EUR/USD conquers 1.0600 level; Emmanuel Macron 10 years’ time
|Currently, EUR/USD is trading at 1.0644, up +0.28% on the day, having posted a daily high at 1.0670 and low at 1.0595.
Rogue bird in the union
The Guardian reports, "The euro may not exist in 10 years’ time if Paris and Berlin fail to bolster the single currency union, French presidential candidate Emmanuel Macron has said, adding that the current system benefits Germany at the expense of weaker member states."
Don’t Count Europe Out, Just Not Yet
Wells Fargo Research Team offered their views on how Europe may surprise in 2017, "As such, investors that believe the U.S. economy is at inflection point should be actively reconsidering their views on European assets as well and, by extension, the potential impact of a reversal of European flows into American assets (in this instance, U.S. corporate bonds). If the U.S. economy accelerates, corporate Europe could finally engage in substantial re-leveraging throughout 2017 as we potentially approach the waning days of the ECB’s quantitative easing (QE) program. This would have the following two major investment implications within the world of corporate credit:
Re-leveraging corporates and recovering financials: A recovering Eurozone economy would bring about the potential for an end to the ECB’s Corporate Security Purchase Programme (CSPP), which likely would spur a round of re-leveraging activity by European corporates. At the same time, a steeper sovereign curve resulting from the shift in the ECB’s Public Sector Purchase Programme (PSPP) toward front-end maturities should be positive for banks over time. As such, we would expect the spread between the two to normalize to pre-CSPP levels when banks traded inside of non-financials.
EUR/USD Forecast: dollar's bulls bend but don't break
A slowing and potential reversal of European demand for U.S. credit: If our Eurozone recovery scenario materializes in H2 2017, the ECB could signal an end to its aforementioned QE programs, which could lead to stabilization and potential appreciation of the euro. In that event, we could see a sharp pullback or even a reversal in European demand for U.S. corporate bonds. Past performance and current hedge costs have created an environment where European investors are significantly under-hedged on their U.S. bond portfolios and, therefore, highly exposed to a currency reversal."
EUR/USD Technical Analysis
Muscle memory, that's exactly how financial markets operate, and the shared currency next move has provided since exception multi-levels, and the current price is no coincidence, just the result of a parabolic pattern. To the upside, as prices move above 1.0600, the euro has one step closer to a decent exchange rate; what's the next target? If traders and investors were to measure the distance from low to high, over the last 2 years (previous breaking below 1.0450), there are 1000-pips.History repeats itself over and over again, then 1.0827 (short-term 38.2% Fib) is the immediate resistance to challenge, later 1.0977 (short-term 50.0% Fib) is doable and finally, 1.1128 (short-term 61.8% Fib).
With so many toxic partners and negative data (including lack of growth and inflation; except Spain), the evidence seems to be on the table to reverse at some point towards parity; what is parity? 1.0075 (long-term 23.6% Fib) looks like it. However, market participants invested in the euro may prohibit the currency to settle below the infamous 1:1 exchange rate.
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