EU or ER

European Flags

European Flags

As we here good news starting to emerge from Europe, such as Spain and as always Germany is this the end of a somewhat disastrous period for the European nations. I do nnot nessesarily think so.

although there are encouraging signs for SPAIN, ITALY and FRANCE two of the larger nations are still not looking financially sound to say the least.

France still struggling with 98% debt to GDP, ITALY has had negative growth over the last decade, both of which are not sustainable, at least not an instant fix.

So looking at a trade for the currency pair GBP/EUR can only mean short to medium term continuation of the uptrend in strength for the GBP. Coupled with QE in progress for the EMF and UK interest rate hikes due very shortly can only increase the fundamentals for this trade. important to play a bounce off any strength in the Eur. Target for me is 1.5

So the bigger question is are we really out of the woods, can we really ignore these alarming situations with very large EU members. Maybe a reform of the Eu is likely in the next decade, where lessons from Ireland, Greece, Portugal and whoever is next could benefit towards a greater Europe.  Assuming we really do learn from these lessons, unprecedented or not.

Trade idea – GBP / EUR

Big picture

Monetary policy QE easing is underway within Europe, Started in January 2015 – R1 1 trillion euros. How much more to come to fend off any problems with the larger problematic member countries.

Britain QE 375Billion in 2011 coming out of its QE. Lasting typically 2-3 years – Actually stopped QE in Oct 2014.

However Spain showed encouraging signs and Germany is also doing well. France and Italy are still a big risk. Italy has not had growth for a decade, dangerous. France is struggling to contain debt at 98% of GDP. Greece is still a burden on the euro and Portugal had a bailout. Ended that bailout last year, however reports show throughout the debt to GDP was at 130%

So all this is going to take time to play out and provide a true sustainable recovery for Europe as a whole and as such the EUR. Even with positive news from other countries such as Spain and Germany.

Added backing for a trade of the GBP/EUR are recent momentum with talks of an increase of rate hikes for the UK, possibly this year. So will the markets start to price this in.

This gives us the short term continuation of the uptrend for the GBP/EUR.

Negatives to look out for

Uk economic outlook has provided a slow growth, albeit growth. 

Trend

GBP-EUR

On an upward trend. However have bounced off high with a lower high, could signal reverse of trend. Short term trade shows a channel that could be played with a good ratio of risk reward. Eyes on the job numbers on Wednesday.

News

UK Employment rate is due – what’s expected? 08:30  Wednesday 12th Aug 2015.

Trade setup

Long term continuation of the trend from the bounce of the channel. Buy at around 1.41, bottom of the channel. Short stop loss. First target 1.45 with a review once it getS there. Maybe sell and buy back in within the channel…. Looks like I’m in on bits one.

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