Forex:EUR/USD retraces 61.8% of fall from near 1.45

EUR/USD has retraced 61.8% of the fall from ear 1.4500 earlier this week on the latest rally to 1.4336. Traders note very little interest to establish fresh positions ahead of a weekend in which a Greek confidence vote and a Eurogroup meeting are set to take place. Looks like short-covering will dominate. More stops are eyed above 1.4350/55.Risk on sentiment in most markets is helping keep lots of wind in the euro’s sales.

FOREX-Euro rebounds on Merkel,Sarkozy comments, Greek aid talk

Euro rallies after French, German meeting in Berlin

Market talk of larger bailout boosts single currency

Greek govt vote of confidence looms after reshuffle

The euro rose on Friday on speculation of a new Greek aid package and as Germany pledged to work with the European Central Bank to resolve the debt crisis, but it remained vulnerable to a sell-off in the absence of a concrete solution. The single currency rose 0.5 percent to a session high against the dollar of $1.4283, recovering smartly from a low of $1.4127 in late Asian trade. It also turned positive against the Swiss franc to reach 1.2121 francs, up from Thursday's record low of 1.1946, and rose 0.4 percent against sterling to reach 88.28 pence. It was also slightly firmer against the yen at 114.64 yen . German Chancellor Angela Merkel met with French President Nicholas Sarkozy on Friday and they afterwards told a news conference a solution had been agreed in line with the so-called "Vienna Initiative." Analysts said the comments were nothing new but European shares turned positive and Greek bond yields and CDS fell as risk appetite improved across the asset classes. "You could argue Merkel's acceptance of the Vienna initiative is somewhat of a climb down and we are moving closer to something more concrete," said Adrian Schmidt, FX strategist at Lloyds. "They are trying to create a positive spin but the issue is can they achieve a version that's acceptable to ratings agencies and the ECB." Under the "Vienna Initiative" for central and eastern Europe, international lenders agreed in 2009 to boost credit to the region and the main commercial banks in turn committed to maintain exposure and roll over credit lines. The single currency has been hampered in recent weeks by discord between the euro zone's paymaster Germany and the European Central Bank, backed by France. Germany has been insisting banks, pension funds and insurance firms that hold Greek debt swap their bonds for new ones with longer maturities. But fearful this solution could create a "credit event" that would prompt rating agencies to label Greece in default, the ECB, European Commission and France all favour a softer option in which holders of Greek bonds would be asked to buy new Greek debt as their holdings mature. Schmidt said investors were unlikely to sell into the euro rally as people did not want to hold positions over the weekend while event risk remained high.

AID SPECULATION

The euro was also boosted by a bout of short covering triggered by speculation of a new Greek aid package that would be larger than previously thought. Traders cited market talk of a 150 billion euro aid package for Greece although this could not be confirmed. "When you get sharp moves on market talk it captures the highly nervous market environment," said Audrey Childe-Freeman, head of currency strategy at JP Morgan Private Bank. "Yesterday was very much doom and gloom and we are bound to see some bounces back but until we get a firm conclusion about the Greek situation the market will remain suspicious." Economic and Monetary Affairs Commissioner Olli Rehn said Euro zone finance ministers will decide at a meeting on Sunday to disburse the next tranche of emergency loans to Greece in early July and decide on the new three-year bailout on July 11. The Greek cabinet, reshuffled on Friday, will face a vote of confidence by Tuesday night. The political moves could be another potential flashpoint in a country already beset by fierce anti-austerity strikes. Markets will keep a close eye on the Monday's meeting and the Greek vote for further clues on how policymakers will proceed in dealing with the debt crisis. The euro's bounce saw the dollar index cede ground. It was last down 0.8 percent at 75.156 while against the yen, the greenback was down 0.4 percent at 80.27 yen. The slight improvement in risk appetite boosted the commodity currencies, pushing the Australian dollar up 0.5 percent to $1.0612. The New Zealand dollar also rose 0.4 percent to $0.8082.

