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  1. #21

    In OPEC Poker Game, Iran and Iraq Call Saudi Arabia’s Bluff

    Riyadh hints it could walk away from Vienna oil talks
    Iran, Iraq judge Saudi Arabia could have to cut unilaterally


    For decades, Saudi Arabia has had its way at OPEC. All of a sudden the position has turned: Riyadh finds its power waning against a resurgent Iran and Iraq.

    As Organization of Petroleum Exporting Countries ministers gather for a meeting on Wednesday, Saudi Arabia is trying to reassert its authority by hinting it’s prepared to walk away from the negotiations. Genuine warning or bluff, Tehran and Baghdad may be willing to take the risk. Both have seen Saudi Arabia gain market share and neither is as dependent on oil prices as Riyadh.

    "Iran and Iraq have assumed that Saudi Arabia will cut unilaterally because it wanted higher prices and thought they could put the Saudis into a corner," said Amrita Sen, chief oil analyst at Energy Aspects Ltd. "Riyadh has effectively said it isn’t in a corner and will not do a deal unless everyone else contributes."

    The consequences could be enormous. If oil prices rise, energy giants such as Exxon Mobil Corp. may soon be flush enough to revive abandoned projects and the finances of cash-strapped nations such as Mexico and Russia will get a boost. If not, oil’s recent rally is likely to come undone.

    "If OPEC does not come up with a credible agreement to cut production on Wednesday oil prices will end the year below $40 a barrel and be chasing down $30 a barrel early next year," said David Hufton, chief executive officer of brokers PVM Group Ltd. in London.

    [Only registered and activated users can see links. ]Important Forex News Daily.-capture7-jpg

    Saudi Arabia is sticking to its same offer: cut production, but only if Iran freezes at current levels and Iraq also reduces output. Iran and Iraq are also holding to their own positions. The first wants to be able to recover to its pre-sanctions level of 4 million barrels per day and the second to freeze, rather than cut.

    Nobody seemed ready to fold on Monday. A committee charged with determining where the burden of production cuts should fall met for 10 hours, but made little progress as the Saudis demanded Iran was barred from raising output any further.
    Last Barrel

    Both sides fought to the very last barrel: the Saudis told Tehran it needs to cap output at 3.707 million barrels a day; Tehran offered in exchange a cap at 3.975 million barrels a day. The difference, a mere 0.3 percent of global oil supply, could still scupper the deal.

    Iran’s frustration was evident. In an article published on Monday by the official news service, Shana, Oil Minister Bijan Zanganeh said reviving the country’s oil output was "the national will and demand of the Iranian people." Like Libya and Nigeria, Saudi Arabia should accept Iran as a special case that’s excluded from production constraints, he said.

    For the latest on negotiations in Vienna before Wednesday’s meeting, click here.

    Together, Iran and Iraq pump more than 8 million barrels a day, up from about 6 million barrels a day from late 2014 when OPEC adopted its current pump-at-will oil policy. Saudi Arabia remains the largest producer at more than 10.5 million barrels a day.

    "The reality is that only Saudi Arabia and perhaps the U.A.E. and Kuwait are prepared to make any cuts, and those will be modest and short-lived," said Bob McNally, founder of consultant Rapidan Group in Washington. “At best, Iran and Iraq will sign for production freezes.”

    Perhaps with that in mind, Khalid Al-Falih, the Saudi oil minister, tried over the weekend to change the OPEC narrative. Oil prices will stabilize next year, "and this will happen without an intervention from OPEC,” he said in Dhahran, eastern Saudi Arabia, on Sunday, according to the Saudi newspaper Asharq al-Awsat.

    For Saudi Arabia, it’s an unusual position: in the past, it’s approached OPEC negotiations differently. Traditionally, Saudi Arabia let another country put forward a proposal and waited to see whether others -- particularly Iran and Venezuela -- were ready to support it, showing its hand last.

