Draghi Rocks the Euro: Weekly Currency ETF Report

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ECB President’s press conference boosts euro, sending Euro Trust ETF to its highest level since early May.

It didn’t seem like much of a pep talk.  In fact, the January 10 press conference, held by European Central Bank president Mario Draghi, to explain the ECB’s decision to hold its benchmark interest rate at 0.75 percent, included his forex 300x142 Draghi Rocks the Euro: Weekly Currency ETF Reportadmission that “the economic weakness in the euro area is expected to extend into 2013.”  On the other hand, Dragjhi’s assurance that the ECB’s efforts to strengthen bank balance sheets and implement market reforms would improve the outlook for growth later in the year, sent the euro skyrocketing.  By the close of the trading session, the CurrencyShares Euro Trust ETF (NYSEARCA:FXE) jumped 1.43 percent to 131.50.

The chart below depicts the trading activity in the CurrencyShares Euro Trust ETF (NYSEARCA:FXE) during the past 180 days (Chart courtesy of Stockcharts.com).

FXE Chart Jan 111 300x227 Draghi Rocks the Euro: Weekly Currency ETF Report

As we pointed out on December 9, an inverse head-and-shoulders pattern was beginning to form on the FXE chart, based on activity since November 19.  Since that time, the euro experienced some setbacks as the dollar was strengthened when the fiscal cliff deal was (partially) resolved and again after the minutes from the December 11-12 meeting of the Federal Reserve’s Federal Open Market Committee were released on January 3, raising concerns that quantitative easing could end by mid-2013.

The January 10 Draghi press conference sent FXE to a level where it has not been since the first week of May and FXE has been able to maintain its advance.  In fact, a look at the 365-day chart for FXE depicts a giant, inverse head-and-shoulders pattern, based on activity since May 1.  The next resistance level for FXE appears to be its February 24 closing price of 134.07.  As the yen continues to experience debasement and the Fed continues with quantitative easing, we could see FXE break above 134 relatively soon.  Gold As a Weapon in the Currency War

Currency ETF Update: 

The following is a summary of how currency indices and ETFs performed from the close on Friday, January 4 until the close on Friday, January 11:

$US Dollar Index:  -1.16%

PowerShares DB US Dollar Index Bullish Fund ETF (NYSEARCA:UUP):  -1.13%, This ETF reflects US dollar performance as indicated by the Deutsche Bank Long US Dollar Index (USDX) Futures Index (DB Long USD Futures Index).  The USDX Index invests solely in Long USDX Futures Contracts, and compares the performance of the US dollar against the Japanese Yen, the Euro, the Swiss Franc, the British Pound, the Canadian Dollar, and the Swedish Krona.

Euro Dollar Index-Philadelphia: EUR: $133.42  +2.08%

CurrencyShares Euro Trust ETF (NYSEARCA:FXE):  +1.96%, This ETF is designed to track the performance of the Euro dollar.  CurrencyShares Euro Trust ETF (NYSEARCA:FXE) is a trust denominated in Euro dollars, and the depository bank is JP Morgan Chase Bank, N.A. London Branch.

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