Forex Commentary EUR/USD March 9, 2012
It sure seems like we may never see the end of the Greek PSI deal. Just how long can they keep postponing this? We are only 11 days from the maturity of 14 billion of Greek bonds that we all know they have no money to pay. Its going to take a small army of pencil pushers to just get all the paperwork finished before the deadline. You can bet that the Germans and ECB will release enough cash from the EFSF to make what ever payment needs to be made on that. There is actually a small chance that some of that debt will be included into the swap deal but remember the hold out hedge funds were loading up on that particular maturity date to hold for full payment. In effect thinking they would cash in since that is the most important to avoid triggering a default. They were buying up those bonds at 40% of original face value and hoping to cash them in at 100% gaining roughly 60% in just a matter of weeks. Not a bad trade if I say so myself but when your dealing with the likes of the ECB and other elite led institutions its a risky proposition to say the least. Those guys have been extremely proficient in squashing the little guys and have been doing it for decades if not centuries.
We have 85% participation!
Are you nuts? The rumors floating around the market like crazy yesterday. Supposedly coming from some Greek “officials” then the real officials step up and say this. “Whoever gives percentage rates now is naive. There are only 4 or 5 people on the planet that know the percentage and those who claim to know are just guessing” They dont say “buy the rumor sell the news” for nothing.
The Dow has approached 13000 again. The S&P is feeling spunky too but I wonder if we can finally break and stay above the 13000 level on the Dow. Maybe this time will be different but in the past couple weeks the Dow has crossed 13K and been rejected at least 30 times. I suppose if the Greek deal goes through with just a small hitch then its possible for sure. However I have seen reports that even if the deal does get 95% participation. Considering how fast the Greek economy is shrinking the debt level goal of 120% by 2020 will still never be obtained and Greece will need a third bailout in the near future.
Although the LTRO has buffered the banks for now it is still a large possibility that once Greece is settled the market will turn on the next in line which is Portugal. However there was an agreement between the finance ministers from Germany and Portugal that they will be more lenient toward Portugal than they were on Greece but its what Mr. Market thinks that will determine how things will go from here. The fact is that in just 2012 alone the PIIGS have debt maturing to the tune of about 500 billion. With the majority of it being Italian and Spanish debt. Europe is not finished with this whole charade yet. The best we can hope for is some sanity to come back to the Central Bank cronies and they let the market correct but considering their actions so far they still need a few years of therapy. LOL
Both the EUR/USD and GBP/USD have pulled out of level 3 of the SM trend and have completed level 1 of the reversal from the lows. Today will be a great opportunity to catch the long trade after the trap move during the London session on either pair.
Considering reports of the possible postponement of the release of the percentage of participants in the Greek bond swap until Monday I will be trading these pairs today.
Happy trading guys