DOES ECB DO THE RIGHT THING IN DEFLATION THREAT?

Hi everybody this week come to end and we can summarize some of the key aspects what has happened on financial markets last week.Us economy continued to expand but a low pace harsh winter ban the evolution of the economy.Manufacturing sector expand in march for the 10 consecutive month and the overall economy expand to 58 consecutive month.Jobs in Us increased to 192 k new jobs in march after an increase to 197 k in february,unemployment rate remain a 6,7 %.

In the Euro area consumer price index fell to concerning 0,5 % in march much below ECB forecast.ECB keep interest rate unchanged at 0,25 % although was rumors that ECB will cut interest rate.ECB officials in front with Mario Draghi adopt a dovish language in deflation issue.

The low inflation problem appeared form january 2014 which was to 0,7%.But all this time Mario Draghi has enusred us that level of inflation is under control and ECB is ready to act if conditions will required.From january to march the consumer price index fells to 0,5 % the low level in more than 4 years.

As I said at the begining of the article the ECB keep unchanged policy.This approach has attracted some criticism to Draghi policy.A delay in adopt any stimuls could track again euro area in recesion.A persistance in low inflation could determinated in the medium termn growth a weight of debt.

I observed in the past of the weeks important ECB officials talking about some measures that they could take such:negative deposit rates and quantitive easing.Jens Weidman is one the ECB offical which agree of using QE.Last week in a interview to Market News said:"Quantitive easing is theoretically posible as long as it dosen't infringe tha ban on monetary financing governments.

As for me I think that such measures could be little complicated to adopt that beacuse the ECB dosen't know what king of bonds to purchase.Theoreticaly in the euro area are 18 different sovereign bonds.Thursday Draghi emphasized for the first time that ECB cold adopt at what so called "Forging different QE"

Why different? different beacuse the financial markets in the euro area depends much from loans,loans which are injected by the ECB.So the eventual of bond purchases couldn't provide liquidity to small and medium enterprize.

Draghi said: "The banking system is more esential to the euro area than other financial systems that are more marked based" So in the end we just have to wait to see what will going on.

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DRAGHI FACING DILEMA TO ACT OR NOT

Hi everybody it passed at time since I wrote the last article.This week the most important events are with no doubt ECB Meeting and US jobs reports. One of the big issue of Euro area is deflation.

Are Euro area in deflation or not? Though question that because some ECB officials memebers do not speak the same language.Mario Draghi ECB chairman told that they are ready to act if conditions will require.

Inflatio in the euro area has envolved from 0,8% in january 2014 and now 0,5% in march.At this level we can say that Euro area is in deflation.If we look to euro currency we observe that euro is at high level against the important currencies.In an interview last week ECB official Christian Noyer said :"He is not happy to see euro rise" First of all a strong euro could aggravate european companies in exports and second and the most important characteristic of deflation is falling of prices which can cause global debt crisis explode again .

So today ECB meeting is very important event and we are aeger to see if Draghi learn  something from japanese lesson.It's more evident that ECB will act today.

Negative deposit rate is probably the exact scenario.ECB Coeure declared a few time ago:"ECB is considering a negative deposit rate very seriously"

Also Jens Weidman ECB:" Negative interest rate could counter the impact of strong euro"

Negative deposit rate is not only the measure that ECB officials had in mind.Other measure is quantitive easing.Marcel Fratzscher german economic profesor at Institute for Economic Research demand 600 billion euro bond purchases each month to combat deflation.About this tool Jens Weidman ECB official said:" Quantitive easing is theoretically posible as long as it dosen't infringe the ban on monetary financing of governments.In  my view I think that this measure will be a little though to put in practice that beacuse will require a purchase of 18 different sovereign bonds.

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MARIO DRAGHI STILL KEPP EURO DREAMS

Hi everybody first article in 2014  the begining of the new year brings reasons to cheer for europeans.Euro zone dreams finally seems to take shapes.But despite this optimist atmosphere the main actor who charge the euro destiny ECB president Mario Draghi refused to say that the fight against euro zone debt is over, he told at Frankfurt European Central Bank Meeting.

One of the key factors that contribued to improving eurozone areas was exports growth ,german industrial production rose with 1,9 % in November and also retail sales who rose with 1,4 % in November compared with October 2013 acording to Eurostat,german industrial orders rose by 2,1 %.European stocks reach ath high level,Ireland,Portugal sold for the first time after many years bonds.

One thing can treaten economic recovery is inflation which was 0,8 in decmber 2013 much below of 2 % ECB target.Could 0,8 % inflation engage Europe in deflation shape? Is hard to say, will see what's going happen.Drahi ensure us the eurozone is not threated by deflation risk.

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BEN BERNAKE THE LAST ACT

Hi everybody today is an important day on financial markets  a day which many investors expect it.Why is so important?  It's important because today is Federal Open Market Committee and perhaps the last meeting that will be leaded by Ben Bernake.

Ben Shalom Bernake is complet name the most powerful banker in the world and the person who toke the FED destiny from more than 6 years as chairman of Federal Reserve.

