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| Action Insight Weekly Report | Markets Snapshot |
Euro's Post ECB Strength to Continue, Showing Evidence of Medium Term ReversalAfter much anticipation, ECB president didn't disappoint and revealed his new bond buying plan, the so called Outright Monetary Transactions last week. Responses from markets were overwhelmingly positive. Euro surged across the board after ECB press conference and was up 1.89% against dollar, 1.76% against yen and 1.29% against Aussie over the week. These three were indeed the largest moving pairs. European equities were broadly higher, in particular with DAX closing at 7214, breaking through this year's high of 7194 made back in March. Spanish 10 year yield closed at 5.63%, way below last week's close of 6.86% and also sharply lower than then 7.62% made back on July 25. Italian 10 year yield closed at 5.058%, comparing to last week's close of 5.850% and 6.60% made on July 24. There were additional support to Euro on rumors that SNB would raise the EUR/CHF floor to from 1.20 to 1.22. |
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| Featured Technical Report | |
EUR/USD Weekly OutlookEUR/USD jumped to as high as 1.2816 last week and showed sign of acceleration. The strong break of 1.2747 resistance, as well as the medium term falling trend line indicates trend reversal. Initial bias remains on the upside this week and current rise should target 38.2% retracement of 1.4939 to 1.2042 at 1.3149 next. On the downside, below 1.2750 minor support will turn bias neutral and bring consolidations. But downside should be contained well above 1.2501 support and bring another rally. |
| Special Reports | ||
ECB Unveils More Details about Outright Monetary TransactionsECB leaves main refinancing rate unchanged at 0.75%, compared with our expectation of a rate cut of -25 bps. Policymakers believed that this is not an appropriate time to lower interests as economic weakness had been anticipated. Meanwhile, President Draghi stated at the press conference that officials have basically agreed on unlimited bond purchase program. Despite objected by a member, the program is expected to be able to help "address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro". According to Draghi, purchases would be fully sterilized, suggesting that the program would not trigger inflation pressure. The ECB also affirmed that purchases would not have seniority. | ||
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The Week in Review and Outlook
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