Euro as new safe haven currency?

Key News

EURUSD Daily: Euro continues to be the big winner against the dollar lately.  Next key Fib retracement resistance daily comes in near 13600-level.

USDCNY (Chinese yuan) Daily: Despite continued bad news on growth flowing from China, the currency has managed to gain against the buck lately, possibly alleviating concerns the Chinese may weaken the currency to help exports. But would a weak currency matter when no one out there seems to be buying?

USDTRY (Turkish lira) Weekly: Stabilized after a test of the high?  Or is it the calm before the storm?

  • Crude oil rose after OPEC’s Secretary-General Abdalla El-Badri said the group needs to make a “sizeable” production cut at this week’s meeting in lgeria. (Bloomberg)

Crude Oil Daily: Crushed!  A bounce would be no surprise.

Key Reports (WSJ):
8:30 a.m. Dec NY Fed Manufacturing Index: Expected: -26.5. Previous: -25.4. 
9:00 a.m. Oct Treasury International Capital Flows: Previous: $57.2B. 
9:00 a.m. Nov Industrial Production: Expected: -0.6%. Previous: +1.3%. 
9:15 a.m. Nov Capacity Utilization: Expected: 75.8. Previous: 76.4. 
1:00 p.m. Dec NAHB Housing Market Index: Previous: 9. 

Quotable

"People who look for easy money invariable pay for the privilege of proving conclusively that it cannot be found on this earth.

                               Jesse Livermore

FX Trading – Euro as new safe haven currency?
We don’t think so–at least over the longer term.  But no matter what we think near- or
long-term, the market likes euro compared to the other players.  The euro has bounced
strongly against the US dollar.  Also, you can see euro’s relative strength in the Euro –
British pound cross (at an all-time high) and the Euro – Swiss franc cross (wasn’t Swiss
supposed to be the safe haven)?  

EURGBP Weekly:

EURCHF Weekly:

No doubt, of the central banks, the European Central Bank at the moment is acting most
“central bank-like.”  What we mean is that Mr. Trichet, President of the ECB, seems
most publicly concerned about stuff like fiscal responsibility and running out of bullets
by cutting too aggressively.  Adding to that, an ECB talker was trying to put on a good
face about 2009, suggesting the Eurozone would be emerging from all this mess by the
second half of the year.  So he is doing come cheerleading too.  

But, we are concerned about the euro safe haven argument for a couple of reasons:

First, despite our general agreement with Mr. Trichet about his monetary and fiscal
views, we wonder if his reluctance to ease further and faster may not add to the weight
of the problems in Europe.  Consider that member countries are busting their budgets in
an effort to drive demand, and ECB stinginess on rates, or lack of monetary stimulus,
may only exacerbate the fiscal strains Mr. Trichet is concerned about–and widen
already widening member country bond spreads.  Plus, we think the emerging markets
of Europe could be the Achilles heel for the euro; they’re starving for liquidity even
more than the larger euro members.  

Our second concern is Germany.  Europe’s real engine of growth is still seen as being in
relatively decent shape.  But, we don’t think that will last too much longer.  Germany
after all is an export powerhouse. We believe the exact same dynamic hitting China–no
buyers–will hammer German growth.  

However, all that said, we remain open.  Price action is always the final arbiter no
matter how we spin our macro story. 

  • hany_egypt

    Actually, I consider all happening a correction to start a long term downtrend on EURUSD from un-known level. That’s just a prediction based on an optimistic overview to todays weak buck. But the question is: despite who is the winner, what’s better for healthy global economy ? longtrend or downtrend EURUSD ?

  • hany_egypt

    Actually, I consider all happening a correction to start a long term downtrend on EURUSD from un-known level. That’s just a prediction based on an optimistic overview to todays weak buck. But the question is: despite who is the winner, what’s better for healthy global economy ? longtrend or downtrend EURUSD ?

  • azzure_zerk

    Do you think Europe could take the title to become a high gainer for the upcoming years?Is there any possibilities that china would take as one of the big winner against the EUR/USD?

  • azzure_zerk

    Do you think Europe could take the title to become a high gainer for the upcoming years?Is there any possibilities that china would take as one of the big winner against the EUR/USD?