Weekly review….. Euro takes a triple whammy or was it 4

Even for seasoned traders last weeks events were pretty hairy. Who would have believed in a matter of days many commodity prices could collapse ,Trichet shows his soft side and US Employment data (although somewhat conflicting) was stronger. The final nail in the Euro on Friday was a report in German Magazine Der Spiegel that discussions were to take place regarding Greece leaving the Euro block.
The Upshot has seen the Euro fall across the board.Down to nearly EUR/USD 1.43 and below 116.00 EUR/JPY
We have bought EUR/USD on the way down which is uncomfortable .I do not see an end to US dollar weakness but undoubtedly there will be a focus back on peripheral EU problems.Taking the above factors one at a time.

Firstly commodities which have enjoyed such a good run show just how speculative some positions are . Prompted by huge falls in Silver which was triggered by increases in margin requirements the sell off continued Friday. Oil falling under US$100 to $97 was another big mover.It shows that authorities will have to get some hold on these markets if they are to prevent speculators causing real damage to peoples lives and economies by forcing up prices. However, tlast weeks move does nothing to interfere with the longer term uptrend.
Trichet chose not to issue hawkish comments. The dilemma for the ECB is that Germany for sure does need higher rates peripheral countries do not.If Germany prints higher inflation levels the pressure will increase on the ECB.
US jobs data was positive with more jobs added however the headline Unemployment rate went up to 9%. The Fed will never tighten while unemployment remains so elevated. What remains in the balance is will there be more QE.
Finally the Spiegel article in what is a publication. normally well worth following in English online. Briefly it hinted at a special meeting in Luxembourg because one option for the Greeks was withdrawal from the Euro.
This has been denied by all member states although discussions on the Greek problem will be ongoing. Once again all parties have excluded the possibility of restructuring. The truth is that the possibility of Greece not restructuring at some time is absurd. They will but when the time is right and in a manor to prevent too much turmoil in the banking sector.
So where can forex markets go from here.Quite possibly a relief rally for the Euro on Monday but Fridays events have rattled the markets. For longer term players there should still be opportunities to buy EUR/USD cheaper although 1.50 plus EUR/USD may well have been postponed for some time.Indeed we may see levels nearer 1.40 before any significant rally begins
Amongst all the fun equities recovered and stability there could well determine general risk appetite.

Thursday Update…. EUR/USD Creeps back up ahead of ECB

Having broken 1.4900 yesterday EUR/USD failed to push on beyond 1.4930 and with commodities easing again promptly fell back to 1.4825 in what was a bit of a suckers rally.Technically there is a lot of old hurdles around the 1.4950 level plus the psychological 1.50 making it tough to break at the moment. It could well be seat of the pants trading today ( i.e. trade it as you see it) with the ECB rate decision and Trichet press conference. On balance I could see a failure again on the upside and still hope for that correction down to clear the air a bit.
Difficult to judge what is already discounted in the market in terms of the ECB decision but if they don’t raise this time presumably Trichet will hint that it is just around the corner. Interest rate markets are beginning to price a further 1% this year.
All in all though there still seems very little to nothing to tempt you into buying US dollars unless its a day trade.Once commodities settle then it could be upwards again with the US currency under pressure.
At the weekend I highlighted Silver´s scary rise …a pretty scary fall now ,the biggest 3 day fall since 1983 which my memory says could have been when the infamous Bunker Hunts (not rhyming slang) tried to corner the market