Appreciated by some criticized by others  Bernake done to establish an equilibrium.In the past of the years Bernake introuduced Bernake doctrine the teory that traditional business cycles have declined in volatility in recent decades and the most important and known fiscal policy who introduced is no doubt QE ( Quantitive Easing).

We can define QE as unconventional monetary policy introduced by Federal Reserve to stimulate us economy to make to bost it.By QE  FEd is buying treasury bonds in among of 85 billion $ every month.Initially was though that QE will produce healthy economic growth but it is not.The economic situation in US is improving unemployment rate is 7 % in november us added 203 k more jobs

I was wondering why is need quantitive easing? QE was taken out as an insurance against fiscal drag and is no longer needed.Back to my article title about FOMC meeting will be important to see what Bernake will say and the economic projections.And at the end I wish as a investor that Bernake to be more hawkish as a gift for Christmans.

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STERLING POUND GOING TO 1 ,5950?

Hi everybody it's a pleasure to write again and today I prepared the technical analysis on GBPUSD currency pair.Last week it seems that bears take control on GBPUSD ,the uptrend  period momentary it's over.

Concludent example it represent a series of economic indicators that were published last week.In October 2013 exports and goods in the UK decreased by 0,5 billion pounds to 12,1 billion,also the RICS (Royal Institution of Chartered Surveyors)  Hause Price Balance increased to 58% from 57% but was much lower than economists forecast.Industrial production rose 0,4 % in October and also manufacturing production rose with 0,4 % .

Last week depreciation of pound comes amid of us economic data.In October US added 203 k more jobs,retail sales rose in November at a solid peace americans bought automobiles and other goods.For next week the main event it's with no doubt Federal Open Market Committe  where will be presented economic projections.Remains to be seen if the FED will start to taper assets purchases

                                                                      TECHNICAL ANALYSIS

On gbpusd started with monthly charter you can see that sellers take out the control,important to see how will close this candlestick at the end of the month.On weekly chart the hammer candlestik emphasize that gbpusd is going to an downtrend and moreover here you can see that we have a continues bearish divergence and the profit target will be 1 5950.
In conclusion for the week 16-20 December on GBPUSD I've bearish views.And don't forget investing in fx,stocks and commodities markets implies high risks.

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TAPER A CHRISTMAS GIFT FROM BERNAKE

Hi everybody financial year 2013 in close to end.It was a year which the main economies has reported signs of recover but not enougf.These small economic increases give us the hope that 2014 will be much better.

The most performing economy is with no doubt UK economy with 0,8 % GDP growth in Q3 2013 compared with Q2 2013 and unemployment rate drops to 7,6%
.
Central banks leaders in hope to revive thier economies created special tools such quantitive easing as they are called but for this subject I "ll write in other article.

Bankers from Ben Bernake to Kuroda adopted such tools to improve local economies.To end 15 years of defalation the Japan Central Bank governor Haruhiko Kuroda launced a series of measures such local assets purchases which reach up to 6 trillion yen in hope to hit 2 % inflation in 2015.Analysts are skeptical that BOJ will hit the inflation target,but will se what's going happen.

Almost the same situation is in United States.Federal Reserve is using quantitive easing  to help us economy to recover by it's monthly asset purchase program.But economis situation in USA differs greatly from Japan.In november us added 203 k more jobs and the unemployment rate drop to 7,00%  making speculation that Fed is ready to taper it's 85 billion $ assets purchase.

Fed chairman Ben Bernake say:"Fed will continue the easing policy for a long as needed"
Despite it was informations that FED will reduce the program in september Bernake has surprised everyone including me to announced that FED will maintian stimuls.

It seems that FOMC meeting in december will be the main event on financial markets.A reducing of bonds purchasing could be seen as a Christmas gift from Bernake at the end of his mandate as Federal Reserve chairman.

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EURO UNDER NEGATIVE DEPOSIT INTEREST RATE PERSPECTIVE

Hi everybody Negative deposit interest rate? Yes it could happen.Important ECB leaders emphasize this.But for that we should wait European Central Bank press conference and bid rate.

Last week euro reported earnings against all currencies unemployment rate in the eurozone area drop from 12,1% in october ,german preliminary (CPI) Consumer Price Index increased from -0,2% to 0,2 % in October

Despite falling of german import prices from 0,0% to negative -0,7%  and german unemployment change which increased from 3k to 10 k in october.

For the next week tha main event it seems to be with no doubt Mario Draghi press conference

On eurusd currency pair  excpet for ECB press conference other events are US preliminary GDP which is forecast to grow from 2,8% to 3,1 %,non farm employment change despite plesant report last week for december the economist forecast it to fell from 204 k to 184 k

                                                                     TECHNICAL ANALYSIS

On eurusd H4 chart the bearish divergence it seems to be consumed so you can think to enter with buy orders starting with 1,3610 and the profit target will be near psychological level 1,3700 ,1,3690 could be a realistic profit target.

If the price fall to pass 1,3610 you can take under the consideration short sell orders started with 1,3560 and the profit target will be near 1,3510 ,stop loss above the last high 1,3630.And at the end don't forget investing in stock,commodities,fx markets implies high risks.

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