Forex New's: Euro Plunges Amid Greek Fears‎

The euro tumbled to a fresh all-time low against the Swiss franc as anxiety over Greece's debt situation intensified, and other currencies seen as risky bets also fell. The turmoil in Greece overshadowed a slew of better-than-expected U.S. data. The euro was at $1.4129 early in New York trading, down from $1.4181 late Wednesday in New York. The dollar fell to ¥80.83 compared with ¥80.95, while the euro was at ¥114.20 compared with ¥114.80. The pound was trading at $1.6121 compared with $1.6193. Deepening worries about Greece's debt crisis and the possibility of contagion to other euro-zone countries briefly pushed the euro below $1.41 for the first time in three weeks. "The risk of the Greek crisis spiralling out of control has increased markedly," said Société Générale strategists in a note to clients. Concerns intensified as the Greek political outlook deteriorated Wednesday amid violent protests against cost-cutting measures. Greek Prime Minister George Papandreou said he would reorganize his cabinet then call for a vote of confidence in parliament after failing to reach an agreement with opposition parties on austerity measures demanded in exchange for new bailout by euro-zone nations and the International Monetary Fund. Two Greek lawmakers, including one seen as a candidate to replace the finance minister, resigned Thursday. Casting doubt on whether the IMF will deliver its expected aid, Zhu Min, a senior adviser to the fund said he is "very concerned" by the situation in Greece, adding that developments have taken a drastic turn for the worse in the last 24 hours. Adding to the negative tone were comments from European Central Bank Governing Council member Nout Wellink that the European Financial Stability Facility might have to be doubled in size to €1.5 trillion ($2.127 trillion) to secure private-sector support for a second Greek aid package and to cover potential risks from Ireland and Portugal. The cost of insuring against the risk of a Greek default rocketed, as investors started to weigh the chances of nonpayment. "With concerns about risks of a disorderly conclusion to the Greek crisis ratcheting ever higher, ahead of tomorrow's key Angela Merkel-Nicolas Sarkozy summit, the focus will be on Athens where Mr. Papandreou will seek to form a new cabinet and survive a parliamentary confidence vote," said Chris Scicluna of Daiwa Capital Markets. As soon as the Greek crisis is resolved, currency markets will move back to looking at fundamentals, said Peter Kinsella, a foreign-exchange strategist at Commerzbank in London. "In that case, you're looking at the ECB that is still hiking interest rates and the Fed that is more or less likely to keep rates on hold until at least the third quarter of 2012," he said, adding that in such a situation it's unlikely the euro could fall much further against the dollar. For now, though, a jittery tone persists. More broadly, the pound and commodity-linked currencies of Canada, New Zealand and Australia were also knocked down by the Greek situation, while the market's premium safe refuges in times of stress, notably the yen and Swiss franc, gained ground. The euro traded as low as 1.1957 Swiss francs—its lowest level on record—after the Swiss National Bank on Thursday delayed reining in its expansive monetary policy, even as it warns of a budding housing market bubble. It stood at 1.2004 francs early in the New York day. "The SNB offered no clear signs regarding a rate hike," said Commerzbank's Mr. Kinsella. "One important point though is they mentioned the residential real-estate sector is possibly overheating and one tool of dealing with that is increasing interest rates," he added.

EUR/USD Technical Analysis Outlook - Falls Continue On Crisis Complications

Further levels in both directions: Below 1.4030, 1.3950, 1.3860, 1.3750, 1.3440.

• Above: 1.4160, 1.4282, 1.4375, 1.4450, 1.4550 and 1.4650.
• Critical support is at 1.4030 above the round number of 1.40. Another strong line is 1.3950.
• 1.4160 now turns into resistance.

Euro/Dollar free falling -

EUR/USD Fundamentals

• 9:00 European CPI. Exp. 2.7%. Actual 2.7%. Core exp. 1.6%. Actual, only 1.5%. No second round effects?
• 9:00 European Employment Change. Exp. +0.2%.
• 12:30 US Unemployment Claims. Exp. 421K.
• 12:20 US Building Permits. Exp. 550K.
• 12:30 US Housing Starts. Exp. 540K.
• 12:30 US Current Account. Exp. -126 billion.
• 14:00 US Philly Fed Manufacturing Index. Exp. 7.1 points. See how to trade this event with EUR/USD.