    This time, however, the kingdom showed its hand early in the process, signaling in the run up to the meeting in Algiers in late September that it was willing to switch from two years of produce-at-will and consider output cuts.

    For both sides, the talks go beyond oil.

    Deputy Crown Prince Mohammed bin Salman is trying to re-tool the Saudi economy through its modernist "Vision 2030" program and low oil prices are forcing unpopular austerity measures. In Tehran, President Hassan Rouhani faces elections in May against conservatives who believe his rapprochement with the West isn’t yielding enough economic benefits.

    "The stakes are extremely high, and everyone seems to be upping the ante," said Yasser Elguindi, a veteran OPEC watcher at consultants Medley Global Advisors LLC. "The thing with poker though is you can win even if you have a weak hand. But right now it’s hard to know who is bluffing and who is holding aces."

  2. #22

    GBP/USD Shrugs Off Gloomy Bank of England Financial Stability Report

    One of the major UK banks, RBS, failed the BoE’s ‘stress tests.’

    GBP/USD strengthened moderately in early European trading Wednesday, before easing back later, largely unaffected by a downbeat Bank of England Financial Stability Report. By midday in Europe, it was still close to the 1.2500 level and within the narrow trading range that has been in place for much of November.

    In its report, the central bank said the outlook for financial stability in the UK remains challenging in the wake of the Brexit vote. “The UK economy has entered a period of adjustment following the EU referendum. The likelihood that some UK-specific risks to financial stability could materialize remains elevated,” it added.

    Since the UK referendum on membership of the EU, UK financial stability has been maintained through a challenging period of uncertainty around the domestic and global economic outlook, the Bank argued. Moreover, substantial moves in financial market prices have not been amplified by the UK financial system.

    However, vulnerabilities stemming from the global environment and financial markets, which were already elevated, have increased further since July. “Financial stability depends on the resilience of the system to risks. The UK banking system is capitalized to sustain the provision of financial services, including the supply of credit, to severe stresses such as those that could face the United Kingdom and global economies,” said the Bank of England.

    As for the fall in GBP following the Brexit vote, “recent market developments further highlight the importance of the resilience of markets, and of market-based finance, to sharp market moves. The resilience of market liquidity remains uneven,” the Bank warned.

    Chart 1: GBP/USD 5-minute Chart (November 30, 2016 Intraday)

    [Only registered and activated users can see links. ]Important Forex News Daily.-capture-jpg

    As part of the Report, the Bank also released the results of its so-called “stress test” to measure the resilience of the UK’s seven major lenders to a global economic crash and one, Royal Bank of Scotland, failed. It has therefore been forced to devise a new capital plan in case of a financial crisis. The lender is still 73% owned by the government after its bailout in 2008.

    Barclays was also asked to take action when it fell short of one hurdle, but the BoE deemed its existing capital plan was enough. Standard Chartered missed a key metric as well, although it was not asked to take any action. Lloyds Banking Group, HSBC, Santander and Nationwide Building Society all passed.

    Looking ahead, Prime Minister Theresa May’s determination to begin the Brexit process by March next year could increase the concerns of the BoE, which asks for sufficient time for business to acclimatize to the post-EU period.

    Therefore, a “hard Brexit” is a still a substantial risk, with the BoE warning that if adjustments take place in a short timeframe, there could be a greater risk of disruption to services provided to the European real economy, which could spill back to the UK economy through trade and financial linkages.”

  3. #23

    CAD: ‘Rates Trump Oil’; Where To Target? – BofA Merrill

    USD/CAD is stuck between Donald and oil. Which factor will win? The team at Bank of America Merrill Lynch assesses the situation:

    Themes: rates trump oil. We pushed up our USD-CAD forecast sizably, and now expect 1.43 at end-2017. The shift in view reflects several developments:

    First, Donald Trump’s election increases the risk that NAFTA will be renegotiated or scrapped. The latter is unlikely, but given 23% of Canadian GDP is comprised of trade with the US, any developments along these lines will be CAD-negative. The economic risks are not adequately priced by the market, in our view.

