Fx EUR/USD commentary February 8, 2012
All seems well in the world judging by the 150+ pip rise in the Eur/Usd yesterday. However as I go through all my news feeds I really dont see that much has changed. The Greek deal still hasnt been finalized and they just keep postponing the political parties meeting. There was some talk from the ECB about pushing their Greek bonds to the EFSF and letting it take the haircut. That seems like a good idea at first glance but then who in their right mind would buy EFSF bonds to shore up the rescue fund if they are not sure they will paid in full on EFSF bond purchases? That dont make much sense to me but the ECB transfer and haircut on those bonds would surely help Greece.
As I scroll down my news a bit further I see that the Greek economy has already all but collapsed reporting a 7% decrease in the budget revenues for January while projections for the year are supposed to be a growth of 8.9%. Somehow that just doesent add up. Sure its the beginning of the year and there are almost 11 months left but starting out with an almost 20% decline from the target seems to me that the hole has just been dug deeper rather than filled.
This comes from data reported by Kathimerini.
“Budget revenues lagged projections by €1 billion in the very first month of the year. “Revenues posted a 7 percent decline compared with January 2011, while the target that had been set in the budget provided for an 8.9 percent annual increase. Worse still, value-added tax receipts posted an 18.7 percent decrease last month from January 2011 as the economy continues to tread the path of recession: VAT receipts only amounted to 1.85 billion euros in January compared to 2.29 billion in the same month last year.”
Considering these numbers Greece is going to need more than the projected boost to the bailout of 15 billion bringing the package to 145 billion if this is any sort of pattern. Even though all the politicians are saying Greece wont exit, “we don’t want a Greek exit” it sure seems to me that they really could care less. There has already been talk of how a Greek exit would have a fairly muted effect on the rest of the EU. This I find hard to believe but if the ECB steps in and protects Portugal like it has Greece and contagion don’t spread then the possibility is good. Plus Portugal has done a much better job of reforming than Greece has but has mentioned in the recent past that they may need some debt reduction in the form of haircuts too. I’m sure there is just as much political BS running here so we will just have to wait and see.
Looking at the daily chart I see the nice break and close above the previous resistance at the 1.3220 level with the close right at the highs. This tells me more upside is likely but will probably test the support at 1.3220 first then run up and test the breakout level at 1.3287 and possibly a bit higher.
Be careful out there guys.