Now is not the time to get long EURUSD and here are some reason’s why:
- I like taking a contrarian view of the market but we closed below the low set on 4/25 which is a sign the bears are in control of EURUSD.
- The April 21st meeting notes state that the GC does not have the motivation to change its stance on monetary policy. So the ECB is fine with having negative interest rates? This is weakening policy for EUR because institutions, the ones with the most money, have to pay to keep cash in the EU so they will transfer out capital to other jurisdictions by selling EUR and buying the currency in a more favorable financial environment.
- ECB has called for reform and wants a looser fiscal policy. This means helicopter money is on the way.
- ECB bond buying is set to ramp up which means the Euro capital base will be expanding.
- ECB members are talking like they want more printing. ECB’s Liikanen is trying to sell the EU on overshooting the inflation target because prices have been stagnate for so many years.
The ECB is doing everything it can to weaken the EUR and from the data above, it appears they will use the entire monetary handbook if the current policies fall short of increasing inflation.
The bottom line: Don’t buy EURUSD. Its going lower.