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by Ashraf Laidi
Posted: Feb 20, 2010 5:00
Comments: 30765
Posted: Feb 20, 2010 5:00
Comments: 30765
Forum Topic:
EUR
Discuss EUR in this thread
Ashraf
" My one question is where the hell was Silvia Wadhwa when we needed her? She would have torn out his heart and showed it to him before he diedmetaphorically, that is. "
i dont see it anywhere
Ashraf
Interesting how fast things escalate
b.
I still think the authorities don't get it. They are not used to work or to think obeying consistency and consequence. ECB has played the ball back to the govt yard .
As a result, the spread between EUR and USD 3-month LIBOR (EUR minus USD) hits a fresh 2 year low of 0.25%.
In normal times, any of these three options would clearly weigh on the euro as it constitutes new form of policy easing. Some would argue otherwise as these measures could be seen as somewhat of a solution, thereby, help stabilize the euro. Such reasoning is misplaced. Traders recognize an easing when they see one and any of these measures would aim at extending liquidity, further dragging the single currency in a lose-lose vicious circle.
Should the ECB announce no new policy measures today, FX markets are unlikely to interpret inaction as a positive on a day when the term contingent has been mentioned by ECB and EU officials alike. Inaction would also be negative because it would be deemed as lack of cooperation by the central bank at a time when Athens is forced to push for more controversial austerity policies and risk politically destabilizing riots.
FX traders have already sent a message to the ECB by dragging EURUSD right onto key trend line support of $1.2738. Markets are ready for more from the slightest ECB signal later today.
Todays $1.2738 low lies on the 5-year trend line support (see chart), which looks to be vulnerable for a breach, leading to last years low of $1.2450. Given the increasing pace of the euro selling and the fact that the 1999 high-to-trough decline amounted to a 16% decline, a similar magnitude from the years $1.4582 high would imply a low of $1.2250. But the fact that the current Eurozone dynamics are worse than last years and the US dynamics are far superior than last years, the argument for prolonged EURUSD downside hold more validity.
Ashraf