Nobel Winner Warns Economic Woes Could Endanger Euro

The EUR USD is retreating this morning, after an initialsurge, on renewed concerns about the impact of the Euro Zone’s sovereign debtwoes.

The EUR USD is retreating this morning, after an initialsurge, on renewed concerns about the impact of the Euro Zone’s sovereign debtwoes.

The Euro was up early in the Asian trading session, boosted byweek-end remarks by Chinese Premier Wen Jiabao.

Jiabao helped the Euro when he said “We hope that byintensifying cooperation with you, we can be of some help in your endeavor totide over difficulties at an early date,” Wen said in a speech to the Greekparliament, according to The Wall Street Journal. “Chinawill not reduce its euro-bond holdings and China supports a stable euro.”

This strong endorsement initially underpinned the Euro untilNobel Prize-winning economist, Joseph Stigliz, warned of sovereign debt threatsto the stability of the Euro Region, eroding Jiabao’s bullish spin, and forcinginvestors to once again face the reality of debt problems in Spain, Ireland and other peripheralnations.

In addition to the Stigliz comments, the Euro was weakenedby a further rise in Spanish unemployment.

It was reported last night that Stiglitz said in his book“Freefall” that governments around the world may have attempted to cut deficitstoo quickly, thereby setting up the possibility of a double-dip recession.

He also warned that the Euro Zone may not survive ifcompetitive tensions continue within the region.

The break this morning in the Euro looks as if investors areparing positions as a precaution against a further acceleration in sovereign debtwoes. There doesn’t appear to be any structural damage to the up trend,however, a closing price reversal is developing which could translate into asizeable correction if confirmed.

Normal profit-taking may also be taking place as the Euroedges toward a major Fibonacci level at 1.3896. Besides a reversal top, a breakunder a major 50% level at 1.3510 will also be a sign that selling pressure isbuilding.

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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