EUR: Funding Spain’s Black Hole

EUR: Funding Spain’s Black Hole

Justin Burkhardt | FXFocus.com

Greece has long been referred to as the linchpin in this EU crisis, but focus has quickly shifted as headwinds from the Greek storm surge into Spanish territory. Spain has just become THE primary threat to the sustainability of the Euro. And the EU has their back against the wall with two options, to respond or do nothing.

Based on the way that previous events have unfolded, it is more likely that the EU will respond than do nothing. But responding would mean more quantitative easing. The discussed need is €57.4 Billion, of which €40 Billion would come from the EU’s rescue fund. The remaining €17.4 Billion would stem from funds that the Spanish banks would raise.  Is this another one of the EU’s “black whole” funding projects?

Spanish officials have discussed budget cuts rather than tax hikes to improve their economic situation, but the projection is that the country will still miss its 2013 financial targets… And now there is the looming threat of another Spanish downgrade. The situation continues to look bleak, Spain has been unable to prove viable and the EU is ignoring the all the facts.

The EU is a sinking ship; even Germany is under fire as this crisis continues to escalate. If European leaders are not going to make sound decisions, at least we can. It’s time to hedge, join the Forward Thinking waiting list today.

Trader Insights

The EUR.USD is an enticing short. Spain’s debt crisis is completely unsustainable and the rippling effect into other EU nations could cause this whole thing to topple over. We have witnessed a nice reversal off of the pairs one month high of $1.316 and now approaching the 61.8 percent retracement levels. I am conservatively bearish on this pair. On the 4-hour chart it looks like we are in the midst of a “B” wave movement, once this wave is completed we should see a drop to the $1.26 level.

Indicators On Watch

• EUR Euro-Zone Retail Sales (Wednesday)
• EUR European Central Bank Rate Decision (Thursday)

Your currency analyst,

Justin Burkhardt

Comments

[bank guy in Brussels]

Re your « ... EU is a sinking ship ... EUR.USD is an enticing short ... »

For the last two years solid, people have lost huge fortunes shorting the euro

A lot of people went broke the last few months shorting the euro

And it's still holding up

Behind just euro-zone big mess (like usual) ... why do you claim this time is different?

Even with euro break-up, why do you think the EU itself will 'sink' ... instead of going back to the kind of customs-free trade zone it was around the year 2000?

Need more filling in that sandwich you are trying to sell