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The gains in the euro and other high yielding currencies are evaporating quickly as investors look at the various proposals to save Greece and denial by politicians with frustration. Their patience is being tested and the longer European officials take to announce a new bailout plan for the euro, the more skeptical everyone is becoming.  The Finnish Parliament lived up to their part of the bargain this morning when they voted to approve the expansion of the European Financial Stability Facility.  With 10 of the 17 member eurogroup having ratified a bailout fund, there is no question that Europe is clearing each hurdle slowly and inching closer to a broader and more ambitious plan to expand their resources and prevent contagion. Another proposal has been put forward by the media, this time involving the privatization of Greek assets. Politicians have denied the East German style recapitalization but the level of detail in each of the rescue plans put forward this week still gives investors hope that the Europeans are getting very close to reaching a deal. Knowing that the Europeans have 3 solid options brings some relief to investors at a time when there was a strong degree of defeatism in the market.  European economic data was also better than expected with consumer prices in Saxony rising sharply. With consumer confidence and inflationary pressures ticking up, the pressure on the ECB to lower interest rates has eased.  Although currencies and equities have held onto their gains, the price action in the market suggests that the patience of investors is wearing thin.  If the Europeans do not acknowledge that a deal is in the works quickly, the relief rally in risk come to an end.

Meanwhile, U.S. economic data continues to provide little cause for optimism.  Durable goods fell 0.1 percent in the month of August which may have been slightly better than expected but still a negative print.  After rising sharply in July, the moderation in demand for big ticket items is not surprising.  Capital goods on the other hand rose 1.1 percent, the sharpest in 3 months.  Demand for computers and communications equipment rose strongly thanks to persistent demand from China and India.  This uptick is encouraging and shows that U.S. companies are not completely adverse to spending, they just have no interest in hiring.  Federal Reserve President Rosengren is speaking this afternoon along with Fed Chairman Ben Bernanke. Considering that both policymakers will be taking questions from the audience, we will be on the watch for any market moving comments about Quantitative Easing. 

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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.