Risk Italy or risk Europe? – Euro vs. Forex MKT – Intermarket Barometer – Updated for June 8th, 2018

The risk Country Italy used on the front pages of the specialized press for weeks. However, are we so sure that this is only a risk limited to a nation or have already been reflected in the entire geo-economic area of ​​Europe?

 

Italy 10 Year Government Bond – Elliott Wave Forecast – Update June 8th, 2018 hr. 10.10 

The image shows the daily trend of the Italian ten-year rates shown with a candlestick chart where the market is analyzed based on Elliott's wave theory. As long as rates do not return to levels below 2.50, investors will always potentially perceive Italy’s risk as a threat.

InchCapital Platform – 10Y Italy – Daily candlestick chart – Elliott Wave Forecast – Data Source Fida

About the declared division between Italy and Spain on one side and France, Germany and Scandinavian countries on the other we had already reported in the previous article (The Inch Magazine – May 29th, 2018) where the spreads of the ten-year Europeans were analyzed that showed this progressive preference for the virtuous European part.

This situation is still ongoing, with a peculiarity that has not been found for some time and that is the weakness of the Euro against all the major currencies of the world: an almost general weakness against all the geo-economic and productive areas of the planet.

The analysis carried out using the Inch platform (Inch Platform) allows us to classify the positions of the EURO against thirty-four currencies, in practice all the main and even secondary ones of the forex market. As usual, the DSS (Decision Support System) trend / momentum (www.inchcapital.com) classifies each time series by assigning a score directly proportional to the trend and acceleration expressed by the trend.

 

Eur vs. the other currencies of the world – Update June 7th, 2018.

The picture shows the Euro long positions calculated by the Inch platform based on the daily time series per trend and momentum. There are only six long positions on thirty-four currencies.

InchCapital Platform – List based on daily time series – Data Source Datalink

 

Based on this analysis the Euro turns to be out long versus respectively:

  • Argentine Peso
  • Turkish Lira
  • Brazilian Real
  • Mexican Peso
  • Hungarian Forint
  • Czech Crown

in a neutral position against six other currencies and consequently short versus all the others.

Consequently, it can be stated that the sovereign Italian and Spanish risk were reflected in a greater perception of the risk U.E. that now involved the Forex market. The levels reached by the Euro versus most of the important currencies are limit levels in the sense that the EURO is called on to react upside by the end of the current month. Failing that, the weakness will gradually extend to other assets denominated in Euro.

The perception of risk is currently limited to the European geo-economic area because the spread analysis continues to favor risky investment in the broad sense. Equity is still strong thanks to the contribution of technology, all that is Growth style and above all thanks to the contribution of small and medium US stocks.

 

The chart shows the spread analysis of the MSCI ACWI IMI NET TR Local global index against the global index of government bonds, the global index of raw materials and gold, respectively.

InchCapital Platform – Spread Analysis MSCI ACWI IMI NET TR Local vs JPM GBI – DJ UBS Commodity – Gold – Data Source Datalink

 

CONCLUSIONS NO ALARM.

There exists no signs of alert about risk perception. The levels reached by the Euro versus all the main currencies are very important not only for the short term but also and above all for the medium / long period. The European currency is called on to highlight a bullish reaction or at least to stabilize on these zones within the next two weeks.