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22 Mar 2013
Forex: Cyprus headlines still Euro's daily bread
FXstreet.com (Barcelona) - There has been one unanimous central theme when trading the Euro this week, that is the unexpected news to apply harsh haircuts for Cyprus depositors, with the subsequent opposition from domestic political parties.
Today, the market's attention continues on Cyprus, where the parliament has scheduled a vote on a new banking restructuring and wealth fund bill at 8GMT, in order to secure a bailout from the EU. The funding gap remains at €5.8 billion.
"The government has also tabled seven other bills, including one placing restrictions on banking activities, including cashing cheques and various other transactions" the Financial Times notes.
Meanwhile, the Eurogroup statement reaffirmed the importance of "fully guaranteeing deposits below 100,000 euros in EU", while reports have also emerged, int his case from a leading German business newspaper, the Handelsblatt, that the European Central Bank is preparing capital controls so that it can prevent money leaving troubled Cyprus.
The Cypriot Popular bank Laiki, the second largest in the country, limited ATM withdrawals to €260/day due to liquidity worries.
According to the Nomura FX team, regardless of the final outcome on Cyorus, "in the longer term, the news from Cyprus does raise question marks about the improving trend in eurozone banking flows observed since August 2012... hair-cutting of all deposits was a radical step and puts into question the notion of deposit insurance schemes broadly."
"Predicting deposit flows is difficult, and deposit dynamics have generally proved more stable than expected in the eurozone in recent years. Nevertheless, the first example of deposit haircuts during the euro crisis could make depositors in Portugal, Spain and Italy nervous, despite the numerous assurances so far from policymakers that Cyprus is a special case" Nomura adds.
Some analysts still sound bearish the Euro. One example being Valeria Bednarik, chief analyst at FXstreet.com, saying that "technical readings in the hourly chart show bears remain in control, as price remains capped by its 20 SMA while in the 4 hours chart indicators are getting deeper in negative territory, which also favors a downside continuation."
However, "market will likely remain on hold waiting more next chapter on Cyprus" Valeria recognizes. Another event that may help set the tone for the Euro is the 9GMT IFO releases in Germany.
Sounding not as bearish is another FXstreeet.com contributor, Fan Yang, CTA, technical analyst at FXTimes, noting: "At this point, a break above 1.2995-1.30 would form a inverse head and shoulders pattern in the 1H time-frame, and neutralize the bearish outlook in the near-term. A hold below 1.29 would maintain the bearish outlook."
Chief FX Strategist at TD Securities Shaun Osborne also believes the “EUR/USD has been pulled lower by the focus on Cyprus this week but relative central bank balance sheet positions suggests 1.35 is fairer value for EUR/USD currently,” he notes, adding that “we look for EUR/USD to rebound if a Cyprus deal is reached,” Shaun concludes.
Today, the market's attention continues on Cyprus, where the parliament has scheduled a vote on a new banking restructuring and wealth fund bill at 8GMT, in order to secure a bailout from the EU. The funding gap remains at €5.8 billion.
"The government has also tabled seven other bills, including one placing restrictions on banking activities, including cashing cheques and various other transactions" the Financial Times notes.
Meanwhile, the Eurogroup statement reaffirmed the importance of "fully guaranteeing deposits below 100,000 euros in EU", while reports have also emerged, int his case from a leading German business newspaper, the Handelsblatt, that the European Central Bank is preparing capital controls so that it can prevent money leaving troubled Cyprus.
The Cypriot Popular bank Laiki, the second largest in the country, limited ATM withdrawals to €260/day due to liquidity worries.
According to the Nomura FX team, regardless of the final outcome on Cyorus, "in the longer term, the news from Cyprus does raise question marks about the improving trend in eurozone banking flows observed since August 2012... hair-cutting of all deposits was a radical step and puts into question the notion of deposit insurance schemes broadly."
"Predicting deposit flows is difficult, and deposit dynamics have generally proved more stable than expected in the eurozone in recent years. Nevertheless, the first example of deposit haircuts during the euro crisis could make depositors in Portugal, Spain and Italy nervous, despite the numerous assurances so far from policymakers that Cyprus is a special case" Nomura adds.
Some analysts still sound bearish the Euro. One example being Valeria Bednarik, chief analyst at FXstreet.com, saying that "technical readings in the hourly chart show bears remain in control, as price remains capped by its 20 SMA while in the 4 hours chart indicators are getting deeper in negative territory, which also favors a downside continuation."
However, "market will likely remain on hold waiting more next chapter on Cyprus" Valeria recognizes. Another event that may help set the tone for the Euro is the 9GMT IFO releases in Germany.
Sounding not as bearish is another FXstreeet.com contributor, Fan Yang, CTA, technical analyst at FXTimes, noting: "At this point, a break above 1.2995-1.30 would form a inverse head and shoulders pattern in the 1H time-frame, and neutralize the bearish outlook in the near-term. A hold below 1.29 would maintain the bearish outlook."
Chief FX Strategist at TD Securities Shaun Osborne also believes the “EUR/USD has been pulled lower by the focus on Cyprus this week but relative central bank balance sheet positions suggests 1.35 is fairer value for EUR/USD currently,” he notes, adding that “we look for EUR/USD to rebound if a Cyprus deal is reached,” Shaun concludes.