Friday November 26, 2010 - 16:52:26 GMT
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Black Swan Capital - www.blackswantrading.com
Contagious. Systemic. Gangrenous ...
Itâ€™s hard not to love this headline from Reuters:
EUROZONE GANGRENE SPREADING AGAIN
The little Thanksgiving â€śresearch noteâ€ť we
sent around on Wednesday included commentary that called the entire
eurozone bailout effort a complete failure. So as the Irish bailout
details are finalized, and focus shifts to potential bailout solutions
for Portugal, Italy, and eventually Spain, the realization eurozone
creditor nations will be unable to fund such rescue efforts will seep
into the markets and continue to beat down on the euro.
Daily: [Chart not available in
Indeed, starting about
two weeks ago weâ€™ve been cautiously ramping up our expectations for a
dollar bottom (euro top). We have for a while now been open to an
all-out collapse of the economic monetary union and the common currency;
but market consensus was fixed on QE2. The speed at which the euro is
now giving up ground should become self-fulfilling; deeper declines are
Before this week
we thought the euro could climb a bit higher before an eventual failed
test of the 1.4280 daily high. But Tuesdayâ€™s mashing and todayâ€™s move
mean the pressure on the euro might have built up more quickly than we
expected. There are some things to watch, however, in the near-term:
[Chart not available in
The pair is approaching the bottom bound of its downtrend channel (solid
2) The pair
is just above its 200-day moving average(purple line.)
3) The pair is testing trend line support
going back to June (speckled line).
4) The pair testing chart support going
back to August(dashed uptrend line).
In other words, on a technical basis,
EURUSD has found several support levels converging at about
1.3150-1.3200. From here we could see a corrective bounce. But ...
We know that when the crowd seizes on a fundamental story, the
technical picture can quickly become irrelevant. So, we recommend you
remain short euro and sit through any corrective bounce; within reason
of course. The potential rewards seem to massively outweigh the risks
of remaining short EURUSD here.
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