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One small step forward and then....

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One small step forward and then....

Postby Eurusd Trader » Tue Oct 25, 2011 5:05 am

The Brussels meetings took a pause yesterday – just to meet again on Wednesday. While the markets seem to have liked what has leaked from these meetings – we have to wait until Wednesday to learn what actually is agreed upon. And after that – likely a ratification process in all 17 eurozone countries.

It’s time consuming to get matters resolved in the European Union – and time seems to be an asset leading members of the Union still believe in. Angela Merkel said after the G20 meeting at the start of the month that EU debt issues will not be resolved before we are well into 2012.

Now – will whatever to be agreed on Wednesday satisfy markets’ need for clarity and remove the clouds of uncertainty that we have had in the wake of these debt issues? I have my doubts.

The outcome on Wednesday will likely be a bit more funds available – enough to meet the additional need Greece has got and to secure a minimum capital for EU banks of 9%. But that’s all.

What then if there are further problems to come – in Greece and among other countries? Are we then in for another round of discussions and further clouds hanging over markets? Likely - yes.

The additional guarantee of 2 trillion euros against losses on sovereign debt is important – but it is only meant for new issues. Outstanding bonds will not be covered by this guarantee.

So to me the strength of markets at the start of this week – also the strength of the EURUSD – is more reflecting relief that progress is made, that we can get some practical issues resolved. And while the good mood can last for a few days more – and maybe take us even a few pips higher - I warn that this could be a short lived effect – and the likeliness of getting old problems back – is rather high.

The Brussels meeting is not the only item on the calendar for this week. It’s almost a relief that other indicators are back in my mind – and those I pay close attention to today are:

• German GfK Consumer Confidence Survey
• US Consumer Confidence
• Us Richmond Fed Manufacturing Index

A preparation note for each of these events is available in the event calendar for the Coaching Program.

What do I expect from EURUSD today? Range bound looks to be the answer. 1.3950 was toppish yesterday and for NY it looked like a struggle to set a new high of the day. We might want to take the pair to another high today – but there should be decent resistance on an approach to 1.40. Decent demand was seen at the low end of 1.38 yesterday and likely will see the same today – ahead of tomorrow’s Brussels meeting.

We will set out a more detailed trading strategy in the Trading Room.

Have a good day and be careful out there.
Eurusd Trader
Posts: 17
Joined: Sat Oct 22, 2011 11:20 am
Location: France

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