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Can Brussels please wake up?

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Can Brussels please wake up?

Postby Eurusd Trader » Mon Oct 24, 2011 5:52 am

Much is at stake this week. In Brussels EU leaders will get on with their 3rd day of meetings – meetings which in my view so far have proven to be rather disappointing.

They are discussing figures which might keep Greece and EU banks just afloat – but that’s all. The figures I have heard will not give the long-term confidence markets are looking for. At moment we might talk about some relief – but that’s all.

To try to structure things a bit: Politicians now seem determined to press forward with a haircut of Greek debt in the range of 50-60%. European banks oppose this – for the reasons that they then would need lots of capital – and as private investors might stay off – that capital would have to come from governments – hence a lot of them might be nationalised.

Banks agreed to a voluntary write down Greek debt of 21% back in July. Lately they have indicated that 40% might be agreed to – 50-60% will make several of them go bust – only to be saved through what now goes on in Brussels.

It’s more than a technical issue to be solved. It’s also about the future – and to what extent banks will buy sovereign debt over the coming years.

The wrangling in Brussels will go on for another three days. By Wednesday they have to agree on something which will give comfort to markets.

The opening level for EURUSD is certainly indicating optimism – as we are close to last week’s high. Optimism might take the pair towards 1.3950 – but anyone buying above that level takes a risk I would not be comfortable with.

Those who analyse the figures now being discussed will likely take an opposite view – and see any spike over the three days to come as an opportunity to shorten the pair. I might fall into that category.

As leaks will come out over the three days to come – I see more of a range bound market – 1.3650-1.3975 would be my estimate for the first part of this week.

But things might change over the days to come – and we just have to relate ourselves to what we see from one day to the next. As of today – I look to shorten spikes above last week’s high.

While the EU summit is on top of the agenda this week, some other news were rather encouraging as of this morning. Chinese manufacturing production grew more than expected as did Japanese export. After some months with a rather pessimistic view on global economy – such figures are most welcomed.

From the economic calendar in EU there is eurozone purchasing managers’ index. Again I pay more attention to that of German than to the rest of the countries. From the US calendar there is only Chicago Fed National Activity Index.

Some minor volatility might be seen on release of these figures – but all eyes are on Brussels today – as will be the case for the next three days.

To wrap up: I see what has come out of Brussels so far as rather disappointing and I like the idea of selling EURUSD into spikes above last week’s high.

Comments and leaks from the meetings might cause dips as well as spikes. Dips could be as deep as 200-250 pips ahead of Wednesday – while spikes should be limited to 100 pips.

What I see thereafter will have to wait for a few days. Someone has to come to their senses in Brussels. We just have to wait to find out whether they do.
Eurusd Trader
 
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Joined: Sat Oct 22, 2011 11:20 am
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