EURO BACK ON THE ROPES???

Now the dust has settled somewhat on the weekend announcements from the EU it seems worthwhile reflecting on reactions thus far.
After an initial surge in the EURO to nearly 1.31 we find ourselves back nearer 1.27 today. The euphoria of Bond and Equity markets has certainly not been matched by the forex markets.
The reasons would appear that the market has viewed the backtracking of the ECB into its own variation of quantative easing as negative. Rate increases in Europe may lag behind the USA and elsewhere and growth will be sluggish on the basis of the fiscal tightening required.
The fact that decisions were not agreed by all members namely Germany (Mr. Weber) you can see that the ECB has compromised itself badly. Any view that the ECB was the Bundesbank in disguise is dispelled.
I would therefore not be surprised to see further Euro weakness and at some point a test of levels nearer EUR/USD 1.20

A consideration if this happens is that we could indeed see some forex market central bank intervention to support the Euro. This if it happened would be done at a time when the market was very short Euros and designed to get maximum effect.
Further out nothing has changed and as I have said before this is throwing even more good money after bad. Can the cultures of Southern European countries be changed or will we see more civil unrest as austerity bites.

As for the equity markets they will continue to take their lead from US markets where Economic recovery at least looks more stable thus far. The technical picture there is still a little cloudy so we wait and see