    Second, we now see the Bank of Canada cutting rates, potentially as soon as midyear or later, as growth remains lackluster and downside risks are growing.

    Third, on the USD side, the GOP sweep opens up the door for dollar-positive fiscal stimulus, raising the prospect of a faster pace of Fed hikes. The market’s mispricing of BoC cuts relative to our forecast (3bps of cuts through mid-year 2017) and the extent of Fed hikes will leave the rate-sensitive Canadian dollar vulnerable during 2017.

    Lastly, while our Energy team sees oil prices higher in 2017, uncertainty is high heading into the November 30th OPEC meeting. Risks are skewed towards lower prices if OPEC retreats from its previously agreed production cuts.

    [Only registered and activated users can see links. ]Important Forex News Daily.-capture-jpg

    Risks: more balanced risks There are a few key risks to our bearish CAD stance. First, while we now see a BoC cut in 2017, a significant fiscal-driven boost to US growth could have positive spillovers to Canada. Given Canada’s lower sensitivity to US growth now we don’t think this would be a game change, though it is a risk. Second, higher oil prices on back of more disciplined OPEC production cuts or positive spillovers from US fiscal spending would support CAD more than we currently anticipate. Lastly, if USD gains turn the Fed more dovish, the policy divergence theme could be less positively USD/CAD than currently anticipated.

  4. #24

    Asian Session Forex Recap – Dec. 6, 2016

    Japan’s average cash earnings up by 0.1% vs. 0.2% uptick expected, 0.0% previous
    U.K. BRC retail sales monitor improves by 0.6% vs. 1.7% previous
    AU current account deficit narrows down from 15.9B AUD to 11.4B AUD in Q3 2016
    RBA keeps rates at 1.50% as expected

    Asian session market players kept calm and carried on today after getting jittery over Renzi’s resignation yesterday.
    Major Events:

    RBA keeps its rates at 1.50% – Earlier today, the Reserve Bank of Australia (RBA) has decided to keep its rates at 1.50%, a move that market players had expected. In its official release, the central bank noted that higher commodity prices are boosting national income and that, globally, “the outlook for inflation is more balanced than it has been for some time.”

    On a domestic scale, the economy is expected to see some slowdown near the end of the year before picking up again. Labor market conditions remain “somewhat mixed” with “considerable variation in employment outcomes across the country.”

    The housing market has also shown different outcomes, with some areas seeing rapid price increases and others declining prices. Last but not the least, inflation is also expected to remain low thanks to lack of upward pressure from wages.

    Overall, the RBA believes that keeping its rates steady is “consistent with sustainable growth in the economy and achieving the inflation target over time.” RBA Governor Lowe and his team will conduct their next meeting on February 2017.

    Australia’s current account – Before the RBA made its waves, Australia had a chance to sneak a peek of tomorrow’s GDP report. See, the current account deficit clocked in at 11.3B AUD in Q3 2016, much lower than Q2’s 15.9B figure and marks the lowest level in two years.

    A closer look, however, tells us that it was higher prices for Australia’s commodity that mostly boosted the numbers. Iron ore export volumes actually fell by 2.0% and while liquefied natural gas (LND) also dipped by 1.0%. In seasonally adjusted chain volume terms, the surplus on goods and services dropped by 61% in Q3, which is expected to shave off as much as 0.2% from the GDP report. Yikes!

    Risk appetite returns – Thanks to Uncle Sam printing better-than-expected data yesterday and Italy’s Renzi delaying his official resignation, Asian session market players had a chance to keep calm and carry on.

    Nikkei is up by 0.47%, Hang Seng is up by 0.76%, the Shanghai Index is hanging in there with 0.03%, and Australia’s A SX 200 is up by 0.52%. Oil prices missed the bus, however, as Brent crude oil slips by 0.53% to $54.65 and U.S. crude oil prices dips by 0.70% to $51.43.
    Major Market Movers:

    AUD – The Australian dollar failed to find support from the RBA’s decision to hold its fire. Instead, Aussie traders focused on the impact of today’s releases on tomorrow’s GDP report.

