Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Euribor’s Wobble, How Nervous Should We Be?

Interest-Rates / Euro-Zone Jul 02, 2010 - 03:32 AM GMT

By: Seven_Days_Ahead

Interest-Rates

Best Financial Markets Analysis ArticleSince the beginning of May, Euribor has traded in a clearly defined sideways pattern. Our analysis of this contract had broadly been that it had little room to rally further due to the economic recovery clearly underway, but no reason to turn into a bear market yet since that recovery was still too fragile.



WEEKLY CHART

The market is dithering at the top of a long uptrend.

But is it a reversal of the Trend?

Look closer.

DAILY CHART

The position is less like a Head and Shoulders Reversal than a Multiple Top.

The double low of 98.68 is important if there is a confirmed (ie twice) close beneath it.

The volume on the sell-off today was significant.

But we have seen that sort of volume before – in early May. And, there is a possibility of a large bull flag too, looking at the wider context.

So for the moment we are skeptics, until a close is confirmed beneath 98.68. If that happens then the market will be pressured lower. But even then, other things being equal, the diagonal at 98.55 is important…
 

The Macro Trader’s view:
Since the beginning of May, Euribor has traded in a clearly defined sideways pattern. Our analysis of this contract had broadly been that it had little room to rally further due to the economic recovery clearly underway, but no reason to turn into a bear market yet since that recovery was still too fragile.

More recently,  we judged Euribor remained trapped in a period of sideways trading that could last for a considerable period, as a result of the uncertainty caused by the Euro zone sovereign debt crisis.

Until the crisis morphed from being Greek centric, the Euro zone economy was in recovery mode with Germany pulling the rest along much like a locomotive dragging its trucks. But as the crisis began to engulf additional countries, forcing each in turn to adopt austerity measures, until Germany its self was infected, traders began to fret that growth would be the most conspicuous victim.

Even in the US, after initially sounding reasonably relaxed about the consequences of the Euro zone drama, the Fed now fears the US economy could feel more than just “ripple” effects.

The main problem currently is the Euro zone banking system. It is judged to be heavily over-exposed to the Government bonds of those peripheral Euro zone countries that initially sparked the crisis and have suffered steep sovereign debt downgrades.

Other Banks have become reluctant to lend to Euro zone Banks for fear the money might not be repaid and this has forced the Euro LIBOR rate up, which in turn has begun to feed into the Euribor futures markets.

The problem is serious because those Banks thought to be most at risk are those in Germany and France. Some estimate that the affected banks require large capital injections from the state, or the emergency fund created recently by the EU/EZ/IMF designed to bailout any Euro zone state at risk of default.

So the recent sell off in Euribor that has seen the two month old range break, isn’t so much a market view on the ECB tightening interest rates, but a reflection of tightening conditions in the Wholesale interbank money markets.

We saw these conditions develop earlier during the original financial crisis, but then the Global Banking system was affected; now it is more localized. The ECB is alert to this and continues to provide liquidity as needed despite fears it was about to begin removing some emergency support this week.

So is Euribor turning bearish? We don’t think so, yet.

Mark Sturdy
John Lewis

Seven Days Ahead
Be sure to sign up for and receive these articles automatically at Market Updates

Mark Sturdy, John Lewis & Philip Allwright, write exclusively for Seven Days Ahead a regulated financial advisor selling professional-level technical and macro analysis and high-performing trade recommendations with detailed risk control for banks, hedge funds, and expert private investors around the world. Check out our subscriptions.

© 2010 Copyright Seven Days Ahead - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Seven Days Ahead Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules