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Ralph Shell
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Ralph Shell has a rural midwest agricultural background. He graduated from a small Ohio liberal arts college. His graduate studies were in economics and history at Duke University. Shell has ten years experience trading cash commodities in domestic and export markets. He is also a former... More
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Forex Brokers
  • Euro Slide Ends With Feeble Rally 0 comments
    Mar 8, 2010 2:23 PM | about stocks: FXB, FXC, FXE, FXF, FXY, UDN

    Greek Prime Minister George Papandreau's travel agent has been busy.  After meeting with leaders in Germany and France, he is giving a speech in Washington today at the Brookings Institution and has a meeting scheduled with President Obama tomorrow.  Since he claims he is not begging for money to subsidize the generous compensation for the Greek bureaucrats, one might ask, what then is the purpose of the meetings.  There now appears to be European solidarity supporting the Prime Minister's reform efforts, though it is not known what will happen in the Greek's need more than moral support. 

    Perhaps Papandreau has this extensive travel schedule because his austerity plans are not popular back home.  Thursday is the day for seemingly, a bi-weekly general strike, called in Athens, by those who will lose benefits and no longer receive their fourteen months of yearly pay.  Today optimism reigns, but the refinancing of €20B in maturing debt by the end of May remains a problem, and a general strike this week may change the mood of the market.

    Quite possibly the Euro central bankers are learning from the Greek experience.  Market Watch reports:

    "The Financial Times on Monday said senior German and French officials are planning to launch a European Monetary Fund that would have the authority and capabilities necessary to prevent a repeat of Greece's de-stabilizing debt woes. "

    Last week the Greek government sold €5B 10 year notes yielding about 6.3%.  This week, the US Treasury is auctioning $21B of 10 year notes, in addition to $40B of three year notes and $13B of 30 year bonds.  The current yield of the 10 year note is 3.70%, firming up in front of the auction.  With the tremendous need to borrow by governments in most of the developed world, this poses a threat to the fragile global recovery.  The public sector's financing needs may make it more difficult for the private sector to borrow and expand business activity.  Should higher rates evolve, it would be the death knell for any hopes of a real estate recovery. 

    It looks like the euro is trying to forge a bottom, moving sideways for over a month in a narrow band.  When we did print a new low on the first of the month there was no follow through.  The COT report shows the big specs remain a massive short in the euro but small spec is only minimally net short.  When the uptrend line was broken on Dec 04, the market then trended down 1500 pips.  The downtrend line now comes in at about 1.3740.  Trend lines are made to be broken, but for now this pair looks like it wants to continue in a 1.35/1.37 range.  We find no reason to expect a breakout from this range, but there may be more 1.29 bears than there are bulls voting for a 1.42/44 recovery.  We chose the sidelines in this pair awaiting events and developments.

    Disclosure: bo equity positions

    Stocks: FXB, FXC, FXE, FXF, FXY, UDN
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