Good Morning,

On Sunday the Italian voters voted “no” in the referendum on constitutional reform, for once in line with opinion polls. The percentage of voters voting “no” was around 5% higher than polls had indicated, in response to this resounding defeat and in line with his previous pledge, Prime Minister Renzi has announced his immediate resignation. Everything sounds like very very bad for the markets, but not. At Monday all the mains stocks markets closed in the green zone. While the Italian referendum result was worse than expected, this as only a half point to populism. An interim government will likely change Italicum, reducing the chances of a populist victory at the next election, so Bourses in Europe opened higher on Tuesday as concerns over political instability ease and investors focus on the upcoming meeting of the European Central Bank.

So, Why The Euro is rising? Traders positioned themselves heavily short the euro expecting the referendum to fail. Sentiment was extreme enough, there were few left to short. The referendum failed by a larger than expected amount, but Italy will not blow up or leave the eurozone immediately. Italy will leave the eurozone in due time, but the market won’t worry about that until the last moment as is the case in the typical European crisis.

The euro steadied on Tuesday, having bounced from a near 21-month low set the previous day after Italian Prime Minister Matteo Renzi’s loss in a referendum over constitutional reform, an outcome that traders had widely expected. The euro eased 0.1 percent to $1.0757. On Monday, it ended up gaining 1 percent on the day, having bounced from a low of $1.0505 set in Monday’s early Asian trade. The euro was buoyed by relief over the lack of any immediate sign Italy would head toward an early election after Renzi’s resignation. So, in the near-term, the euro could be supported by investor caution ahead of the European Central Bank’s policy meeting on Thursday, analysts said.

At the Dec. 8 meeting, the ECB is expected to extend its QE program by six months and keep the size of monthly asset purchases unchanged, according to a majority of economists. While the ECB is seen likely to announce an extension of its quantitative easing (QE) program, one uncertainty is whether it will send any signals about a possible tapering of its asset purchases. Analysts are expecting President Mario Draghi to announce Thursday an extension to the bank’s trillion-euro bond-buying scheme, at least by another six months.


Is the stronger index in Europe in this week, the trend may continue until the point of resistance at 10.800. Support: 10.660.


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Bank of America

Financial sector stocks were trading up in the last months, with a lot of potential. Surge continues, and technically the stocks of bank of America could rise much more. Level of support: 21 usd.


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