Monday October 4, 2010 - 14:08:30 GMT
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Nobel Winner Warns Economic Woes Could Endanger Euro
The EUR USD is retreating this morning, after an initial
surge, on renewed concerns about the impact of the Euro Zoneâ€™s sovereign debt
The Euro was up early in the Asian trading session, boosted by
week-end remarks by Chinese Premier Wen Jiabao.
Jiabao helped the Euro when he said â€śWe hope that by
intensifying cooperation with you, we can be of some help in your endeavor to
tide over difficulties at an early date,â€ť Wen said in a speech to the Greek
parliament, according to The Wall Street Journal. â€śChina
will not reduce its euro-bond holdings and China supports a stable euro.â€ť
This strong endorsement initially underpinned the Euro until
Nobel Prize-winning economist, Joseph Stigliz, warned of sovereign debt threats
to the stability of the Euro Region, eroding Jiabaoâ€™s bullish spin, and forcing
investors to once again face the reality of debt problems in Spain, Ireland and other peripheral
In addition to the Stigliz comments, the Euro was weakened
by a further rise in Spanish unemployment.
It was reported last night that Stiglitz said in his book
â€śFreefallâ€ť that governments around the world may have attempted to cut deficits
too quickly, thereby setting up the possibility of a double-dip recession.
He also warned that the Euro Zone may not survive if
competitive tensions continue within the region.
The break this morning in the Euro looks as if investors are
paring positions as a precaution against a further acceleration in sovereign debt
woes. There doesnâ€™t appear to be any structural damage to the up trend,
however, a closing price reversal is developing which could translate into a
sizeable correction if confirmed.
Normal profit-taking may also be taking place as the Euro
edges toward a major Fibonacci level at 1.3896. Besides a reversal top, a break
under a major 50% level at 1.3510 will also be a sign that selling pressure is
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