    AUD/USD is down by 15 pips (-0.20%) to .7462, AUD/JPY is down by 19 pips (-0.22%) to 84.88, EUR/AUD shot up by 13 pips (+0.09%) to 1.4415, and AUD/NZD ended the session 31 pips lower (-0.30%) to 1.0452.
    Watch Out For:

    8:00 am GMT: German factory orders (0.6% expected, -0.6% previous)
    9:15 am GMT: Switzerlan’s CPI (-0.1% expected, 0.1% previous)
    10:10 am GMT: Euro Zone retail PMI
    10:30 am GMT: FPC meeting minutes
    11:00 am GMT: No revision expected to the Euro Zone’s GDP

  5. #25

    What will happen with the euro after the ECB meeting?

    Morgan Stanley’s strategists believe that the ECB will keep rates on hold at this week’s meeting, but can expand its QE purchase program. But they consider different scenarios with various responses from the euro.

    Potential scenarios and the reaction of the euro.

    1. QE purchases extension for 6 months after March. This expansion is well priced in by the market participants, so, it wouldn’t be surprising for markets. The reaction of EUR/USD should be restrained. To extend purchases and leave an expectation in the market that they could extend again, the ECB should introduce some changes to its present program. Which kind of changes?

    - The ECB may announce that it is not going to use the capital key to allocate purchases. This option will be positive for periphery countries of the Eurozone, but bad for the German band. The reaction of the euro should be positive in this case. The ECB may not express itself explicitly, it can only hint that it is going to be flexible (in this case the euro’s reaction won’t be stormy). If the ECB is more explicit, the euro may react with some moves.

    - The ECB can recourse to buying bonds below the deposit rate. This decision will be negative for the euro.

    - The ECB may commit itself to changing the maximum limit on buying per issue. This approach should be bullish for German bund curve. EUR/USD will fall, if there is a larger decrease in bond yields than US Treasury yields.

    - The ECB may address the scarcity of bonds. If there is a rise in short end rates (it would dissipate fears over the bond scarcity), the euro may gather momentum.

    2. The ECB announces the cut of its interest rate. This scenario is not expected by the market. If it is realized, EUR/USD should fall significantly.

    3. ECB decides to extend its QE purchases by more than 6 months beyond March. This option is not expected by the market. EUR/USD will be poised to weakening.

    4. ECB doesn’t change its policy stance. This approach will cause German bunds to rise substantially and push EUR higher.

    5. ECB extends corporate bond purchases, but not government bond. Basically, in this case, the ECB will commit to the tapering of the bond purchasing program. This scenario is unlikely, and if it’s realized, it will be positive for EUR.

    The ECB meeting will be held on Thursday, December 8.

  6. #26

    Crude prices pull back as traders cash in on one-year highs

    On Tuesday, crude futures retreated from one-year peaks, as market participants took profits following the steep surge in the wake of the previous week’s decision by OPEC to cut output.

    January delivery CLF7 futures dropped 0.7%, trading at $51.45 a barrel in New York. February delivery Brent crude futures LCOG7 plummeted 0.53%, hitting $54.69 a barrel.

    Crude futures had reached fresh one-year speaks during the New York session. Crude prices have soared steeply during the sessions before and after the previous week’s deal by OPEC to cut production. Experts told that the crude market looks most likely to head higher, with occasional pullbacks as market participants take money off the table.

    The market is purchasing into this rebalancing story, backed by a cut from OPEC. Crude prices ascended nearly 15% after the previous week’s OPEC deal, that would remove approximately 1% of supply from the energy market.

    [Only registered and activated users can see links. ]Important Forex News Daily.-30-jpg

  7. #27

    Trading ECB: Potential Scenarios And EUR/USD Response

    After EUR/USD enjoyed a spectacular rebound after the Italian referendum, the next big event is the ECB.

