Stocks and Dollars

The euro climbed on signs that Greece may reach an agreement on budget cuts, needed for a potential $159 billion bailout, but remains capped at 1.3260/80 former support of March breached Tuesday due to S&P downgrading Greece and Portugal ratings. The whole euro zone sentiment is under pressure as fears of Greece contagion persist, therefore the euro is likely to face a difficult task while trying to advance higher, to 1.3500. On the other hand, short positions are at record level and a potential short squeeze may occur any time. What’s needed for that is some catalyst news to sound better than the tons of news coming each day: more action and less talking. Meanwhile, minor pullbacks to the upside are facing massive selling and the $1.30 level is first bears’ key target. Some month-end profit taking is likely today, favoring a retreat to the upside – but will the barriers at 1.3300 and 1.3350 permit an extended rally? Current quote is 1.3242 @05:43 GMT

The pair has reversed more than 50% of its weakness started from the 1.5496 level following a halt in price at the 1.5113 level to close higher at 1.5345 on Thursday. This reversal is significant in two key ways with the first being a validation of the 1.5127 area as a strong support and second, a possibility of the bull pressure started at the 1.5124 level extending higher.

The euro climbed on signs that Greece may reach an agreement on budget cuts, needed for a potential $159 billion bailout, but remains capped at 1.3260/80 former support of March breached Tuesday due to S&P downgrading Greece and Portugal ratings. The whole euro zone sentiment is under pressure as fears of Greece contagion persist, therefore the euro is likely to face a difficult task while trying to advance higher, to 1.3500. On the other hand, short positions are at record level and a potential short squeeze may occur any time. What’s needed for that is some catalyst news to sound better than the tons of news coming each day: more action and less talking. Meanwhile, minor pullbacks to the upside are facing massive selling and the $1.30 level is first bears’ key target. Some month-end profit taking is likely today, favoring a retreat to the upside – but will the barriers at 1.3300 and 1.3350 permit an extended rally? Current quote is 1.3242 @05:43 GMT

Christopher Pavese submits:

As we discussed in our Q4-09 Broyhill Letter, it appears that the EU’s initial plan of action (see illustration below) was not exactly a robust plan after all. At the time, we suggested that Mr. Almunnia consult his history books, when he claimed that:

There is no bailout problem. In the euro area, default does not exist.

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Prieur du Plessis submits:

The gold price is not only making headway in U.S. dollar terms, but also in most major (and minor) currencies as illustrated by the table and graph below. Bullion veterans will recognize this phenomenon as a manifestation of solid investment demand (and a vote of no confidence in fiat paper per se).

The picture and the numbers tell the full story. (Click to enlarge)

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The dollar closed mixed versus its counterparts on Friday. Greek default risks eased and reports showed that federal prosecutors are weighing criminal fraud charges against Goldman Sachs. US Q1 2010 GDP rose at a 3.2% annualized pace, in line with expectations. Stronger-than-expected private consumption and business investment bode well for…

USDJPY preserves most of its recovery gains activated from the 84.80 level, its Nov’10 low but its weekly and daily price charts show some forms of price exhaustion as the week ended on Friday. The weekly chart (not shown here) shows the inability (ahead of key resistance) of the pair…