Last week was indeed a roller-coaster week as the week started with the aftermath of SEC vs. Goldman Sachs, then with President Obama announcement of the Financial Overhaul bill, the widened spread of Greece bond to record levels, and ended with week with Greece calling on the activation of the aid package.
Although we still don’t have anything definitive yet, it is clear now that the Goldman Sachs’ issue is no longer as grim as it originally appeared. With SEC’s split vote initially on its decision to take on Goldman Sachs and the confidentiality argument of Goldman to its clients, SEC’s case is 50/50 at best, and it may just be a witch hunt that ends up costing taxpayers’ at lot of money, while SEC drag on this lawsuit for years; traders will probably forget all about it as early as this week…
As for the U.S. Financial Overhaul bill, on a news flash over the weekend, stated that although it is possible that a bipartisan agreement may be reached, it’s probably not likely to pass through the Senate vote on Monday. This may help risk appetite sentiment in the U.S. trading session on Monday and possibly for the rest of the week as the passing of this bill may lead to serious concerns that may affect the recovery of the global economy.
Last but probably the opposite of least, is the call for activation of the EU/IMF aid package by Greek Prime Minister Papandreou, which boosted EUR on Friday after hitting yearly lows against the USD at 1.3200 levels. Papandreou stated over the weekend “don’t bet against Greece or you will lose your shirt” as the aid is near and assuming it will be available to Greece before its obligation deadline, which makes restructuring of its debt unnecessary.
Assuming that Greece does get the aid, which is the most likely scenario, speculators betting on Greece to default will probably have to reconsider their positions, as the possibility of a Greece default will be postponed for at least another year… And in the meantime, unless another country (take your pick: Italy, Portugal, Spain, etc…) falls in the same dire situation, EUR should start to consolidate over recent exaggerated losses and make its way back above the 1.3700…
Therefore, I do expect to see some ranged trading, some more weakness in the JPY, and some recovery in the EUR against other majors. As the market is on an up trend due to global economic recovery, and unless we have continuous negative news events bombarding the market, we should see global recovery leading most markets this week.
Of course I’d recommend monitoring the talks over the EU aid package for Greece, the closer we are to May 19th, more bets will be placed on possible Greece default. The moment aid package is successfully passed, we should see a strong relieve in the market and EUR should surge up in the next few sessions…
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{ 8 comments… read them below or add one }
Hello! Mr. Henry so we look forward, to the rise of Euro after the meeting?
As we can see by the market reaction after the approval of the aid package, EU did move up initially!
With the latest development 27/4/10 with Euro at new low, will you still hold the same view?
Political posturing of German politicians are the primary reason for EUR’s weakness. This should be countered with Trichet’s trip to Germany tomorrow. We’ll see.
Any change from the German positions today?
Trichet and IMF are going to Germany today to talk to their Parliament. Hopefully this will smooth things as if the Germans had their ways, not only Greece will default, Portugal is likely to follow next, and then eventually even Germany will be affected.
Henry what can you say about the EUR/AUD currency pair?, as anyone can see this pair have been in a downtrend for over a year, do you think its time for the pair to retrace or it will keep on a downtrend for a little further
It could retrace back as soon as we get news on the aid package approval… I would wait and then buy, not before.