Forex Signals: EUR/USD will be the crucial point today

Thursday, August 18, 2011

EUR/USD will be the crucial point today

EUR/USD (SELL): We recommend investors to SELL EUR/USD at the current level. S/L at 145.80.
EUR/NOK(SELL): We recommend investors to SELL EUR/NOK with T/P at 775.78 and S/L at 783.10.
EUR/PLN (SELL): We recommend that investors SELL EUR/PLN with a S/L at 418.05

The market players were slightly disappointed about the announcement from the SNB. Investors had expected that the SNB would put a floor under EUR/CHF, yet this did not happen. This was the reason why CHF strengthened by about 2.70% at the beginning of yesterday?s trading session. The signals from the SNB indicate that the central bank is still far from employing such drastic measures. One challenge is that it is far from certain that the SNB or the Swiss government has the political will to do so. Another challenge is that the SNB most likely does not have the necessary strength to defend a certain level. Particularly if the debt crisis in the EU is rekindled, i.e. the SNB will be forced to enter into an agreement with the ECB to defend a certain level, which we do not assess to be in the interest of the ECB.

Yesterday the SNB announced the following initiatives.

- Increased liquidity allocation (again).

- Pressure on the 3-month swap rate down to -1.65%.

- Verbal intervention (the SNB will employ further methods if necessary).

We expect that as long as CHF is at the current level or higher, the SNB will announce further initiatives of the same kind. We assess that the CHF is to strengthen somewhat before we see direct intervention.

EUR/PLN (SELL): We recommend that investors SELL EUR/PLN; S/L should be placed at 418.05 On 11 August, the rate peaked at the same level as the old top at about 425 seen in 2010. We expect that 407 will have a 'magnetic effect?. As EUR/PLN falls, we will lower S/L.

EUR/USD (SELL): We recommend that investors SELL EUR/USD with a S/L at 145.80. Yesterday, EUR/USD was traded up to 145.20. Subsequently the cross rate was sold down quickly due to concerns whether the announced initiatives will suffice to contain the EU debt problems. At the meeting between Sarkozy and Merkel, France and Germany agreed to strengthen the integration within the EU. No specific initiatives were presented. We assess that EUR will still be under pressure as long as no extraordinary initiatives are proposed.