FX Monthly Report

November 2015

EUR/USD 1M

EUR/USD 1Y
1,4000

1,1200

1,3500

1,1000

1,3000
1,0800

1,2500

1,0600

1,2000
1,1500

1,0400

1,1000
1,0200

1,0500

1,0000

1,0000
3-Nov

10- Nov

17- Nov

24- Nov

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

MARKET ANALYSIS
Technical Analysis
November was characterized by a downtrend. Although the EUR/USD only fell by 4.1% during this period, it recorded 13 negative trading
sessions out of 21. A clear sign of this bearish trend is the big fall in the MACD on the first days of the month. But, on the 10 th of November,
there was a bullish crossover, when the MACD crossed the signal line and rose above it. In fact the downtrend did slowdown, but the
EUR/USD kept on falling. Applying a Fibonacci Retracement on the downtrend, we can identify two strong lines. The first at 23.6% of the
downtrend (1.068). This originally was a support line, but since the 17th of November served as a resistance several times. The second
strong line is at the bottom of the downtrend (0.0%). This became an important support line (1.057) for the last trading sessions of the
month, and its expected to keep as a reference support point in the next month. Should the security rise, we predict further resistances at
1.060, 1.064 and 1.068.

Fundamental Analysis
The EUR/USD went down this month, closing below 1.06. It began
when Fed Chair was testifying: "we still see the risks to economic
growth" leading the currency to 1.0882. This trend was reversed
with the release of unemployment claims in the US worse than
expected (276k against 263K). On the other hand, Draghi said
"other instruments could also be activated", reinforcing that ECB
will use the necessary measures to stimulate the economy. The key
indicators such as Core Retail Sales, PPI and CPI outperformed
expectation. Also the German ZEW Economic Sentiment was
positive, showing that the economy is growing at a better perceived
value than predicted, despite the indicators the currency kept its
falling trend to 1.0570. Yellen avoided comments but she said: we
see a domestic economy that is pretty strong and growing at a solid
pace leading us to believe that FED will raise the interest rates on
16th December.

Calendar

December 2nd Fed Chair Yellen Speaks

December 3rd ECB Interest Rate Decision; ECB
Press Conference; Yellen Testifies
December 4th US Unemployment Rate; OPEC
meeting
December 11th US Core Retail Sales; PPI
December 15th German ZEW Economic
Sentiment; US CPI
December 16th FOMC Economic Projections,
Statement and Press Conference; Federal Funds
Rate
December 22nd US Final GDP
December 29th CB Consumer Confidence
December 31st ECB Monetary Policy Meeting
Accounts

Financial Markets Department | fm@fepfinanceclub.org | http://www.fepfinanceclub.org/

Political Instability in Europe

In order to control the sovereign debt problem, emerged from the Financial Crisis in 2008, the majority of the European countries, rescued by IMF funds,
put into practice austerity policies. Such policies originated a huge discussion among both academic and politicians.
Many countries that implemented the strongest austerity policies faced recession that led to high levels of unemployment, averaging 11.4% for the Euro
Area in 2012 (Eurostat). At this point, public contestation against the austerity policies, that were widely seen as a European imposition (in fact, such
measures were already written on the Stability and Growth Pact), started arising in some countries such as Greece (Syntagma Squares protests), Italy,
and Belgium, among others.
Some perceived that such policies were needed to control the high levels of public debt ratios. The opposite side argued, that without policies to
stimulate the economic growth, it would be impossible to surmount the sovereign debt problem. Instead of reducing the national deficit, they would
hinder economic growth putting an obstacle on the reduction of the deficit in the long term. This divided opinions among European countries.
Until this moment, even though not all the Europeans were pro Europe, the ones clearly against the European project were no more than a drop in the
ocean. From this moment on euroscepticism and anti-Europeanism, has been gaining a lot of support across countries. Nordic countries, France United
Kingdom, Poland just to mention a few, skewed completely to the right, while Spain, Greece and in a smaller extent Portugal saw the far-left parties
become stronger.
In France, the National Front, led by Marine Le Pen, has gained many additional voters. UKs Prime Minister Cameron included the referendum on a
Brexit in his campaign of Mays elections to help to secure his victory. In Poland, the far right wing party won the recent governmental elections and in
Spain, the left wing party Podemos is on the rise.
Even the European Parliament has today about one third of eurosceptics (Source: BBC),
which means that they doubled their weight in Strasbourg, not enough to constrain the
Parliament yet, but already enough to raise some apprehension between the Europeans.
Adding to existing conflicts, the migrant and refugees crisis, fuelled by the Syrian civil war,
that began more than four years ago, shows no sign of ending. Eurostat estimates that by
the end of October about 720.000 asylum seekers (only the ones that claimed for asylum)
had entered in Europe, even though a lot more have passed through the borders undetected
(Source: BBC). Moreover, according to the European Commission more than 3 million refugees are expected to arrive in the European Union by the
end of 2016.
Additionally, terrorism became a reality for many Europeans and is making people nervous about the future. This harms even the European confidence
levels and thus has an impact on the European economy, through a decrease in consumption and investment (Source: FT).
This is triggering a trail of different events across Europe. Some European countries are putting
up walls (e.g. Hungary and Austria), resulting, according the Economist, in more barriers on
national boarders in Europe than during the Cold War (also due to the ongoing conflict
between Ukraine and Russia) which brings back a protectionist sentiment.
The ongoing tensions between Russia and Turkey could bring some concerns to the EU, since
now Europe has a deal with Turkey to shrink the refugees inflow; further integration of
refugees seems unlikely. For instance, Danish people voted against (53%) adopting the EU
rules on cross-border policies and the UK will vote in a referendum in 2017 on the possibility
to exit the EU. Current polls show that the Brexit is gaining momentum, and stands now at
50:50 chance (Source: Bloomberg).
But there is something that is really startling: Europe has not been able to act as one, not even
to find the minimum amount of consensus to give a coordinate response to the latest events.
In fact, as it was stated by The Economist, there is one indispensable European: Angela Merkel.
She is the longest-serving leader in the EU and if it was not for her, the tensions in the continent
would probably be much worse. But will she be able to keep in the power to be the leader
Europe needs? Recent polls show that she has been losing popularity, but she still has the
massive Christian Democrats support.
In less than 10 years the future of Europe changed dramatically. From a natural and strong
integration, we stand nowadays in a critical point where the question is how to avoid the
disintegration. Tensions are growing, the economic reality is not ideal, and a worrying picture
seems to be arising. Yet, with the cooperation that distinguished European Union in the past
decades, these challenges are perfectly surmountable. Will Europe manage to do it?

Financial Markets Department | fm@fepfinanceclub.org | http://www.fepfinanceclub.org/

Contacts FEP Finance Club FX Team

Charlotte Hoefner
Director of Financial Markets, Head of FX

Pedro Guimares
Analyst & Trader

lvaro Leal

Rui Ramos

Analyst & Trader

Analyst & Trader

Financial Markets | fm@fepfinanceclub.org | http://www.fepfinanceclub.org/

Hugo Sanches
Analyst & Editor

Joana Silva
Analyst & Trader

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Financial Markets Department | fm@fepfinanceclub.org | http://www.fepfinanceclub.org/