Anti-Euro events this week: - The govt of Portugal collapsed after austerity measures were rejected - downgraded to BBB - French and German relations, already strained, getting worse over Libya (http://www.spiegel.de/international/germany/0,1518,752992,00.html) Pro-Euro events: - EU agrees to create a "permanent crisis fund" (http://www.spiegel.de/international/europe/0,1518,753145,00.html), mostly revolving around hundreds of billions of Euros in credit guarantees, in large part deriving from Germany. However, Merkel's govt loses what little credibility it has left daily... The German public is not keen to bail out anyone. Is this a real solution to the European credit crisis? Even ââ¬700 bn seems a bit short to cover the debt problems of Greece, Ireland, and Portugal, not to mention potential issues with Spain and Italy looming large. I do not envision Germany's next government being quite so forthcoming with bailouts. Evidently, the market thinks it is sufficient... but I remain unconvinced. However, as we all know, the market can remain irrational longer than I can remain solvent ... Thoughts? Opinions?
IMO, eur/usd has been floating based on Trichet hinting, while Bernanke & Co. have been quiet....until today anyway, as Plosser's speech prompted the DX rally. I needed that as I'm delt neutral around 1.39....
Exactly. The FED blew out the safety trade. USD @ zero pct isn't going to attract anything but risk. Money's moving somewhere else now for protection. My guess something big is on the horizon that's going to snowball. Muni defaults would be my guess.
According to the technical picture, it still looks like it may be heading lower, IMO. It does not go all the way in one day Let`s see what happens by the end of next week.
Re: USD is worse off -- while I don't think USD is in great shape, at least it's not in imminent danger of political collapse, nor does anyone seriously suggest that any US state is close to bankruptcy (California notwithstanding.) Plus, it's not like EUR is being sold off hard against other currencies and holding up only vs USD...
Raul, I attached a daily picture of EUR/USD. 1,4200 is the clearest resistance line as I see it. This level was slightly exceeded and we did not take out the previous swing high @ 1,4282 before dipping below 1,4200. Ignoring the 1,4200 level, the uptrend is still in effect and we might be seeing just a retracement in the up trend. If we believe the 1,4200 level to be significant resistance, the uptrend might have ended and we will pull back more than a normal retracement. Note that he have closed below 1,4200 three days in a row. The only thing I can say for sure is that we are at an inflection point here. Continuation or reversal of trend is likely, but we might just as well enter a trading range here. Currently, I`m comfortably short @ 1,4200, with a stop @ 1,4300. Let`s see what happens this week.
Attached is the 60-minute chart of the EUR/USD. Still looks like we might be heading lower, IMO. The downgrading of Greece and Portugal should weigh on the euro, but then there`s talk about ECB hiking rates next week, so the market may dance around here until then. Opinions? Other viewpoints?