 

FOREX-Euro at 2-1/2-week low vs dollar; Greece in focus

The European Central Bank said the threat of the Greek debt crisis spilling over into the banking sector is the biggest risk to the region’s financial stability. “Greece could have a contagion effect,” ECB Vice President Vitor Constancio said at a briefing in Frankfurt today, when presenting the bank’s semi-annual Financial Stability Review. “That’s the reason why we are against any sort of default with haircuts and any form of private-sector event that could lead to a credit event or a rating event.” The euro area’s sovereign-debt woes have worsened as investors increased bets that Greece will not be able to pay its debts, sparking the region’s first sovereign default. The risk that euro-area banks holding Greek government bonds will be saddled with losses has jumped, after Standard & Poor’s slapped Greece with the world’s lowest credit rating on June 13. "The euro area faces a very challenging situation that comes mostly from the interconnection of the sovereign debt crisis and the situation of the banking sector,’’ the ECB said in the review. “In light of the potentially very dangerous implications of sovereign-debt restructuring for the debtor country, including its banking system, a determined and unwavering focus on improving fundamentals” is required.

Vienna Initiative

The ECB and the German government have clashed over how much investors should contribute to alleviating Greece's debt load, which reached 143 percent of gross domestic product in 2010. While the German government has argued for an extension of the maturities of Greek bonds, the ECB has said it’s against anything that could be interpreted as a default.

Constancio reiterated that the ECB is in favor of a plan for bondholders to agree to roll over their debt voluntarily. The approach is modeled on the Vienna initiative, where banks agreed to roll over loans to units in Eastern Europe at the height of the financial crisis in 2009. “We are not against all forms of private-sector involvement,” he said. “Some sort of Vienna style initiative could be conceived. It’s not for us to provide solutions.”
While Ireland and Portugal were also forced to ask for external help over the past year, the ECB said there are“encouraging” signs the crisis has been contained.

FOREX NEWS: Euro Falls to Lowest This Month Versus Dollar on Greece Bailout Deadlock

The euro dropped to its lowest level this month against the dollar as the European Union struggled to break a deadlock on a second Greek financial rescue. Europe’s shared currency remained weaker after the cost of living in the U.S. rose more than forecast in May and a measure of manufacturing in the New York region unexpectedly shrank in June. Sterling fell versus the dollar after a report showed Britain’s jobless claims rose in May more than economists forecast. Australia’s dollar fluctuated after the Reserve Bank of Australia’s governor said policy makers will need to increase interest rates. “The fact that the data is very poor gives market participants more of an excuse to continue to unwind their euro long positions,” said Stephen Gallo, head of market analysis at Schneider Foreign Exchange in London. “There is contagion risk in Europe and it’s acting to weigh on the euro, or boost the dollar.” A long position is a bet that an asset will increase in value. The euro fell 1.1 percent to $1.4289 at 9:26 a.m. in New York, from $1.4440 yesterday, after touching $1.4264, the lowest level since May 30. The currency slid 0.7 percent to 115.42 yen, from 116.23. The dollar gained 0.3 percent to 80.76 yen, from 80.49, after touching 81.06, the highest level since June 2. Europe’s currency has depreciated 1 percent in the past week against nine other developed-nation currencies, according to Bloomberg Correlation-Weighted Currency Indexes. The dollar has risen 1.3 percent. German Chancellor Angela Merkel and French President Nicolas Sarkozy will meet on June 17 in Berlin, with pressure mounting for the leaders to resolve their differences over a rescue for Greece. Standard & Poor’s lowered Greece’s credit rating on June 13 to the lowest among nations. EU finance ministers agreed yesterday to convene again on June 19 after they failed to reconcile a German-led push for bondholders to share part of the cost of a new plan for Greek aid. European Central Bank warnings were backed by France that the move might constitute the region’s first sovereign default. Moody’s Investors Service placed the ratings of BNP Paribas SA, France’s biggest bank, and local rivals Societe Generale SA and Credit Agricole SA on reviews that will focus on their holdings of Greek public and private debt.

