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FX EUR/USD, GBP/USD and EUR/GBP Commentary March 13, 2012

I have a feeling that the market may be waiting for the Federal Reserve announcement this week before any major movements. There is still a bunch of conflicting opinions on whether or not there will be any hints of a third QE program. I am in the camp of no more QE this year. The reason is it would be politically unacceptable for Obama. There has already been some attempts to distance the FED from the president and since everything is “getting better” there should be no reason for helicopter Ben to fire up the presses again.

We did have the WSJ reporter who is considered to be the Feds mouthpiece write an article over the weekend steering away from any sort of QE and Bernanke did say last month that there were no discussions of QE3 in last months Fed meeting. What we will be looking for is any wording in the speech that has to do with inflation. If that word is uttered enough times then there will be no QE3 this year.

Now on to a bit more Bizzaro World. Last night we had this from Twitter.

EU’s Juncker says Greece won’t need a third bailout. So be prepared for the next Greek bailout LOL

This from Talking Forex, New Greek debt analysis says new debt-to-GDP ratio could fall well below 120% by 2020 if debt swap participation is pushed above 96% according to EU sources. Yea right when pigs fly some growth into Greece and stop the profuse bleeding of the economy.

Again from TF, The French finance minister says Spanish debt is relatively low. I beg to differ. Yes the public debt looks rather well on paper however Spain has an elephant in the closet. I got this from Things That Make You Go Hmmmm.

As manageable as Spain’s public debt would appear to be at face value, her private debt is an altogether different story – standing at a staggering 227% of GDP and, according to McKinsey, Spanish corporations hold twice as much debt relative to their output as US companies and, in comparison to Germany, that number goes up to six times (incidentally, Portugal – the PIIG that nobody cares about – has even worse numbers with public debt at 93% and private debt at an eye-watering 249%, – still as high as it was at the height of the GFC. Portugal is unsalvageable- it’s just that nobody seems to think it will matter. It will.)

Plus remember Spain just kinda told the EU to stick their deficit targets where the sun dont shine. But after some arm twisting and probably head bashing they did give in but so did the EU making some excuses for Spain. They still wont make the agreed deficit target but did agree to a smaller number than they announced last wee. How nice it is for a country that is a bigger threat to the EU if it goes down to catch a break that they would have never given Greece. Not that I think Greece deserved one but why does Spain? Maybe because the powers that be might actually be pulling their head out of their you know what and seeing that putting a foot on the throat of an economy doesnt help it pay its debts. however I have my doubts the proverbial head is out yet LOL.

Lets talk todays news. We do have a bit and some decent ones at that will be watched.

Starting with the EU Finance minister meetings Since they have already approved the Greek bailout. I expect a lot of Bizzaro talk from these guys again so we may have an entertaining commentary tomorrow LOL. This will most likely give the Euro a boost at least temporarily.

Next up is German and EZ ZEW economic sentiment which is expected to be much better than last months. I find it hard to believe that things have improved that much but stranger things have happened. If these come out just a little better than expected the Euro will rise also.

Then we have the ECBs Draghi speaking. (Euro Pumper)

Last but not least during the US session there is Retail sales numbers. We could have the Trifecta of better than expected news today which will most likely turn the risk sentiment on again and the Euro will benefit mostly. Along with a possible break and close above 13K on the Dow. Fundamentally there are plenty of reasons to be bullish today.

Looking at the charts the 1hr EURUSD has found support and made 3 intraday pushes up and is approaching the 200EMA on the hourly and 4hr charts so it will probably take the good news to break those to the upside. It is still unclear as to direction considering the Smart Money trend so I will be waiting to see what today brings.

The story is pretty much the same with the GBPUSD other than it is possible it has made the first level down but considering the potential for the EURUSD to move up today and drag it with too its a bit risky to take the short today.

What does look rather nice for a level 2 long trade is the EURGBP. It has made a nice 2 level rise from the lows and should see the third today. I will be looking for the trap move then take the long on this pair.

Happy trading to all


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