On the fundamentals side, beside from being illegal, it looks like the ECB might have some difficulties implementing their bond purchase. Maybe someone (the German officials?) are acting in the background and trying to prevent it from happening?
July 19 (Reuters) - European Central Bank purchases of euro zone government bonds has slowed to a virtual halt, data showed, adding substance to suggestions from policymakers that the programme could soon be phased out.
The bank said on Monday total purchases since the scheme started on May 10 were 60 billion euros, after it spent just 302 million euros on bonds last week.
Last week marked the least amount of bonds bought and settled in a week since the programme began and compares to the roughly 800 million euros it spent the week before. The pace of buying has progressively slowed as bond markets get back on their feet -- in the first week of the programme, the ECB spent 16.5 billion.
The market had factored in 600 billion € worth of purchase, while currently, only 60€ have been printed out of thin air. The next few weeks are going to be interesting on that side of things.
Also today, I received a nice report from a friend who works in the Hedge Fund industry: the HF Monitor published weekly by BofA Merrill Lynch.
It seems that contrary to what I thought, the dollar bulls are still there massively overbidding for the US$ Index, while the shorts on the Euro have still a lot of positions to close. Here are the quotes from the report, along with the chart:
Large specs further covered their net short position in euro futures to roughly $3.4bn notional from roughly $4.9bn notional previously. Readings are out of a crowded short. The euro has seen significant technical deterioration recently on fiscal concerns over Greece and other Eurozone countries. The euro last week hit 1.30 and could move a bit further to the upside to 1.31-1.32. But we would begin to anticipate a pullback to lower levels.
Large speculators slightly sold the US$ index to a net long of roughly $1.2bn notional from about $1.4bn notional previously. Readings remain in a crowded long. The USD has corrected but could pullback a bit more. Look to the euro for direction in the USD. Support is in the range of 82-79.50. We do expect higher highs for the USD later this year.