    We believe the reaction of the EUR over the ECB meeting will ultimately depend on the probability of tapering in the next 12m. In particular, EURUSD will rely on the short end rate differential between EMU and the US. Our economist’s assumption is that the ECB will keep rates on hold at next week’s meeting but add a 6m extension to its QE purchase program.

    What is the market expecting?

    Rates – no cut is priced for the December meeting and only 3.5bp by the end of 2017. The first hike is now 38 months away in 2020 instead of 60 months away as was priced at the end of October.

    QE – the level of a bond yield is unable to give us an accurate measure of what the market is “pricing” regarding further government bond purchases. Our only estimate is via speaking to our clients. Recent discussions suggest the majority of macro investors are not assuming the ECB will taper in 2017, indicating another extension would come in September.

    Potential Scenarios and EUR response

    1) Extends QE purchases for six months beyond March at the current pace of 80bn/month. Expected by many market participants, already hinted at by ECB members speaking to MNI news, wouldn’t be surprising for markets. Limited EURUSD impact. To extend purchases and leave an expectation in the market that they could extend again, the ECB would need to make some tweaks to its current program that limits the scope for purchases. Here are some tweaks that the ECB could make and the potential EUR impact.

    -a) No longer using the capital key to allocate purchases. As this approach could be bearish for the German bund but bullish for the periphery, we think the EUR could react positively. Note that the ECB doesn’t necessarily need to explicitly express it is moving away from the capital key, they could indicate that they plan to be more flexible, in which case the EUR reaction should be limited. The market impact would be more volatile if they are explicit.

    –b) Buy bonds below the deposit rate. Would be bearish for the EUR on the day given that this measure should put downward pressure on front-end German yields in particular.

    —c) Change the maximum limit on buying per issuer/ISIN. This approach would generally be bullish for the whole German bund curve. For EURUSD to fall we would need to see a larger decline in bund yields than US Treasury yields, pushing down the yield differential. EURUSD is more sensitive to front-end rates (2y) than long end rates (10y).

    —-d) Scarcity to be addressed (Bundesbank repo facilities enhanced) We have to assume that the ECB will either discuss or be asked about the lack of bonds, specifically about short end bonds being used for repo purposes. Any rise in short term rates as a result of reduced worries about bond availability would strengthen the EUR, but we wouldn’t expect more than a 1% increase.

    [Only registered and activated users can see links. ]Important Forex News Daily.-capture-jpg

    2) Cuts rates by10bp Extremely unexpected. Markets price in no probability of a cut next week and only a 3bp by the end of 2017. EURUSD would fall by 2-3%, driven lower by front end rates (Exhibit 15).

    3) Extends QE purchases by more than six months. This would be unusual for the ECB to extend for more than six months as they haven’t done that before so this measure would surprise markets. We would expect EURUSD to weaken.

    4) No change in policy. EUR would rise as markets are expecting some form of easing. The magnitude of the increase will depend on the explanation given by the ECB and how it intends to scale back QE purchases. This would see German yields rise substantially, while Italian spreads likely widen out, pulling the EUR in opposite direction.

    5) Extend corporate bond purchases but not government bond. 10% of the current monthly purchases are in corporate bonds. Reaching this sector and not government bonds would imply a tapering of bond purchases. This scenario is highly unlikely and would be the most bullish of the scenarios considered here.

  8. #28

    London Session Forex Recap – Dec. 6, 2016

    German factory orders m/m: 4.9% vs. 0.6% expected, -0.6% previous
    German factory orders y/y: 6.3% vs. 1.6% expected, 2.6% previous
    Swiss CPI m/m: -0.2% vs. -0.1% expected, 0.1% previous
    Swiss CPI y/y: -0.3% vs. -0.2% expected, -0.2% previous
    Euro Zone Q3 final GDP q/q: unchanged at 0.3% as expected
    Euro Zone Q3 final GDP y/y: unchanged at 1.7% as expected

    Today’s morning London session was rather calm, with many currency pairs trading sideways. The risk-on vibes likely sent buyers towards the Aussie, though, while the euro got a bearish injection near the end of the session.
    Major Events/Reports:

    Oil tumbles – The oil rally fueled by the successful OPEC oil deal showed signs of ending today, since oil benchmarks were leaking red.

