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Pivot Point Table
The EURUSD held a the 10yr low of 1.1754 forming a possible double-bottom formation and has since risen to 1.1815. The pair remains within 0.5% of the lows and the long-term downtrend continues unless the price rises above 1.2000, 1.2250 and 1.2600. Each of these levels will incrementally lead to a turn around in the directional trend. Financial markets are exhibiting heightened volatility and this has led to sharp movements in fx markets, stock indexes, shares and commodities. The main events casting a shadow over markets are the threats of ISIS in the Middle East, Domestic terror attacks, Crashing oil prices, the Russia, Ukraine and Nato stand off and Greece potentially dealing a blow to the stability of the EU by breaking out of the Union. Each of these elements in isolation would be considered potentially destabilizing to global stability, economic growth and markets. We will look at each factor individually.
- The threat of ISIS, which has been described as the most sophisticated and strongest terrorist organization by the US Pentagon and more challenging than Al-Qaeda is a huge concern to the 'West''. This conflict raises the question as to how to do you face or stop a non-state organization and prevent destabilization of the oil rich middle east region. If the US and its allies fight an extensive ground war in Syria and Iraq this would cost trillion of US Dollars that would be diverted from growth and will increase the US debts and those of other participating nations. In addition the question remains whether this war can be won and if it will lead to further harmful unintended consequences as has been the case in the Afghanistan, Iraq and Syrian conflicts. It has been said fighting terrorism is a war with no end. A war with no end is good for arms producers and suppliers and bad for the majority population.
- The new threat and fear of domestic terror attack such as those that have taken place in London and more recently in Paris are extremely troubling in their dimensions and as to how they can be combated and at what cost? Will it require instigating an invasive police state that monitors all citizens and deprives basic freedoms in a desperate attempt to stop potential terrorists?
- Crashing Oil Prices primarily affect oil producing nations and holds the potential to bankrupt countries that are not prepared to face an extended time period of depressed global oil prices. Already Venezuela appears on the brink of bankruptcy and the Russian Ruble has been adversely affected by the future loss of revenues stemming from oil price declines. The sudden nature of the price drop amounting to 60% in a year makes it more difficult to manage and mitigate the costs due to brief time-window for meaningful adjustment.
- The conflict in Ukraine and Russia is big talking point. Russia has claimed that it is under attack by the West and the US and has annexed the Crimea region. This clash is taking place on Russia's border and Ukraine was formerly a part of Russia or more correctly the USSR. Russia has the second largest nuclear arsenal after the United States and one of the best armies and most difficult territories to conquer on earth.
- And finally the fear of a Grexit looms over the Eurozone. If Greece were to exit the European Union this could lead to a domino effect with Portugal, Spain, Italy, Ireland and any number of other countries may consider exiting the Monetary Union. The financial politics of the EU have proven quite problematic in application by depriving member states from taking control of their monetary policy and interest rates and being able to align policy with their respective economic strengths and weaknesses and the needs of each economy. 2015 is likely to be a highly eventful year with plenty of market action.
Resistance levels above are at 1.1975, 1.2000, 1.2200, 1.2300, 1.2380, 1.2402, 1.2444, 1.2500.
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