By Christopher Vecchio, Currency Analyst for DailyFX
Fundamental Headlines
- ECB Plan to Shield Its Greek Bonds May Subordinate Some Holders - Bloomberg
- Germany Seeks to Avoid Two-Step Vote on Greek Aid - Bloomberg
- Inflation Heats Up on Gasoline Prices - Reuters
- Germany, Bank Ease Tensions on Bailout - WSJ
- U.K. Retail Sales Stronger Than Expected - WSJ
Overnight price action yielded little indication of whether Friday would be a risk-on or risk-off day to end the week. The U.S. Dollar was slightly stronger against the Australian and Canadian Dollars, while the New Zealand Dollar was tied with the Euro for the top performer. Ranges were tight, however, with all of the majors - save the Japanese Yen - trading within a +/- 0.30 percent range against the U.S. Dollar, at the time this report was written. The big news - or what should be big news - is that the European Central Bank has participated in a Greek bond swap. According to sources, however, the bonds are simply being rolled over: the ECB will receive similar bonds at the same value. As per information DailyFX Quantitative Analyst David Rodriguez has notified me of, it appears that the ECB may also be considering allowing the Greek bonds held in national Euro-zone banks' portfolios to be subjected to the same conditions private investors are readying to take. Beyond this, the International Monetary Fund has tentatively announced that it will only contribute €13 billion of the €130 billion in the second bailout package, which means, should this be the case, Euro-zone governments will have to up their contributions (the European Troika is looking rather weak in this regard). Given the rhetoric out of Dutch, Finnish, and German parliaments, I remain highly skeptical that this will occur. Greece will default, and while I've previously stated that this could happen in mid-March, this accelerates the timetable to as soon as this weekend. As mentioned in yesterday's report, on Wednesday, Greek President Karolos Papoulias blatantly attacked the Euro-zone core - the group tasked with saving Greece - saying, "Who is Mr Schaeuble to insult Greece? Who are the Dutch? Who are the Finnish?" This infighting is not to be taken lightly; the renationalization of Europe would result in a politically fractured continent and the breakup of the Euro-zone. For those that disagree, the cultural heterogeneity of the region will make it impossible to have sustainable peace over the long-term, and that a unified and peaceful Europe is an outlier in the grand scheme of human history. EUR/USD 5-min Chart: February 17, 2012 Charts Created using Marketscope - Prepared by Christopher Vecchio Overall, the Euro was the top performer on the day at the time this report was written, just up over 0.20 percent. The most interesting price action by far comes from the USDJPY, which now having declined by over 0.42 percent at the time of writing, has pared over 2.00 percent in just the past week alone. This comes after the Bank of Japan announced another stimulus package totaling ¥10 trillion ($128 billion), to be used to boost asset purchases in order to help pull the country out of a two decade long deflationary spiral (it will not). As discussed in last week's Japanese Yen Weekly Fundamental Forecast, I expect these measures to fail once more, and that the simple effort of flooding the market with liquidity has and will prove ineffective. The USDJPY is expected to continue to strengthen over the course of the year, ultimately settling at or above 90.000. 24-Hour Price Action Key Levels: 14:20 GMT  Thus far, on Friday, the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is trading slightly higher, at 9811.42 at the time this report was written, after opening at 9809.38. The index has traded mostly lower, with the high at 9817.81 and the low at 9787.80. --- Written by Christopher Vecchio, Currency Analyst for DailyFX
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts. Any opinions, news, research, analyses, prices, or other information contained in this email are provided as general market commentary, and do not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. The content in this email is subject to change at any time without notice, and is provided for the sole purpose of assisting traders to make independent investment decisions. Dailyfx has taken reasonable measures to ensure the accuracy of the information, however, does not guarantee its accuracy, and will not accept liability for any loss or damage which may arise directly or indirectly from the content or your inability to access the content, for any delay in or failure of the transmission or the receipt of any instruction or notifications sent through this email. Please read the full disclosures here. Additionally, Dailyfx takes your privacy seriously. Please click here to read our privacy policy. |  Related Blog Posts |  Subscribe via RSS *Get live updates in your web browser window. | |