    U.S. crude oil was down by 1.37% to $51.08 per barrel
    Brent crude oil was down by 0.98% to $54.41 per barrel

    Market analysts say the drop in oil price during the session was due to reports that Russia and many OPEC members ramped up their oil production. Quite naturally, this eroded optimism over OPEC’s deal to cut oil output.

    Another round of risk-taking – There were signs of another bout of risk-taking in Europe, albeit not as strong as yesterday. And thanks to the risk-on vibes, most of the major European equity indices ended the session with moderate gains.

    The pan-European FTSEurofirst 300 was up by 0.42% to 1,352.71
    The blue-chip Euro Stoxx 50 was up by 0.61% to 3,072.50
    Germany’s DAX was up by 0.22% to 10,708.00

    U.S. equity futures were rather flat, but leaning towards the green.

    S&P 500 futures were up by 0.06% to 2,205.50
    Nasdaq futures were up by 0.11% to 4,786.12

    According to market analysts, Italian banking shares were rallying, which improved overall risk sentiment. And the rally in Italian banking shares was due to expectations that an election won’t come in early 2017, which would allow the government to address the beleaguered Italian banks. However, European equity indices showed signs of retreating when reports about the possibility of early Italian elections emerged.

    Early Italian elections? – Near the end of the session, reports citing Italian Minister of the Interior Angelino Alfano began making the rounds. According to these reports, Alfano said the following after meeting with Renzi: “I forecast there will be the will to go to elections in February.” This obviously goes against the prevailing belief that there won’t be an election in early 2017.
    Major Market Movers:

    AUD – Price action was limited, but the higher-yielding Aussie did end up as the top dog of the morning London session, likely because of the risk-on mood.

    AUD/USD was up by 10 pips (+0.12%) to 0.7454, AUD/CHF was up by 36 pips (+0.49%) to 0.7525, AUD/NZD was up by 25 pips (+0.25%) to 1.0460

    EUR – Like most currency pairs, euro pairs were well-behaved for most of the session. However, the euro abruptly got trounced by sellers near the end. There weren’t really any major economic catalysts, but the euro’s drop did coincide with the spread of reports about the possibility of early Italian elections.

    EUR/USD was down by 28 pips (-0.27%) to 1.07338, EUR/CAD was down by 35 pips (-0.26%) to 1.4233, EUR/AUD was down by 57 pips (-0.40%) to 1.4397
    Watch Out For:

    1:30 pm GMT: Canada’s trade balance (-$1.70B expected, -$4.08B previous)
    1:30 pm GMT: U.S. trade balance (-$42.0B expected, -$36.4B previous)
    1:30 pm GMT: Final U.S. non-farm productivity (upgrade from 3.1% to 3.3% expected)
    1:30 pm GMT: U.S. factory orders (2.6% expected, 0.3% previous)
    3:00 pm GMT: Ivey’s Canadian PMI (60.0 expected, 59.7 previous)
    10:00 pm GMT: RBNZ Governor Graeme Wheeler will testify before the Finance Select Committee
    Dairy auction currently underway (+4.5% previous); auction usually ends at around 2:00 pm GMT

  9. #29

    South African Rand Gains On Dollar Despite GDP Missing Estimates

    South African GDP misses estimates, underlining that the economy remains extremely weak
    But the Rand has risen versus the Dollar, which eased against most major currencies Monday
    A host of emerging-market currencies also gained versus the Dollar yesterday

    South Africa’s Rand has advanced on the US Dollar, despite a weaker-than-expected rise in South African GDP, as some emerging-market currencies make up lost ground in the wake of a weakening Greenback.

