EUR/USD Fx Commentary February 16, 2012
I cant help but notice all the BS that has been floating around the markets yesterday. All of a sudden again China is going to help the EZ by investing in the EFSF. At the same time the Chinese say that investing in European bonds is a risky sell to investors. Of course its in China’s interests to have a strong Euro considering they are their 1st or 2nd largest importer of Chinese goods. However the fact is China has their own internal problems to deal with that will most likely trump any investment in the EZ. Check out this article. China is in no place to rescue Europe and the markets know it. They have some serious issues with their own banks becoming insolvent due to bad loans that they just extended the maturity on those bonds so the defaults have more time LOL. The fact is the Chinese sovereign wealth fund has only $400+ billion to play with and they are not going to part with that lightly. What happened yesterday is a classic case of verbal manipulation to keep the status quot in the Chinese interests.
Now lets get on to Greece again. Yes again LOL. The deal will get done I am rather sure. However the guy who has been one of the fiercest against the austerity measures is also the one who has the best chances of winning the elections in April or whenever they decide to hold them. 2013 was the original time frame but they may happen before that. Antonis Samaras is the guy I am talking about. He did just have a lackey tell the press yesterday that he is going to sign the document required by the Troika on the Greek austerity. I havent seen the news yet but I do expect it to happen. The issue I am conflicted with is if or when he does win an election on his stance of how the Germans and the EU have screwed Greece what will he do then? Well it seems like they think they have the answer. The Troika will delay the full loan to Greece until the elections are over in April giving them a bridge loan to cover the bonds due in March . Good job LOL.
So now the market will turn to Portugal whose bonds have just been downgraded to junk by all the credit agencies and showed a 3% contraction in its economy last year. However as I mentioned in yesterday’s forex commentary German Finmin Schauble has quietly promised to loosen the noose on Portugal after they get finished putting the boot to Greece. There is also some good news for Portugal (or not) on any restructuring of their debt like Greece. The fact is the overwhelming majority of bonds issued in Portugal are governed by English law. Sound familiar? See here. The holders of Greek bonds governed by English law are the ones held by all the hold outs that are not taking the haircut and those bonds in particular have been gobbled up by those hedge funds just for that purpose.
The only important news today is the ECB monthly bulletin when we will find out just what the ECB has been doing the last month. The rest of the market moving news is coming from the US session with building permits, unemployment claims, Bernanke speaking and the Philly fed index. It could be a choppy US session today.
The charts look rather bearish again with the daily closing close to its lows and well beyond the support I mentioned yesterday at 1.3080. I do expect some support to come in at the daily lows at 1.3026 but once that does break the next decent support I see is the break out level at 1.2968 if that breaks its a ways down to the next level at 1.2819. I will be looking for a stop run to the upside during London to short but trying to keep an open mind since the possibility of good news rumors to levitate the Euro temporarily is high. Temporarily is the key word!
Be careful out there guys