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Forex Weekly Recap EUR/USD – December 19, 2011

After the latest emergency summit the EUR/USD tumbled as traders didnt buy the success of the deal at all this time. The 400 pip drop on Monday and Tuesday confirms traders seem to have lost any confidence in a swift action that will halt the euro zone crisis. As I noted as every emergency summit in the past has brought a bounce in the euro so I expected some of the same for this latest one also. This time there was no optimism at all. This tells me a lot. The CFTC also released its latest numbers and more traders are short the euro now than any time back to 2007. Which leads me to think there may be a short covering before the end of the year. However the end of the week has seemed to be a lack luster up move so at this point I will let price tell me what action to take.

Monday, December 19th

A clean break of the stubborn 1.3000 level and the 1.2900 level should be an easy target this week. If it holds above 1.3000 for the first couple days of the week then a short run up is possible as high as 1.3165 area. Intraday I will be watching the 1.3050 area and see a rejection for a short. I would only be considering a long from the 1.3000 level as it may well be defended as it was last week. I have my doubts there will be any substantial movements during Asia and will be looking at the London market mostly today.

There isnt much scheduled news for Monday but will be watching for the typical tape bombs coming from EZ finance ministers. Which will be discussing this week how they will try and pump the IMF 200B Euros.   All this talk of pumping up the IMF seems silly to me since the IMF treaty funds are a pool and are to be allotted as a percentage of the pool. It seems to me that earmarking and loans or donations strictly for the EZ does not follow the treaty and may not work as intended. We will have to wait and see on that front

Be careful out there and Happy Holidays


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