    South Africa's economy grew by 0.2% quarter-on-quarter in Q3 2016 after rising by a revised 3.5% in the previous quarter, according to official data from Statistics South Africa Tuesday, suggesting little underlying economic confidence in the country. Analysts had forecast the economy would grow by 0.5%. GDP rose 0.7% year-on-year, which was in line with expectations.

    Flagging growth will hinder Finance Minister Pravin Gordhan’s pledge to hit the GDP target of 3.4%expansion this year and narrow the budget deficit to 2.5% of GDP by 2020, pointing to interest rates remaining unchanged rather than rising.

    But despite the poor showing, USDZAR dropped to 13.58560 in Tuesday trading, the lowest since November 10, illustrating that movements in USDZAR are more likely to be determined by events in the US than in South Africa. The Dollar, while generally still strong, fell against most major currencies yesterday as fears of the impact of the Italian referendum result receded, helping the Rand and other emerging-market currencies, to make some headway. Turkey’s Lira, China’s Yuan, Mexico’s Peso and Brazil’s Real all strengthened versus the Dollar yesterday.

    Another Rand-positive factor is last week’s decision by S&P Global Ratings to affirm South Africa’s BBB- credit rating. That’s the lowest investment-grade level achievable, but some analysts had feared that, against a background of slowing inflation, a weak economy and a turbulent domestic political situation, the country might lose its investment-grade rating altogether.

    [Only registered and activated users can see links. ]Important Forex News Daily.-south-african-rand-gains-dollar-despite-gdp-missing-estimates_body_rand-png

  10. #30

    Dollar Bounces as Risk Reaches, Market Awaiting Both ECB and Fed

    The Euro's unexpected rally after the Italian Referendum lost steam as focus now turns to the ECB decision
    Between the EUR/USD slip and a mild risk appetite rebound, the Dollar advanced for the first time in 4 days
    Conviction will be difficult to secure with major event risk ahead and prevailing trends stretched on speculation

    Want to watch analysis of events as they happen, develop your trading strategy or ask analysts trading questions? See what live events are scheduled for the coming week on the DailyFX Webinar Calendar.

    The Euro's rally after the Italian Referendum ran out of steam quickly. While the 'No' vote may have been an expected outcome, the course adjustment including political uncertainty, delays to banking sector support and likely gains in anti-EU sentiment do not bode well for the currency longer term. Further applying the breaks to the contradictory climb was the transition of power to the ECB rate decision scheduled for Thursday. While this event maintains the capacity to further lift the shared currency - perhaps if the ECB decides to Taper and international investors do not treat it as a transfer of risk from central bank to their own shoulders - uncertainty will work against establishing a clear trend.

    Given the role the Euro played in forcing the Dollar into a high-profile technical break (head-and-shoulders pattern) via EUR/USD, the moderation disarmed the potential for strong follow through. Greenback bears were already relying on questionable, fundamental footing to project a lasting move before next week's FOMC decision. Without a committed move from its primary counterpart, that motivation will be even more difficult to muster. Rather than a question of bullish or bearish for Euro and Dollar, we are facing a backdrop struggling for any trend. That makes the EUR/USD's now tempting retest of former resistance (the 'neckline' in the aforementioned pattern) as support a dubious proposition.

    As we have frequently found ourselves these past months, the more appropriate approach to operating in a market lacking the commitment to sentiment and focusing to key event risk ahead is likely shorter termed trades with more reasonable (closer) targets and stops. Pairs like GBP/USD show better circumstance for this approach with reaction to event risk forcing short-term technical breaks on clear and limited patterns. Ahead, the docket has a even smattering of notable event risk, but little to override the ECB and Fed countdowns. Tabs should be kept on risk trends as the crawl higher as the fundamental risks grow more prevalent. Traders in all assets should also make it a point to mark oil's whereabouts with the pullback from 52 rousing both overambitious bullish and bearish forecasts.

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