EUR: Funding Spain’s Black Hole
Justin Burkhardt | FXFocus.com [6]
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 [6].
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)
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Your currency analyst,
Justin Burkhardt
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