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Fx Commentary EUR/USD February 9, 2012

In todays commentary Im going to give you all a break on Greece and we are going to discuss France where they have a presidential election coming up. Its sure looking as tho Sarkozy is going to lose. After being second only to Burliscony on pilfering his countries  bank account for his personal benefit. It sure looks like his countrymen are fed up.

The problem is with who is the front runner against him. Francois Hollande with no more political experience than being the mayor of a small town looks to be the one who will beat Sarkozy. I read this from the Wall Street Journal the other day.

In the upcoming French presidential election, the Socialist candidate Francois Hollande is virtually certain to take power from the incumbent, Nicolas Sarkozy.

The Merkozy double act that has been managing the euro-zone crisis will suddenly become the Merllande or the Hokel, or whatever the wags of the bond markets decide to call it. But Hollande’s only executive experience is eight years as mayor of the tiny town of Tulle.

As president, he will be a catastrophe for the European economy. He has no experience of running anything, he is pushing an old-fashioned borrow-and-spend policy, he will have a poisonous relationship with Germany’s Angela Merkel, and he has shown no sign of understanding the scale of structural change France needs.

True, there are still 10 weeks of campaigning before anyone actually votes, and plenty of people have still to make up their minds. And true as well, Sarkozy is a formidable campaigner, and a man with a thick skin, and a fierce determination to win.

There is a lot more that is worth a read about this guy in the article and why if he does take the helm of France it may be chaotic for the EZ to say the least.

As if this little tid bit wasnt enough there were a dozen or so French economists that have gotten together and put a plan out on how to restructure the EZ currencies when the break up happens. here are a few quotes from the statement given to the Telegraph. I find it interesting that most of the blame right now for any potential break up of the Euro has been put on Greece. Admittedly though nobody in the current political arena will admit Greece is already circling the drain. Here comes France to give a hand to dig the hole a bit deeper. I can just about hear the echo from the hole “We are almost to China” LOL

 “The obstinate determination of governments to take us by forced march deeper into the euro impasse can only lead to the general aggravation of the economic situation in Europe.”

“Even though our American and Chinese competitors have an interest in the survival of the single currency, the euro is condemned to an uncontrollable explosion sooner or late”. (A nice twist that one, inverting the false and widely believed conspiracy theory that the US is trying to destroy the euro.)

“National currencies should be recreated in each eurozone country”. There will be a short transition period of dual notes as old euros are stamped by country (‘U’ for France) until new francs etc are printed. (This is what happened when the Austro-Hungarian monetary union fell apart in 1919.)

 “The obstinate determination of governments to take us by forced march deeper into the euro impasse can only lead to the general aggravation of the economic situation in Europe.”

“Even though our American and Chinese competitors have an interest in the survival of the single currency, the euro is condemned to an uncontrollable explosion sooner or late”. (A nice twist that one, inverting the false and widely believed conspiracy theory that the US is trying to destroy the euro.)

“National currencies should be recreated in each eurozone country”. There will be a short transition period of dual notes as old euros are stamped by country (‘U’ for France) until new francs etc are printed. (This is what happened when the Austro-Hungarian monetary union fell apart in 1919.)

The group of twelve economists are of course in the eurosceptic camp, not in any way linked to the Sarkozy team. What is new is that they are gaining a platform. They are: Gabriel Colletis, Alain Cotta, Jean-Pierre Gérard, Jean-Luc Gréau, Roland Hureaux,Gérard Lafay, Philippe Murer, Laurent Pinsolle, Claude Rochet, Jacques Sapir, Philippe Villin, Jean-Claude Werrebrouck

Today is a busy day for news with the interest rate decisions from the BOE and ECB. Of course no change is expected for either but the Asset Purchase Facility will be watched for the pound and the ECB press conference will be eventful for the Euro as usual. There is also unemployment claims coming from the US today and funny thing is with the awesome NFP data and a drop in the unemployment rate. The claims are expected to rise by 13K. Go figure.

Getting to the daily chart of the Euro price just touched and was rejected at the 1.3278 line I had up yesterday and dropped right back to the 1.3220 line before closing as a nice daily doji candle. I figured one of those lines would hold but not both. LOL At this point I am expecting a break of the 1.3220 level and possibly a full retracement of the Feb 7 candle.

Be careful out there guys

Chad

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