Investors Losing Confidence in Euro

The Euro touched its lowest level since October 2008 thismorning as investors continue to pull out of the currency on the fear thatpolitical and economic problems will lead to a collapse of the economy.

The Euro touched its lowest level since October 2008 thismorning as investors continue to pull out of the currency on the fear thatpolitical and economic problems will lead to a collapse of the economy.

Besides the risk of sovereign debt default, investors arenow becoming concerned about the lack of activity and the inaction from theEuropean governments. Once again investors are asking the question “where isthe union in the European Union”.

The inability to stop the slide in the Euro by pumping $1trillion into the economy with basically debt on top of debt has convincedinvestors that the EU has and had no plan to prevent the kind of currencyslaughter taking place at this time. Investorshave grown weary of the reactive moves by the governments and want to see moreproactive action.

From the start investors have been asking for clarity fromthe EU. No one wants to see a currency collapse, but without a firm plan inplace investors have had no options to consider except to sell the Euro.

This morning’s selling pressure has been triggered by astory in a Spanish newspaper saying that French President Sarkozy isthreatening to pull out of the Euro. Although his statement has been denied afew times this morning, traders don’t seem to believe.

The plunge in U.S. equity markets is leading to asharp break in the USD JPY. Traders are divesting out of higher yielding assetsand into the safety of the lower yielding Japanese Yen. The chart patternsuggests that a break to 91.61 is likely. A failure to hold this important 50%price should lead to further weakness.

Weakness in the Euro is spreading to the British Pound asthe euphoria from this week’s creation of a new government has apparently wornoff. Investors are nervously watching the events in the Euro Zone unfold withthe thought that the same issues can quickly spread to the U.K. At thistime, the GBP USD is holding last week’s low at 1.4474, but downside momentumcan push the market through this price at anytime before the close.

Yesterday’s closing price reversal in the USD CAD wasconfirmed earlier this morning, putting this pair on a path toward to 1.0423 to1.0498. The dumping of higher risk assets led by equities and crude oil are thecatalysts behind today’s decline.

Falling stock prices are putting pressure on the AUD USD buthave not reached the point of panic. So far today it looks like normal sellingpressure, but this may be only because the Dow is down 200 points. Should theDow extend its losses in dramatic fashion then look for even stronger sellingpressure to emerge on the Aussie.

A similar repositioning is taking place in the NZD USD.Investors are selling the Kiwi in sympathy with the U.S. stock market break, but therehas been no sign of panic selling. So far everything has been orderly. This maybe because of lessons learned from last week’s panic sell-off. Traders don’twant to overreact like they did last week

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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