10 února 2010

Ken Veksler's Market Commentary

Good morning,

HOORAH!

Souvlaki and Ouzo for everyone…. Take the “for sale” sign off the Acropolis and start dancing the Cirtaki while smashing plates Zorba the Greek style!
The EU is coming to Greece’s rescue…. Well sort of….

Late last night in the dying throws of the European session we had headlines hit the wires reporting the imminent bailout of Greece by the EU! Of course the EURUSD rallied on the back of this eventually tripping decent stops into 1.3825/30 trading to a high of 1.3840 roughly. Details were sketchy at best about the package and the plan other than the fact that where there is smoke there is indeed usually fire and in this case there may have been something more to Trichet’s early return from Australia other than kangaroo poisoning. In quick succession (within the hour) Germany was first to vehemently deny any involvement in planned bailouts and following that there was another round of speculation as to what this plan would look like. Will it be the ECB and member states solitarily helping the Greeks or would it be in combination with the IMF? Would there be hurdles and targets set for the struggling nation akin to the recent Latvian debacle? How much money is needed? Etc etc etc. Long story short the EURUSD gave back all its gains and traded promptly in Asia to an overnight low of 1.3735. We walk in this morning not really all that clearer for what is going to happen but I do see that the EURUSD is range bound within 1.3730 and 1.3820/40 until such time as there is more light shed on this topic.

On a side note worth mentioning that outside of the obvious moral hazard problem this whole situation raises, it’s necessary to consider this little fact…. As soon as they’re done helping Greece Spain is clearly next in line and the problem there is far greater, so where does all the money come from and in what form? All in all in my humble view not all is rosy when said and done for the EUR at present. In simple terms whatever the solution its now likely to be seen as EUR negative in the medium term…..

Looking a little further a field at what else has been going on while you were sleeping;

China releases a far smaller trade surplus overnight than expected, risk falls off…. Very, very sketchy market at present and clearly the above is the main story that the market is currently watching.

Otherwise on the day we have despite the snow in Washington, Fed testimony without our man Ben as well as the BOE inflation report later this morning. Neither is likely to really move markets as most is priced in and as already mentioned 10 times above the headline story still continues to be Greece.

On the majors today, well you’ve seen what I think of the EURUSD, elsewhere Cable is likely to squeeze on a buy the rumor sell the fact scenario ahead of the inflation report. I look for more downside perhaps to test into 1.5550/70 today. USDJPY still needs to have rallies faded but overall don’t waste your time for now as this thing is sideways at best. USDCAD in my mind continues to be a sell on rallies but I look for a possible extension of current price action into 1.0830 before we finally commence a proper move lower.

Oh and did I mention that Greek public servants are on strike today after all the nonsense concerning their pensions etc were announced yesterday?
Yeah that country is well on its way forward…..

Best regards,

Ken Veksler.

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