Hopium Floats: The Draghi Effect

The market was shaken overnight as the head of the European Central Bank, Mario Draghi, stated that the "ECB is willing to do whatever it takes to preserve the euro." This opens up possible monetary relief to larger EU countries such as Spain and Italy to alleviate financial woes.

The news snapped a 5-day decline of the euro against the U.S. dollar and the yen on the expectation that the EU will boost the rescue fund. The euro made significant gains against the dollar climbing just above $1.23 this morning.

The immediate question traders should be asking is one of sustainability. Can this rally hold allowing for a new trend to emerge? Or is this just déjà vu of 2011 when the constant stream of statements helped push the market back a few feet from the cliff? A few statements does not equate to a

Paths emerge. The EU has options. Yet they continually choose the well-beaten road of fiscal suicide. Leaders of the currency bloc made a weekend announcement that they will be issuing yet another bailout for Spain's faltering economy in the amount of $125 billion. The goal for this endeavor is to shore up Spain's banking crisis prior to the election in Greece, with the hope that it would decrease the probability of a Greece exit.

The announcement had an immediate impact on the markets this week, and investors responded by increasing the 10-year Spanish borrowing cost by 22 basis points to 6.69%, the highest level since the country's introduction to the euro. This move has several implications one of which is that it will increase their interest payment making it more difficult for them to pay off their debt.

The issued funds will be used to recapitalize the Spain's newly nationalized

The European debt crisis, the derailing of Chinese economic growth, and an underemployed United States all point toward a "global crunch." Today's economic superpowers are faltering as the spillover of the EU disaster continues to increase.

The eurozone is the third-largest market for U.S. goods, importing more than China and Japan combined. So the face value here is that the EU represents nearly 13% of all U.S. exports. If the euro continues its sharp decline against the dollar, and I believe that it will, U.S. goods will become too expensive for the European markets. That means it will be increasingly more difficult for U.S. manufacturers to compete with their European competitors.

In the first quarter of this year, the EU purchased $49.2 billion worth of U.S. goods. A decline in the amount of exports will inevitably impact the economic development within the United States that is directly related to job

How Far Will This Empire Fall?

The eurozone's house of cards is already on a shaky foundation. Greece is on the verge of a full societal collapse. Spain's rampant unemployment rivals the Great Depression. A negative reaction from Italy and France could lead to an utter catastrophe ... Once the first domino falls the game is over …

The euro continues in its downward spiral this week as the EU suffers one devastating blow right after another. Over the weekend, Greece's government was forced to bailout four of the countries largest banks, which cost them a sum of 18 billion euros.

Talks of a Greek exit from the currency bloc continues to heighten this week, but a chief concern for Greece right now is that if that comes to pass that there will be a front-run on the banks; which could mean "capital flight." The economic effects of an

World leaders assembled over the weekend at the 2012 G8 Summit to discuss the crippled state of the European economy. Over the last week, global markets have been in complete turmoil over Spain's banking problems and the worsening debt crisis in Greece, which renewed fears over the country's ability to remain on the Euro.

G8 Leaders have expressed their desire that Greece remain within the eurozone in light of the country's economic and political unrest, but have strongly urged that Greek leaders adhere to the agreed upon bailout measures. Restoring the eurozone will require cohesiveness amongst the Euro nations, but if Greece chooses not to play by the rules then it will be almost impossible for Europe to weather this economic storm -- the first domino would be tipped.

The event created a sense of optimism in the markets causing the EUR to gain strength against the USD, bouncing back

The topic of the Euro's fate has been the center of global and economic conversation for months and rightfully so. From the Euro's genesis, economists have questioned whether or not a centralized currency like this one could sustain itself in times of crisis. The unraveling of the European economy sheds new light on this line of reasoning. And in terms of economic events, we are seeing a domino effect within the EU and the pieces are falling fast. French Elections. Greek fury over austerity. Rampant Spanish unemployment.

Over the last few months investors have been subjected to a yo-yo diet of so-called fixes. Greek deal. No Greek deal. Spanish yields going parabolic. We have witnessed Italy and Spain emerge into economic crisis that has resulted in a significant amount of turbulence within global markets. And the crisis continues to build as turmoil erupts in France and Greece this week reaching

Some of the greatest artists in history evolved out of Europe, crafting the most historical works of art in the world, but none of them could have fathomed a picture like the one now set before us.

The entire European economy is "shaky" at best with debilitating eruptions surfacing almost weekly. Last week was the release of Italy's Consumer Confidence Index which fell to 89, 8% lower than last year, which is the lowest number that Italy has seen since 1996. In order to keep the country from an economic crisis, the government is issuing spending cuts and tax hikes to the tune of $26.5 billion; this is Italy's fourth recession since 2001.

To make matters worse, Spain announced on Monday of this week that they are entering into yet another recession. Spain is the fourth largest country of the 17 countries using the euro, so the concern is

Breakout Inevitable - EUR/USD Consolidating

Will the Euro break out or break down? The current consolidation pattern of the EUR/USD provides only two options. A deciding factor for this directional thrust could hinge upon the coming French election next month.

Francois Hollande, French presidential candidate, won the first round of the election with 27% of the vote. This is the first time an incumbent has come in second in a French presidential election, which forces a run-off. Hollande's potential nomination could pose an immediate threat to the value of the Euro, as he is not planning on ratifying the European agreement pushed by Germany to tighten budget rules.

The outcome of this election could be the straw that brakes the camels back. There is already enough unrest in the EU to weaken investor confidence.

Indicators on watch this week

• EUR German Consumer Price Index (Thursday)
• Euro-Zone Economic Confidence (Thursday)
• Euro-Zone