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Substantial speculation on the Eurozone sovereigns
Every single word that comes out of an ECB official rapidly translates into a further rush in the Eurozone’s sovereign debt market and to a weaker euro. The Italian, Spanish and German two-year bonds trade on negative rates.

The Eurozone sovereign bond market is like a blowing balloon. The risk-return ratio is well shattered. The Eurozone bond purchases have become speculative investment tool; investors look to benefit from a bond price increase as the ECB prepares to expand its bond purchases program (QE). The increasing bond prices carry the risk of a potential unwind at any time.

The Euro sinks to fresh 7-year low against the US dollar. Trend and momentum indicators remain flat-to-negative, the upside corrections are seen as opportunity to sell and hence are expected to remain capped at 1.0700/1.0750. All eyes are on the ECB’s Dec 3rd meeting. The ECB is expected to expand its QE program and could also lower its deposit rate to further negative. The broad picture remains comfortably negative and the mid-term direction remains bearish with unchanged target at 1.0500/1.0450 zone.