Macro View
As one might expect, the Euro has sold off on the announcement of a EUR 1 Trillion Quantitative Easing program. National Central Banks will purchase EUR 60 billion worth of their respective governments' debt, in amounts proportional to their capital key in the ECB. The stated purpose of this program is to fight deflation.
Central Banks will earn interest on the debt they purchase. This interest will flow back to the Euro-area governments. This mechanism is already in place in the US and the UK. The Fed/BoE pay the interest received on QE holdings back to the government (minus costs and interest paid to banks on excess reserves). Effectively these governments will obtain interest free financing on the QE purchases.
A monthly decrease in interest payments will gradually reduce the pressure to retain austerity policies. Greater government spending will stimulate peripheral economies, and help unblock the transmission mechanism of ECB monetary policy.
Capital that previously fled the Euro area in fear should begin to return home as sovereign financial distress eases. If these capital flows materialise as expected they should arrest the decline of the Euro.
Technical View
The EUR/USD and EUR/GBP pairs have been in well-channeled corrective declines since the 2008 tops. In Elliott Wave terms both pairs appear to be in a Double Zig-Zag corrective patterns counted as ABC-X-ABC.
Both pairs are now approaching very long-term ascending channel bases, and the Weekly RSIs are at record lows.
EUR/GBP
My prediction for EUR/GBP in August 2013 calling for a decline from 0.855 to 0.75 has been achieved. See previous post here: http://elliottwavecounts.blogspot.co.uk/2013/08/eurgbp-breaks-below-uptrend-line.html.
EUR/USD
A decline in EUR/USD was identified to the precise date of the top on 8th May 2014 at 1.3899 (see second chart). The measurement for A = C in the second zig-zag implies a low at 1.109. The Euro has traded down to 1.1115, which is good enough for me! An extension of wave C could lead to a drop to parity if the long-term channel does not hold. Trail stops on existing short positions to capture any last spike down.
From: Arvind Damarla
Subject: Fwd: EUR/USD
Date: 8 May 2014 15:22:58 BST
Here is a potential wave-count to go with the outside reversal in play today. What is at stake is a breakdown in the rising wedge that began at 1.333 last November, and potentially even the end of wave B from 1.21
A sharp reversal below the wave 4 low (approx 1.365) is needed to confirm.
