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Forex Commentary EUR/USD February 22, 2012

In todays commentary I wont mention that we have the Greek deal. Mainly because even though its made muster with the EZ finance ministers there are still some road blocks ahead check out these two articles from Zero Hedge. One describes how the PSI hold outs could still derail the whole thing and the other discusses how Greece is trying to maneuver considering the outstanding bonds in ways that have potential to kill the bail out deal also. At the very least do such damage to the EU bond market by setting a precedence that could make EU bonds not worth buying. Now they have deemed a 66% agreement as sufficient CAC and wont trigger the CDSs.

Here is a small excerpt:

We ignore how a 66% participation rate is anything but a majority, let alone supposedly consensual. There is a bigger issue. And unfortunately by the Greek’s actions, it shows they are in process of abrogating even more contractual rights in the form of foreign (UK-Law) covenant agreements. Either that, or the country is about to pay par to all UK-law bonds, both outcomes that threaten to put the entire second bailout in jeopardy.

What I really want to cover today is something I found yesterday. There has been letters of “Greek default plans” sent to two large Wall Street firms. Not contingency plans but a schedule of sorts that outlines what will happen when the Greek default will be announced on March 23rd. Now we already know that the credit agencies have already told the media that they will consider Greece in default anyway and the powers that be are going to do what they can to mute the effect this has on the markets so it may not matter even though it should. The fact is as long as the ISDA (International Swaps and Derivatives Association) dont declare Greece in default it really dont matter what the credit agencies do because the Credit Default Swaps wont get triggered.

Having said that I was surprised how much sense this writers idea made. Saying that they have been planning for the default all along considering the “deal is done then its not” and how all the postponements have happened. They even have a scheduled date. This guy obviously has some connections in high places on Wall Street so I dont take it lightly but still trying to have an open mind. However my gut does tell me something is up. Check out the “Greek Default Exclusive” and make your own decision.

There is a slew of news out today with German, French and EZ Flash Manufacturing and services PMI data being released so keep an eye on that. Mainly the German #s because they have been revised down from last month and may dissappoint considering that. Otherwise the MPC Meeting minutes will be released for the GBP and if the EUR/GBP gets a drastic move it will certainly affect the EUR/USD

Now on to the charts. The daily has made a nice doji or spinning top (indecision) candle. (use which ever you like) However we as Smart Money traders know these are nothing close to indecision but rather the Smart Money absorbing orders when the market framework is correct. It has tested the close from Monday at 1.3242 and been rejected. During the London session I will be looking to see the stop run to the upside and short from there.

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