Euro Screams Higher: Weekly Currency ETF Report
Larger-than-expected bank repayments of LTRO loans give the euro its latest boost.
European banks did European Central Bank President Mario Draghi a big favor by agreeing to make an earlier-than-expected repayment (on January 30) of €137 billion of the of the €489 billion in loans obtained during December of 
2011 as part of the long-term refinancing operations, or LTRO. The timing gave Draghi a star turn at the World Economic Forum in Davos, Switzerland on Friday. The 278 banks will be making a repayment on the first tranche of loans on the earliest day permitted under the program. A second tranche of three-year loans totaling €530 billion was obtained by the banks from the ECB in February of 2012. Most economists were expecting the first payment to be slightly less than €90 billion. The news sent the euro to $1.3479 – its highest level against the dollar in almost a year. At Davos, Draghi had the opportunity so soak up the congratulations for fulfilling his promise to “do whatever it takes” to save the euro. “Currency Wars Heating Up Again! What It Means for You!”
The chart below depicts the trading activity in the CurrencyShares Euro Trust ETF (NYSEARCA:FXE) during the past 180 days (Chart courtesy of Stockcharts.com).
FXE finished Friday’s trading session at $133.54. The chart depicts an inverse head-and-shoulders pattern followed by a cup and handle pattern, suggesting another advance to come. Its next resistance level will likely be $135 – simply for psychological reasons. FXE’s Realtive Strength Index is a healthy 67.41, with plenty of room to go before it reaches 70 – the level beyond which many analysts consider as overbought. Bullish Pattern Continues to Push the Euro Higher!
Currency ETF Update:
The following is a summary of how currency indices and ETFs performed from the close on Friday, January 18 until the close on Friday, January 25:
$US Dollar Index: $79.75 -0.36%
PowerShares DB US Dollar Index Bullish Fund ETF (NYSEARCA:UUP): -0.32%, This ETF reflects US dollar performance as indicated by the Deutsche Bank Long US Dollar Index (USDX) Futures Index (DB Long USD Futures Index). The USDX Index invests solely in Long USDX Futures Contracts, and compares the performance of the US dollar against the Japanese Yen, the Euro, the Swiss Franc, the British Pound, the Canadian Dollar, and the Swedish Krona.
Euro Dollar Index-Philadelphia: EUR: $134.60 +1.04%
CurrencyShares Euro Trust ETF (NYSEARCA:FXE): +1.02%, This ETF is designed to track the performance of the Euro dollar. CurrencyShares Euro Trust ETF (NYSEARCA:FXE) is a trust denominated in Euro dollars, and the depository bank is JP Morgan Chase Bank, N.A. London Branch.
ProShares UltraShort Euro ETF (NYSEARCA:EUO): -1.88%, This ETF tracks the 2X inverse daily performance of the Euro dollar in US dollar prices. The ProShares UltraShort Euro ETF (NYSEARCA:EUO) relies on the EUR/USD cross rate as determined by Reuters by 4 PM EST to determine the price of the Euro in US dollars.
Australian Dollar Index-Philadelphia: AUD: $104.16 -0.71%
CurrencyShares Australian Dollar Trust ETF (NYSEARCA:FXA): -0.71%, This ETF is designed to track the performance of the Australian dollar. The CurrencyShares Australian Dollar Trust ETF (NYSEARCA:FXA) is a trust denominated in Australian dollars, and the depository bank is JP Morgan Chase Bank, N.A. London Branch.
CurrencyShares Swiss Franc Trust ETF (NYSEARCA:FXF) +0.83% This ETF is designed to track the performance of the Swiss Franc. The Swiss franc is the national currency of Switzerland and Liechtenstein and the currency of the accounts of the Swiss National Bank, the central bank of Switzerland. The Swiss franc is the sixth-most-traded currency in the world, accounting for 6.4% of global foreign exchange transactions. The USD/Swiss franc pair is the fifth-most-traded currency pair.
Japanese Yen Index–Philadelphia: JPY: $110.09 -0.78%
CurrencyShares Japanese Yen Trust ETF (NYSEARCA:FXY): -0.97% This ETF is designed to track the performance of the Japanese Yen. The CurrencyShares Japanese Yen Trust ETF (NYSEARCA:FXY) is a trust denominated in Japanese Yen, and the depository bank is JP Morgan Chase Bank, N.A. London Branch.
Bottom Line: The early repayment to the ECB of €137 billion of the of the €489 billion constituting the first tranche of LTRO loans to the 287 banks making the January 30 payment, sent the euro climbing to its highest level against the dollar in nearly a year.
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