EUR/USD Down During Open Session

The Euro was lower against the U.S. Dollar on Wednesday. EUR/USD was trading at 1.4294, down 0.19% at time of writing. The pair was likely to find support at 1.4222, Monday’s low, and resistance at 1.4551, Friday’s high. Meanwhile, the Euro was down against the British Pound and the Japanese Yen, with EUR/GBP shedding 0.16% to hit 0.8808 and EUR/JPY falling 0.28% to hit 115.92.

EURUSD's rebound rally at the start of this week finally came to a grinding halt yesterday; as the pair peaked at 1.4498 and then quickly began to fall back lower. With the choppy summer months in full swing (notorious for treacherous sideways trading), this may simply be the start of a 1.4200-14500 range; however, should we break below 1.4309 (1 Jun low), then it seems more likely we see a resumption of the broader downtrend, and should then focus on a challenge to 1.4258 (30 May low) and 1.4149 (100-day moving average). In the meantime, the topside is thick with sellers; first resistance stands at 1.4450-60 (upper edge of our downtrend channel), then 1.4550 (10 Jun high), 1.4653 (9 Jun high), and 1.4696 (7 Jun high).

Roubini Says “Perfect Storm” May Clobber Global Economy

EUR/USD Technical/Fundamental Analysis 06.13

Euro dollar consolidates its losses in a lower range. While many European countries are on holiday, the uncertainty about Greece weighs on peripheral bonds, including Spain. Here's a quick update on  what's going on in the markets.
EUR/USD Technicals Asian session: The pair dipped to 1.4318 before climbing back to resistance and settling in range. Current range 1.4282 - 1.4375

Further levels in both directions: Below 1.4282 1.4160, 1.4030, 1.3950, 1.3860.

Above: 1.4375, 1.4450, 1.4550, 1.47, 1.4775, and 1.4882.

The old peak of 1.4282 is important support with the critical 1.4030 still in the distance.

1.4375 is only minor resistance before 1.4450.EUR/USD Fundamentals

14:00 ECB president Jean-Claude Trichet talks.

For more events later in the week, see the Euro to dollar forecast

EUR/USD Sentiment

German banks ready to contribute: Over the weekend, it seems that pressure for restructuring of Greek debt pushed the German banks to volunteer to participate in Greek losses. This joins approval from Jean-Claude Juncker to the German plan and a comment made by a senior German adviser that a Greek default could be weathered. The ECB is cornered.

• Strong vigilance, but other worries: Trichet did make the expected hint for a rate hike using the code words "strong vigilance". On the other hand, he expressed concern over the global economy, repeated the "strong dollar policy" and also continued to reject any Greek restructuring. The fall of the euro that began during the presser continued. We'll get more of Trichet now.
• Contagion risks in Ireland: There are fears in Ireland that a Greek restructuring will hammer Irish bonds, sending them to junk status and keep Ireland away from the market for too long. An Irish minister saw "benefits" for Ireland in the German plan.
• Contagion risks in Spain: As the new governors and mayors begin working after the local elections on May 22nd, the worries about Greece send Spanish bonds to test the peak levels. 10 year notes now yield above 5.5%, after a calm month. The critical level is 5.60%. The new authorities might reveal a huge pile of hidden debt

Bitcoin Triples Again-The Future Of World Currency

The online currency has minted off-line millionaires.  

