EUR/USD made it’s way once more back below 1.3300 as the Greek tragedy continues and new data paints a bleak picture for the euro zone. Moody’s Investors Service once again downgraded Greece’s government bond ratings to A3 from A2 and stated that a further possible downgrade might be coming upon further review. Hardly a major surprise there, but it did help send the euro much lower today. As I’ve mentioned before in previous posts, the bonds market is something to keep an eye on when evaluating the strength/weakness of the Greek situation and it’s impact on the currency market. Today Greek 5-year CDS rose to a record 616 bps after Moody’s announcement. Portuguese Finance Minister went to say risk of a contagion effect from Greece exists, and is being reflected in the bond markets. One other thing driving the bears right now was Eurostat data showing Greek budget deficit is up to 13.6% of GDP in 2009 vs government’s projection of 12.7%. Perhaps the scariest part was that Eurostat expressed reservations on the quality of data reported by Greece.
In the U.S., Obama made a public speech from Cooper Union in Manhattan and expressed several points:
- Goal of regulation measures is to make sure taxpayers never again “on the hook” because firm deemed to big to fail; Reform would put a stop to taxpayer-funded bailouts
- Economy growing, fastest growth turnaround in almost three decades, more work to do
- Will bring market transparency, help ensure derivatives trading takes place “in the light of day”
Also we had some economic data out of the NY session:
- US March existing homes sales came in at 5.35 mln unit annual rate; Above consensus 5.28 mln
- March PPI has come in at +0.7% m/m, +6.0% y/y, firmer than median forecasts +0.4%, +5.8% respectively.
- Ex food and energy +0.1% m/m, +0.9% y/y, exactly in line with median forecasts.
- US initial jobless claims week April 17 fell to 456K from 480k prior week
So in summary, it doesn’t look good for the EUR/USD bulls going into Friday as the insurmountable problem continue to build for that region without much hope any near future relief. On the other hand, the U.S. seems to be in good shape and continuing to recover. I would expect new lows for this pair to be reach by this time next week. What will be interesting to see is how much of a fight the bulls will be able to carry out as the Greek bailout plan has already been revealed now, which is what helped the pair avoid a continuation of the main downtrend this month. It would now appear that the plan isn’t enough to restore confidence and fears of a “contagion effect” in the bond markets are going to take center stage in the near future. As I type this I am actually long on the EUR/USD after the pair found support at the 1.3282 level and the daily S3 and now appears to be in the process of a slight corrective move. I’m still VERY bearish on this pair and am looking at the 15 minute chart MA’s to signal a change in momentum back in the direction of the main downtrend while hoping to score at least 30 pips off the corrective move.
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