All Trade Ideas and trading scenarios found on FX360.com are hypothetical. FX360.com has not placed these Ideas in a live trading environment. Forex Trading involves high risks, with the potential for substantial losses that exceed your initial deposit and is not suitable for all persons. Past performance is not necessarily indicative of futures results.

Euro: EU Accord Still a Dud

Last updated 2/11/2010 9:51 AM ET (GMT -5) 0 Comments - Add your comment

• Share this:

Kathy Lien

Director of Currency Research, GFT

With Washington still digging themselves out of the snow storm, the U.S. retail sales report has been delayed until Friday. Although we wonder how the labor department managed to get the jobless claims report out but the Commerce department had to delay the retail sales report, this is a completely separate discussion.  The number of Americans filing for unemployment benefits fell to the lowest level in more than a year.  Jobless claims dropped to 440k in the week ending Feb 6, down 43k from the prior week.  Continuing claims also continued to ease with the total number of Americans receiving benefits at 4.538 million.  The dollar is trading lower against everything except for the euro which can't seem to rise on anything - bailout and no bailout. 

The delay of the retail sales report leaves the EU Summit as the market's primary focus.  Based upon the price action of the euro, traders have not been impressed by the announcements that have come out of the EU's Emergency Summit.  Members of the European Union announced earlier today that they have reached an accord on Greece but the lack of concrete details and any clear financial commitment has disappointed currency traders.  All the EU have said is that they will confer with the ECB and IMF on the next steps for Greece.  Although this indicates that the EU is taking the situation very seriously, they also stressed that Greece has not asked for aid, which we believe is just a play of words. 

Eurozone nations have pledged to provide support for Greece in a "determined and coordinated way" which means that at the end of the day, larger and healthier countries within the eurozone will step up to the plate and bailout of Greece.  Yet as the 27 leaders of the EU countries move closer to this inevitable outcome, currency traders do not seem to be satisfied. They fear that by offering this band-aid, they may have opened a can of worms.  Not only could this encourage countries like Portugal and Italy to stretch out their hands and ask for support as well but in order to meet the deficit reduction goals, these countries will have to take hard steps that would ultimately slow their growth and recoveries.  Nonetheless there is no other way out.  Either Greece defaults on their debt which could have strong regional consequences and be a huge embarrassment for the Eurozone OR Greece receives a bailout.  If Eurozone nations continue to sit in the bleachers and watch Greece default on their debt, investors would pull their money out of euros more aggressively.  Although there is risk of moral hazard if they bailout Greece, it would at least help to pacify one of the biggest concerns in the financial markets right now and buy Greece and the Eurozone some time by pushing the fiscal crisis to the background. 

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Forex Trading and FX360 .com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of Global Forex Trading, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. Global Forex Trading and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

Loading...

About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.