The world's fastest-gaining currency has tripled in price again. Last week, SmartMoney reported that the Bitcoin had exploded from an exchange rate near zero to more than $10 in about a year, making it one of the top-returning assets of any kind. On Wednesday the currency topped $30. If returns like those seem otherworldly, perhaps its because Bitcoin is a world unto itself. To recap, it's is a purely online currency with no intrinsic value; its worth is based solely on the willingness of holders and merchants to accept it in trade. In that respect, it's not so different from fiat currencies like the dollar or Euro, but whereas governments back such money, Bitcoins lack central control. In another way, the appeal of the Bitcoin echoes the appeal of gold. Instead of a central bank, a computer algorithm dictates their supply. Today there are six million Bitcoins, a number that will grow at a steadily slowing rate until it approaches 21 million, but no more. As with gold, some see such limited supply as built-in protection against inflation that could result from runaway government budget deficits. Gold, of course, has been a store of value for thousands of years and has at least some industrial use, whereas Bitcoins are brand new and exist only on the Internet. For some early adopters, Bitcoins have turned from a hobby into a windfall. MtGox  the main exchange for users swapping Bitcoins for dollars and other currencies, charges buyers and sellers a fee of 0.65% for its brokerage service. (The name stands for Magic the Gathering Online Exchange, but the Bitcoin dabbler who bought the domain didn't bother to change it.) As recently as a few months ago, the site generated just pennies a day in income. By Wednesday it was making more than $40,000 a day. Mt. Gox, needless to say, is not a regulated exchange, so its pricing and liquidity data aren't subject to any review or verification. Mt. Gox didn't respond to an email request for comment. The site offers no customer service phone number. The largest Bitcoin account holder -- who is, of course, anonymous -- has 297,000 units of the start-up currency, according to Donald Norman, a spokesman for the The Bitcoin Consultancy, which offers advisory services for institutions interested in Bitcoin transactions. At $31 per Bitcoin, that's equivalent to $9.2 million. Bitcoins are accepted by a limited number of merchants for services, such as website design, and some goods, such as music and clothes. The anonymous nature of the currency has also led to brazen use by drug dealers, including ones who hawk their merchandise on Silk Road, a website than can only be reached through a network that cloaks the identity of its owner. Lawmakers are not amused. "The only method of payment for these illegal purchases is an untraceable peer-to-peer currency known as Bitcoins," wrote Sens. Charles Schumer of New York and Joe Manchin of West Virginia this week in a letter to the U.S. Attorney General and the Drug Enforcement Agency. Cash, Bitcoin advocates are quick to point out, is also an anonymous payment system used to buy drugs, and Norman says the focus on drugs is sensationalistic and misguided. "It would be sad if the growth of Bitcoin was stunted because of this criminal byproduct," he says. "Bitcoin is going to change the world in the same way the Internet did and make societies freer." It's not clear that U.S. law enforcement agencies could regulate Bitcoins if they wanted to. The currency runs on software similar to the file-sharing software used to download music and movies, technology the entertainment industry has been trying unsuccessfully to quash for years. There's no headquarters, main server or central bank to visit, just a network of thousands of users. It's also not clear whether U.S. regulators would have jurisdiction over a global, virtual currency. Last week, a spokesman for the F.B.I. said he was unaware of Bitcoins and would check into the Bureau's position on them. Subsequent calls for comment have not been returned. Readers tempted to bet on the Bitcoin should resist, not least because it's unclear whether it will have any enduring worth. Beyond what fans say are the currency's design advantages, its chief appeal at the moment is surely that it's soaring in value. As of now, today is the first day in more than a week that the currency didn't hit a new high. And when the gains stall, the fall that follows may be as breathtaking as the rise.

EUR/USD WEEKLY TECHNICAL REVIEW 06.12

In the previous EUR/USD Weekly Review, we noted that the US NFP was worse than expected and that the American economy is really not out of the danger zone yet. Mounting debts are a threat and the low interest rate threatens to erode the value of the US Dollar. On the other hand, while the Euro Zone’s diversity complicates efforts to cooperate, it also shields the entire Euro Zone from an immediate complete melt down when financial crisis strikes. Looking at the EUR/USD chart above, the currency pair is currently in a steep drop. Slicing through the 1.44 line like butter, if the bearish pressure persists, we may be looking at 1.42 next. It seems that the market is not ready for a higher Euro currency for now as the EUR/USD tried unsuccessfully to break beyond 1.46+. From a technical point of view, the currency pair will be bearish unless it consolidates and holds above 1.44. The main highlight of the week was probably the Euro Zone minimum bid rate which remained unchanged at 1.25%. While a number of investors hoped that an interest rate hike was done, the market was relatively unsurprised with the move. Having said so, comments from the European Central Bank ECB indicated that there might be differences regarding the solution to the Greek deficit crisis and the market took that badly. Despite previous developments regarding the continuum of a Greek solution, possibly involving a further bailout and even private involvement, individual ECB officials deferred in their take on the situation. It may be possible that Greek developments may continue to steer the Euro currency next week.