Forget Euro $1.30: Here's The New Crucial Level, And Here's When To Bet On A Turnaround

The Business Insider ^ | 5-6-2010 | Joe Weisenthal

[blam]

Forget Euro $1.30: Here's The New Crucial Level, And Here's When To Bet On A Turnaround

Joe Weisenthal
May. 6, 2010, 5:05 AM

It was a pretty violent night in euroland, with the battered currency trading in the $1.27s before trading back above $1.28.

The $1.30 "support" level that everyone was obsessed with a couple days ago is a fond memory.

So what's next?

$1.25? $1.20?

Mike O'Rourke of BTIG explains what you should be looking out for:

The (chart) below highlights the key 1.25 support level which coincides with the October-November 2008 and February-March 2009 bottoms the currency made versus the Dollar. Remember (how could anyone forget) those were key levels/bottoms in the U.S. equity market during the crisis. The irony is that the flight to quality bid was largely the result of problems emanating from the U.S. Obviously, today the problems are originating from Europe. That distinction is a key one because when that previous flight to quality occurred, global risk assets were sold and the currency was converted into Dollars and Treasuries were viewed as the only safe place to be. Fourteen months later, investors also have the alternative of a U.S. equity market trading less than 14.5x this year’s still rising earnings, estimates. Amidst the global uncertainty, it is not overwhelmingly compelling yet but should another notable down leg materialize, the situation will get very interesting. The Euro also has a major support level at the 1.20 level where it hovered for the second half of 2005.

As for "the play"

Ideally, as this situation unfolds over the next few sessions, an opportunity will arise if the Euro hits the 1.25 level in conjunction with a market event, i.e. German vote, U.S. Jobs report or something of a similar nature. .

[snip]

[the Real fifi]

Greece will be forced to leave the EMU soon. I am not betting on any EU turnaround for a long time.

[DCBryan1]

The big question is, when do we go down to the bank and buy Euros?

[RexBeach]

Not yet. Patience.

[MrB]

Buy silver and gold American Eagles.

Their buying power remains the same regardless of the value of currency.

[kabar]

If Greece is forced to leave, the Euro collapses like a house of cards. I doubt it will happen.

[Red Badger]

Greece will be forced to leave the EMU soon.

That's a bit of ostrich, don't you think?...........

[celmak]

ping

[the Real fifi]

the end near for the European Monetary Union?
Clarice Feldman
One market watcher predicts -and I agree —the end of the European Monetary Union is near:
Yesterday we pointed out that France was a global top three derisker in sovereign CDS as traders have shifted their worries from the periphery to the core. We have long discussed that the reason for this is that France, not Germany, has the greatest exposure to Greece and the PIIGS. Below is an RT clip in which Hugh Hendry confirms just this: according to the Ecclectica head man, a mark to realistic market of Greek debt would wipe out E35 billion in French bank capital, “and it is questionable whether the French banking system would take such a hit.” Hendry’s solution, as has been the case from the solution, is for Greece to leave the euro, and points out that due to FX inflexibility, there will be no tourists in Greece this year as everything becomes painfully expensive, not in Drachmas but in Euros. We would add that the burning parliament is probably not that much of a tourist draw either. In typical fashion, Hugh dismembers Angela Merkel’s hypocrisy: “When the truth becomes unpalatable, what is the truth. Angela Merkel, when we say she is being generous, there is nothing generous about spending taxpayers’ money in another country, that is not generosity, that is merely trying to salvage a bankrupt set of political ideology. So to blame the messenger when it’s the truth that hurts, I find that inexcusable.” Just as Hugh’s huge bet against the euro has proven to be a terrific success, we are confident that he will be correct about the end of the EMU quite soon as well. And as the moderator adds “Shame on you, Europe, for needing the IMF to bail you out. Europe is like an African nation.” Amen.

McTeer of Forbes says essentially the same thing. The European Monetary Union is all but over. Kaput. Next to exit unless things change drastically are Spain and Portugal. The idea was ridiculous at the outset and is only more absurd now.
Posted at 08:33 AM | Email | Permalink | Comments | Share

[kabar]

There is no way Greece can leave without causing a chain reaction on the EMU, the UK, and us.

Greece crisis: 'Contagion risk' for UK & Europe banks

Whether the bailout of Greece is successful or not is another question, but the EU and IMF (the US funds 40% of the IMF) will do their damndest to save the Euro.

[the Real fifi]

No it won’t do anything but piss away more of our and everyone else’s money—just as the bailouts here did.
http://dailycaller.com/2010/05/06/u-s-taxpayers-are-helping-finance-greek-bailout/

We are already into this thru the IMF to the tune of %6.8 billion in US tax payers’ money and everyone knows they’ll be back for more. Let Greece and the EU take the hit NOW.

[kabar]

You are entitled to your opinion. I am as well. There is no way we can insulate our banks and country from the collapse of the Euro. The global economy is so intertwined that everyone feels the hit when a major player goes down. The UK is not part of the EMU but has a major stake in what happens. Whether we like it or not, we are stuck with this giant tar baby.

[Nihil Obstat]

that won’t happen with an eagletarian system like the EMU

[Red Badger]

That’s a bird of a different feather?.................

[arthurus]

with hawk-eye economists watching out for the Euro

[SunkenCiv]

Saudi Arabia can't have the Euro slide too much.

OPEC Has Already Turned to the Euro
GoldMoney Alert
February 18, 2004

...The source for the euro exchange rate is the Federal Reserve, and I have calculated the euro's average exchange rate to the dollar for each year based on daily data.

US Imports of Crude oil
(1)	(2)	(3)	(4)	(5)	(6)
Year	Quantity (thousands of barrels)	Value (thousands of US dollars)	Unit price (US dollars)	Average daily US$ per € exchange rate	Unit price (euros)
2001	3,471,066	74,292,894	21.40	0.8952	23.91
2002	3,418,021	77,283,329	22.61	0.9454	23.92
2003	3,673,596	99,094,675	26.97	1.1321	23.82

We can see from column (4) in the above table that in 2001, each barrel of imported crude oil cost $21.40 on average for that year. But by 2003 the average price of a barrel of crude oil had risen 26.0% to $26.97 per barrel. However, the important point is shown in column (6). Note that the price of crude oil in terms of euros is essentially unchanged throughout this 3-year period.

As the dollar has fallen, the dollar price of crude oil has risen. But the euro price of crude oil remains essentially unchanged throughout this 3-year period. It does not seem logical that this result is pure coincidence. It is more likely the result of purposeful design, namely, that OPEC is mindful of the dollar's decline and increases the dollar price of its crude oil by an amount that offsets the loss in purchasing power OPEC's members would otherwise incur. In short, OPEC is protecting its purchasing power as the dollar declines.

Thanks blam.