Update on Euro

Update on Euro

            I write a post before that say Euro is time to rebound. Now make some update after ECB meeting. ECB launch a new QE around 60bn bond purchase last week higher than market expectation. Euro immediately tumbles to reflect this policy to fall by around 3%. However, I still persist in my call that Euro rebound is coming soon and this rebound can be over 5%.

             Figure 1: The latest Europe economic dates recently reveal the bottom is hit. Growth differentials start to tighten to promote Euro to rebound.

Source: Nordea Market and Macrobond

             

             Figure 2: According to previous QE, market is close to fully discount expectation.

Source: Nordea Market and Macrobond

            

              Figure 3: Euro is overdone to reflect the US/EMU monetary base.

Source: Nordea Market and Macrobond

              Figure 4: Euro is extremely oversold and 52 week of change of US dollar seemingly to hit a peak. US dollar faces a resistance.

Source: Kimble Charting Solution

              All in all, my call that Euro will have a significant rebound remain unchanged after EMU meeting. Almost all bad news for Euro is released and in addition, extremely pessimistic sentiment, oversold price reaction and improving Europe economy create a opportunity to long Euro to catch a short term trend.