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Euro Rebounds as Panic Subsides

Last updated 11/11/2011 3:58 AM ET (GMT -5) 2 Comments

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Boris Schlossberg

Director of Currency Research, GFT

EUR/USD burst higher at open of European trade today rising to 1.3650 from the lows of 1.3600 set in Asian trade  as short covering and some stabilization in EZ credit markets helped to lift the pair. ECB was reportedly buying bonds on the open further helping the rally.

Today the Italian senate is expected  to pass the budget vote  that will assure the departure of Prime Minister Silvio Berlusconi and usher in the new government of former EU commissioner Mario Monti who is viewed as a competent technocrat that could better handle the country’s financial problems.    

Meanwhile the economic data in Spain showed that GDP in Q3 stalled at 0.0% but the news was expected by the market and players were more focused on the possibility of  a win by the centre right People’s Party which has promised to enact much needed labor reform registration which could spur growth and improve the country’s 21% unemployment rate.

Thus, with investor panic beginning to recede ahead of the weekend, the tone in the currency market was decidedly more constructive towards risk, as markets adopted a “no bad news is good news” view. With bank holiday in North America today, trading volumes may be lighter as we progress through the last day of the week  and unless currency traders are hit with more negative headline news the short covering could continue into the close with EUR/USD eying 1.3700    target.

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Comments (2)

kfeentllc

November 11, 2011 at 09:38 AM ET

Will it last...that's the real question. If it goes over 7% will it cause another big drop.

Justin Parizi

November 11, 2011 at 04:42 PM ET

If the euro trend depends at all on the well being of Greece, than it should be said Greece's only source of oil is Iran which has some sort of 'open credit we sell it' policy. Check this rueters report out http://www.reuters.com/article/2011/11/11/us-greece-iran-oil-idUSTRE7AA3IJ20111111 , it's interesting that we have Leon Panetta of the CIA trying to warn Israel not to attack, all through out the past month because the "west" has planned sanctions against them and their oil exports. This will have crippling effects on Greece, so if greece is somehow still apart of the euro in a few weeks these sanctions are expected to pass, would higher oil prices aid the OPEC petro dollar? and how would that fair with the EUR? GFT analyst say that belief of oil and USD is BS but if the kissinger deal with OPEC US debt have fundamental beneficial grounds for US and EUR has negative Greece problems would this be a good time to sell?

For anyone skeptical that these sanctions will not pass because Russian support, I could agree, however according to the CFR assessment CPA Contingency Planning Memorandum No. 5 90% of warning indicators have have already occurred, to the experts if there was a crusade against Iran how would this fair in the foreign exchange? what is a tactical position?

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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.