Continued Drop in EUR. (2010-02-13 EURUSD analysis)

Just before the long vacation of Lunar New Year in China, the world looked so peaceful and the most breaking news was probably the world largest car manufacturer Toyota was in the third round of recalling it's cars Tacoma. The effects of the second increase in reserve rate by China People Bank and the boost of retail figures in US would probably vanish (at least in China and Hong Kong) after the holiday.

And now my focus is mainly on the EUR attack by speculators in the world. As I did not experience the 1997 Asian Financial Crisis caused by the attack to Thai baht and followed by the attack to HKD in 1998, I am sure it would be a very great time for me to learn about large-scale currency war this time.

So let's get started.
Firstly, it started by Greece wanting to cut its budget-deficit. Then EUR raised due to expectation of increase in interest rate.
Secondly, there was a financial problem in Greece, and economy went down.
Thirdly, people found out that international speculators were in short positions of EUR, as the short-contracts greatly rocketed.
Then, some experts along with the public expected that EU would save Greece, EUR raised to around 1.3820 again (which was actually in three days ago).
Yesterday, it was found out that there was no concrete measures of how EU would save Greece, EUR reversed again.

Speculators could stand in a must-win situation:
1. they could gain from the drop of EUR if EU does not save Greece
2. if EU saves Greece, then interest rate would go upwards, giving pressure to the stock markets, and speculators could gain from the short-positions in stock markets too

However, in 1998-1999, Hong Kong Government spent billions to raise interest rate and at the same time buy lots of stocks in the stock market. Speculators could not gain and this was a victory showing how a government could beat the speculators up.

Would this time be the same as what happened in Asia in 1998? I guess no.

Hong Kong was "somehow" backed up by the China Government mainly due to its international position, and the China Government had large pool of money! Now, let's get back to the Europe case, would the EU love to spend such giant amount of cash to fight against speculators after which they might face serious economy problem in their own countries? Would they choose to simply save Greece so that the stock markets would be in bearish and speculators would declare a win again? or would they choose not to save Greece, but to support the stock markets and economy in their own countries?

So going into the technical analysis, there is no doubt that EUR is in a bad downward-trend. The fibonacci and the lower line might give some support to it for some little rebounds. Nevertheless, the whole trend would be dropping. So, it looks like that this time, speculators would knock out governments by the short positions of EUR.



--- written by Jeffrey Sha