Euro Holds Its Ground Despite Unsatisfactory G7

Last updated 2/8/2010 2:51 AM ET (GMT -5) 1 Comments

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Boris Schlossberg

Director of Currency Research, GFT

The G7 meeting over the weekend produced no concrete proposals on the resolution of the Greek crisis leaving the currency market adrift at the start of the Monday trade. The G7 officials also discussed the possibility of an additional 15bp tax on the financial sector to help raise revenue after last year’s massive fiscal stimulus plans across the G-7  universe resulted in record deficits for all member nations.

Although the details of the possible tax were not yet available, the prospect of yet another levy on the global money centre banks will likely put further strain on capital markets if it should ever become actual law. The EUR/USD opened down in Asian session hitting 9 months lows at 1.3620 before rebounding sharply on short covering flows at the start of European trade.

Although the euro remains pressured by the political and fiscal upheaval in the union, the currency is now grossly oversold after declining for 12 out of the last 15 days. The latest data from  CFTC shows that euro positioning has turned strongly negative with shorts growing to 43.7K contracts from 39.5K the period prior. The increase in shorts is now at a record in the series and argues for some sort of technical bounce as late comers get squeezed.

With no economic data on the calendar on both sides of the Atlantic the FX market is likely to consolidate with flows driven by equity market movements and official commentary. With Dow staging a late session recovery on Friday any move to recapture the 10,000 level later today will be positive for risk and could provide EUR/USD with further upside potential as late shorts scramble for cover.   

Comments (1)

Mike

February 08, 2010 at 07:09 AM ET

it's ranging time between low and 1.3720

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.