The Great Demise: EUR at Two-Year Low

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The Great Demise: EUR at Two-Year Low
Justin Burkhardt | July 19, 2012
Strength is fading. Parity is visible. Reform is the only option. European markets are tumbling and the euro has slipped to record lows against several major currencies. The market is in reaction mode responding Spain and Greece in the headlines.
Investors have cast their doubts that the debt-ridden nation of Spain can avoid another full-blown bailout after Valencia, the third largest city in Spain, called out for aid from Madrid. Spain continues to march towards its fiscal demise, while Greece stands perched at the edge of its own fiscal cliff – Which country will be the first domino?
The European Central Bank’s have announced that they are suspending the eligibility of Greek bonds as collateral.
After a brief respite, Spain’s borrowing costs have once again breached the unsustainable level of 7 percent; and there are not signs of relief any time soon. Meanwhile, the country’s credit rating is being pushed further into “junk territory” as Egan-Jones aggressively downgraded Spain for the sixth time since mid-April. Egan-Jones’s newly adjusted rate is a double-C-plus which is a downgrade from a triple-C-plus. According to Egan-Jones, Spain’s probability of default in the next year is 35%.
The ECB’s decision to suspend Greek bond eligibility resulted from the upcoming expiration of a Greek bond swap that was launched earlier this year.  Greek sovereign bonds "will become, for the time-being, ineligible for use as collateral in euro-system monetary policy operations," said the ECB. This decision may not be permanent, as the ECB has stated that they will reassess bond eligibility once experts have reviewed Greece’s progress in meeting the conditions set within their bailout program.  
These events have set fire to the streets and investors are quickly fleeing the scene.
The euro plummeted to record lows against the Australian, Canadian and New Zealand dollar; and is falling fast against the U.S. dollar reaching a low of $1.2143 this morning.
This move should not come as a surprise to any of my readers. I have been short on the EUR.USD since its consolidation back in May of 2012 at $1.31 and have projected that the first leg of this decline would send it to the $1.19 region.

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Your on point currency analyst,
Justin Burkhardt
Editor & Currency Strategist | @JDBurkhardt

Dislaimer: I have not position in any stocks listed above and do not plan on entering the market within the next 48 hours.

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bourbondave's picture

It's strange for an article to talk about the author's trading position but then have a Disclaimer at the bottom saying he doesn't hold a position in any of the stocks listed in the article.

Burkhardt's picture

I close all open positions over the weeked, the article was posted at the end of the trading week after the market closed.

Eireann go Brach's picture

Change your name from Justin Buttfart and you will garner more comments!

Jack Sheet's picture

"Justin's approach and analytical style revolve around the Elliott Wave principal, which is known to be one of the most accurate ways of anticipating market movement."

No shit.

If you made so much money on the short, why do you need to post?


Vic Vinegar's picture

You understand fx much better than I do so let's not even go there.  How about...

...five articles to date and you've had 26 comments prior to this one.  That might be the lowest comments-to-article ratio anyone has ever seen here.  Not that that is a bad thing.  Perhaps you are too nice a guy?

I suggest changing your picture.  Never trust a man wearing a suit so why not go with a picture of you in a 'I Heart baby_BLYTHE' or a 'I Heart RobotTrader' t-shirt?  Let us know where you stand spacemonkey!

Also, what does your comment Reform is the only option.  mean?  Are you for one-world government, one-world currency or against it?  Give us something to care about other than $1.19.

Burkhardt's picture

It is obvious that the austerity measures being pushed are
not helping. They prevent growth rather than foster it. So by “reform is the
only option” I simply mean that there must be both fiscal and economic reform
in order for these EU countries to begin making positive progress.