where highs and the 61.8% retracements levels are located.

Trichet announces quantitative measures. Comments and actions send EURUSD on up and down ride

Trichet says to launch repo operations.  To offer banks 12 month loans.  This has sent the EURUSD sharply lower.

ECB will buy EURO denominated covered bonds.

• He adds that key rates are appropriate levels. 
• He sees tentative signs of stabilization. 
• Sees a small upturn beginning in 2010. 
• The Eurozone is experiencing a downturn as is the rest of the world.
• Inflation pressures continues to ease
• Sees further fall in the job market
• Continued slowdown in monetary expansion

The EURUSD moved sharply lower through support at 1.3320 (100 hour MA)and 1.3305 (the 100 and 200 bar moving averages on the 5 minute intraday chart) on the initial comments.  The low reached was 1.3261, above the low for the day reached earlier at 1.3251.  The 200 hour moving average is currently at 1.3248.  Since the lows the pair has rebounded back above these technical levels. 

Risks have increased in the market as the market digests the news and comments.  The price action remains contained but volatile.   Waiting for calm after the storm may be in order.  Comments by the often unpredictable central banker can lead to sharp moves at any time.  The press conference generally lasts around 45 minutes.

ECB cuts rate by 25 basis points

The rate is now at 1.0%.   Trichet will speak at 8:30 AM.   Be aware that although there is no headline of quantitative easing measures by the ECB, he may still announce it at that time. 

The EURUSD has broken higher on the back of no quantitative easing.

NY enters a market pushed around by comments overnight. EURUSD and USDCHF in focus.

Markets remember and the markets remembered March 12th when the Swiss National Bank entered the market and intervened directly in the market.  As a result when SNBs Roth spoke last night, the market remembered.  Of course the much weaker Swiss Retail Sales report for February (-3.8% vs -0.2% expectations - lowest level since November 2003) also helped contribute to Swiss Franc weakness (USDCHF strength). 

ECB Trichet was also on the wires once again with thoughts that were pessimistic for the Euro region.  “Risks of sudden economic, financial developments remain” was of particular concern to me.  As mentioned in past posts and somewhat forgotten from time to time by the market as focus goes elsewhere, the western Europe banking system is exposed to the Eastern European economies.  One concern, is there is pressure on Eastern home borrowers who secured mortgages from western European banks.  If the value of the Euro or CHF rises, this makes it more expensive for Polish homeowners (for instance) to pay their mortgage. It is Europe’s equivalent of the sub prime mortgage mess in the USA.

This idea re-enters the markets thoughts from time to time. The comments from Roth and Trichet are just a reminder of the fragility that still exists.  It is also no coincidence that Ireland was placed on review from Moody’s today. HMMM.  A comment from Moody’s included,  ”Action reflects the severe economic adjustment taking place in Ireland, which threatens to undermine the country’’s low tax, financial services-driven economic model.” .  Banks have enough trouble managing domestic banking issues.  When it is coupled with risk from outside a countries border (and when  currency exposure enters the picture), the layers of problems can accelerate.  This is what Trichet/Roth speak of and is why they are fighting for a lower currency. 

We have been speaking about the 100 day MA in the EURUSD for some time now.  Specifically, the EURUSD has been bumping against the 100 day MA.  In 5 of the last 6 days the price has move below the 100 day moving average but on each day the price could not break.   Yesterday afternoon, the price dipped below the key level yet again but a report that AIG was selling their Auto insurance arm, raised the stock market (see post) .  This has the preverse effect of raising the EURUSD as flight to quality bids into the dollar fade (1.3172 is the 100 day MA).  That is what happened and the EURUSD closed back above the 100 day MA once again. 

Today the EURUSD moved back below the 100 day MA in early Tokyo trading, and this time found the momentum and volume to the downside.  Along the way, there has been a couple attempts to test the 100 bar MA on the 5 minute chart(see above chart).  These would change the intraday momentum if the price could move back above the level.  Currently, the average comes in at the 1.3082.  It is Friday.  It has been a non-trend type week.  We have the break today.  Will the momentum continue?  A trend is supposed to trend.  If the price stays below the 100 bar MA, things will continue to move lower (by definition). 

Support comes in at 1.2991 high from Feb 23rd, and 1.2945 which is the 61.8% of the move higher from the March 4th low to the March 19th high (see chart above). 

In our video commentary, we have also been watching the daily chart on the USDCHF.  The pair has been no trending with the 100 and 200 day MA converging (indication of non-trend market trend).  At one point last week, the price broke above the 100 day MA and stalled quickly.  The move back in the comfort area between the goal posts (e.g. 100 day MA and 200 day MA) took the price down to test the 200 day MA one last time (grreen line in the chart above).  From there ,the rebound started (see chart above).  Last night the 100 day MA was at 1.1469.  The price closed just below at  1.1463.

Like the EURUSD, the market moved back above the 100 day MA iin the Tokyo session, after coming to a virtual standstill ( non-trending market).  The 100 and 200 bar MA on the 5 minute chart were both going sideways.  The price was on the line which was also the 100 day MA.  Talk about being in balance! 

The market tired of standing still (no one makes money when it stands still), and perhaps in anticipation of Roth and the Retail Sales, the USDCHF started to rise.  The momentum and volume started to increase, and the pair started the trend higher.  The price momemtum has been stronger than the EURO as the price has not seriously tested the 100 bar MA 9see chart).  This is indicative of the momentum of the pair and also the relative strength of the EURCHF which has move higher as well today.  The current 100 bar moving average on the 5 minute chart comes in at 1.1601 (and rising).  A correction cannot be ruled out toward the 1.1616 level. However, I would not expect a move below this level (or the 100 bar MA onthe 5 minute chart).  If it does, the momentum to the upside would be in question.

Trichet on the newswires

•  FIGHT AGAINST PROTECTIONISM IS FUNDAMENTAL
•  MUST SOLIDLY ANCHOR INFLATION EXPECTATIONS
• STABILITY AND GROWTH PACT KEY FOR ALL 27 NATIONS
• SAYS STABILITY AND GROWTH PACT IS FUNDAMENTAL

More Trichet comments …

•  SHOULD SEE RECOVERY EMERGE IN COURSE OF 2010
•  WILL PROBABLY SEE NEGATIVE GROWTH THROUGHOUT 2009
•  2009 WILL BE VERY, VERY DIFFICULT YEAR
• ABSURD TO SAY ONE NATION CAN CREATE AREA-WIDE PROBLEM
•   EACH EURO-ZONE NATION RESPONSIBLE FOR OWN FINANCES

Trichet coming to the realization of  the economic issues including sharply lower inflation (well below 2%) and slower growth.  The ECB meets on Thursday and his comments seem to be in line with an additional cut in rates of 50 BP to 1%.  Before the report, the ECB Flash CPI estimate will be announced (0.7% Y/Y vs 1.2% last month) tomorrow.  On Wednesday, PMI Manufacturing for March (final) will be released (est 34.0) and the Unemployment rate for Feb is expected to come in at the highest rate since June 2006 (8.3% expected).

Next Page »