A Template for Euro Declines

The Eurogroup leader suggested Cyprus will be used as a template for future European bailouts. The comments sent the euro to a close below the 200-day moving average. The highlight of Asia-Pacific trading is a speech from RBA Governor Stevens. Some subscribers have asked why Ashraf considered the  Premium long in EURJPY targetting 123.90 from 122.50s to have been stopped out, the market rallied to 123.85. The rule is to only consider a trade to have hit all targets when the full range has been attained, even if some clients may have exited at a profit. The same applies to the existing shorts in GBPUSD. Full details can be seen in the latest Premium Insights.

The Eurgroup's Dijsselbloem sent a shudder through Europe saying that future bank bailouts should include bondholders and deposits over 100,000 euros before taxpayers are asked to contribute. Adding to the euro declines was a widespread rumor – which proved untrue -- that Moody's was preparing to downgrade Italy.

From 1.30 at the start of US trading, the euro sank as low as 1.2829 and closed below the 200-DMA and 55-WMA. Virtually every euro cross posted a bearish engulfing candle pattern, foreshadowing further declines.

The comments from Dijsselbloem caused a deep drop in European banking stocks on speculation that anyone with a deposit larger than 100K euros will flee the region. He later backtracked with a statement saying every program is unique and there are no templates but the euro hardly bounced.

US news was light but dovish comments from the Fed's Dudley caused a drop below 94.00 in USD/JPY. He said monetary policy must be kept 'very accommodative' and that there is a case for more asset purchases. Japanese year-end repatriation may have also been at work.

The upcoming session is relatively light but the leaders of central banks from Japan and Australia will make appearances. At 0000 GMT, Kuroda will appear before the Diet for the semi-annual report on currency and monetary policy controls.

The RBA's Stevens speaks at a forum at 0445 GMT.