Forex EUR/USD, GBP/USD Commentary March 16, 2012
The EUR/USD has been finding support at the daily lows from February 1st and the 6th. It has also already tested the daily closes from March 6th and 9th and been rejected yesterday. This gives me a slight bearish bias. We did have a 3 level rise in the reversal I didn’t expect. In yesterdays commentary I was thinking it had a third level down intraday and I was wrong the reversal happened and I did take a 13 pip hit. When I took my short the market did move off 20+ pips down so I tightened up my stop and eventually got hit. As of now I see it has had three levels of intraday rise on the reversal and if I see the topping formation will be looking to short this pair today. If this recent high is breached then we may be in for a second level of rise longer term. Time will tell.
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The GBP/USD is still a bit messy and has been rejected by the hourly 200EMA again. This pair hit my BE stop yesterday. I will most likely be leaving the GBP/USD alone today.
There is not much on deck for news releases until the US session today with CPI numbers, Industrial production and consumer sentiment being the highest impact releases. I dont expect to much reaction unless these have large deviations. Mainly the Core CPI numbers. If this surprises to the upside then Bernanke will have to delay any QE3 further and if it somehow drops for some crazy reason then the chances of Ben firing up the presses a bit sooner come into play.
The European fiasco continues.
The good news is there was not a bunch of Bizzaro talk from the Europen elite which is refreshing. However in sifting through articles this morning I found this one from Phoenix Capital. I really like how bluntly Grahm is but I am not quite such the gloom and doomer he is even though he could be 100% spot on and his arguments have merit. Here is an excerpt from his The Big Greek Lie article and how this relates to Spain. Good stuff and repeating what I posted in my commentary recently.
Spain’s official Debt to GDP is only 64%, but its private sector debt is at an astounding 227% of GDP. And the Spanish banking system is leveraged at 19 to 1 (worse than Greece).
Moreover, the country is already experiencing an economic Crisis with an unemployment rate of 20+% and an economy that has been contracting since mid-2011 (in fact Spain’s GDP just actually went negative in the first quarter of 2012)…
Indeed, Spain’s recent efforts to tell the EU to “shove it” have put a crack in the Eurogroup power over individual EU members that can quickly widen.
Spain’s sovereign thunderclap and the end of Merkel’s Europe
As many readers will already have seen, Premier Mariano Rajoy has refused point blank to comply with the austerity demands of the European Commission and the European Council (hijacked by Merkozy).
Taking what he called a “sovereign decision”, he simply announced that he intends to ignore the EU deficit target of 4.4pc of GDP for this year, setting his own target of 5.8pc instead (down from 8.5pc in 2011).
In the twenty years or so that I have been following EU affairs closely, I cannot remember such a bold and open act of defiance by any state. Usually such matters are fudged. Countries stretch the line, but do not actually cross it.
With condign symbolism, Mr Rajoy dropped his bombshell in Brussels after the EU summit, without first notifying the commission or fellow EU leaders. Indeed, he seemed to relish the fact that he was tearing up the rule book and disavowing the whole EU machinery of budgetary control.
The EU rejected this (of course) and Spain has since agreed to meet softer budgetary requirements. But it’s clear that a shift has begun in how EU members will deal with the Eurogroup as a whole.
He actually goes on to say that the probability of Spain and Italy considering default rather than do with the austerity program. I have my doubts on this one but nothing that comes out of Europe these days would surprise me.
On another note I cant help but enjoy this picture coming from the Muppet fall out from Goldman Sachs. They get a visit from Michael Bloomberg. Check out the look on his face. A picture is truly worth a thousand words. He dont look very happy at the moment. LOL