Which Future for the Euro?

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JANUARY - MARCH 2012
which future
for the
euro?
THE ECB ROLE . THE SECURITIES MARKETS
PROGRAMME . MORE SEVERE FISCAL RULES .
WHAT WILL DRIVE THE MARKETS IN 2012?
CONTENTs
FX
30
WHICH FUTURE FOR THE EURO?
The role of the ECB, the Securities Markets Programme and the
decision to implement severe fiscal rules will define the future of
the euro.
Cover photo: Sebastian Zwez
49
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04 Editor’s note
BECOME A FUND TRADER:
18
CURRENCY WATCH:
22 GBP Outlook: combined
FUNDAMENTAL ANALYSIS:
10 Global FX Analysis: 2011 recap, fundamental and technical analysis of
the British Pound
and currency prospects for 2012
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MARKET WATCH:
74 Expert Advisors and
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TECHNICAL OUTLOOK:
82 Majors, Emerging and Asian
TECHNICAL ANALYSIS:
TRADING STRATEGY:
Markets: trends and targets,
64 Seeing the Music of the Market: 77 Majors analysis, using Ichimoku Featured pairs:
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EUR/USD, EUR/JPY, EUR/HUF,
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86 Majors Report: EUR/GBP,
58 Automation, Diversification and EUR/USD, EUR/JPY, USD/JPY
INTERNATIONAL DATA:
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94 ECONOMIC CALENDAR
FX TRADER MAGAZINE January - March 2012 3
FX
MONETARY POLICies
“I am sure the Euro will oblige us to introduce a new set of economic policy instruments.
It is politically impossible to propose that now. But some day there will be a crisis and
new instruments will be created.”
R omano Pro di, EU Commission President, D e cemb er 2001
WHICH FUTURE FOR THE EURO ?
30 FX TRADER MAGAZINE January - March 2012
MONETARY POLICies
FX
KEY FACTS OF THE CRISIS ever-larger scale, have been able to In this article I will move from
The sovereign debt crisis that broke out
in Spring 2010 and was initially limited
to Greece has since then expanded
rapidly and led to a profound crisis of
confidence. Since treasury bonds have
traditionally formed the secure core of
the financial system, the uncertainty
has increasingly spilled over into the
banking sector, which has in turn
impacted negatively on the credit
rating of public sector borrowers.
Neither the ambitious consolidation
programs in the countries in difficulty
nor the rescue plans, floated on an
fundamentally change this vicious
circle to date. The euro area’s increasing
instability contrasts with conditions
in Japan, the United States and the
United Kingdom, countries which
-despite far higher budget deficits
during the same period - have been able
to secure refinancing at historically low
interest rates. This discrepancy reflects
the constitutive element of a monetary
union that bars its member states
from taking the comfortable albeit
highly questionable route of central
bank financing from the viewpoint of
stability policy.
what is likely to be the main
unknown able to drive markets in
the first few months of 2012 (i.e.
Will ECB print and how much?)
to an attempt at forecasting the
potential consequences of a breakup of the monetary union (thanks
to a Nomura study). Re-offering a
brilliant WSJ article from historian
Niall Ferguson on a fantasy 2021
Europe will give us some solace
before summing up that ECB help or
a more severe enforcement of fiscal
rules cannot be the solution of the
euro area problems by themselves.
FX TRADER MAGAZINE January - March 2012 31