First, the Euro. We are again at a major resistance point. Today's rally made little sense, given that the weekend Euro finance meetings disappointed with absolutely no result. The market was trading down over 100 pips this morning until there was an announcement made that the European Financial Stability Fund was being expanded from 440B Euros to 780B Euros, to which the Euro reversed strongly upwards to the highs of Friday's stupid rally.
The computers that trade our markets need a little help with their reading comprehension, because that isn't good news. The fund is likely being expanded to cover larger countries like Spain, who is next on the chopping block. The 340B Euros is certainly not for Greece, who is already being denied part of the emergency funding set aside last year, because they have failed to meet the budget requirements from a year ago. Nevertheless:
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| EUR/USD Hourly |
Of course, the bond market is buying none of it.
10 year bond yields | ||||
11.15% | 4.85% | 11.46% | 17.34% | 5.59% |
Spanish 10 year yields appear to be breaking out of the six month triangle, which would target around 6%.
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| Spain 10 Year Bond Yields |
The PIIGS CDS Composite Index has gone vertical.
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| PIIGS CDS Composite Index |