Greece Urged to Give Up Euro
May 31st, 2010WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
I’m not sure how much of this is piece is short-the-euro hype, but here it is in any event. Just be aware that the shortside euro trade has been VERY easy money lately. When the mainstream news is going with the easy money trade, watch out.
From a technical analysis perspective, though, while a double bottom of sorts is in on EUR/USD, a bearish descending triangle is shaping up. My call would be to stick to the short side for the moment, BUT to consider covering and reverse it long if that triangle breaks to the upside. A break above the top line of that triangle means that the double bottom “won” so to speak.
As of now, though, I don’t believe that double bottom. For it to be real, that is, for it to signal a major reversal, I’m guessing that interval between the pivots would have to be much longer, a few weeks at least. This is just about a week.
That said, if that top line of the triangle is taken out, it’s going to set off a short covering rally.
EUR/USD, 8 Hour Interval
Via: Times:
THE Greek government has been advised by British economists to leave the euro and default on its €300 billion (£255 billion) debt to save its economy.
The Centre for Economics and Business Research (CEBR), a London-based consultancy, has warned Greek ministers they will be unable to escape their debt trap without devaluing their own currency to boost exports. The only way this can happen is if Greece returns to its own currency.
Greek politicians have played down the prospect of abandoning the euro, which could lead to the break-up of the single currency.
Speaking from Athens yesterday, Doug McWilliams, chief executive of the CEBR, said: “Leaving the euro would mean the new currency will fall by a minimum of 15%. But as the national debt is valued in euros, this would raise the debt from its current level of 120% of GDP to 140% overnight.
“So part of the package of leaving the euro must be to convert the debt into the new domestic currency unilaterally.”
Greece’s departure from the euro would prove disastrous for German and French banks, to which it owes billions of euros.
McWilliams called the move “virtually inevitable” and said other members may follow.
“The only question is the timing,” he said. “The other issue is the extent of contagion. Spain would probably be forced to follow suit, and probably Portugal and Italy, though the Italian debt position is less serious.
“Could this be the last weekend of the single currency? Quite possibly, yes.”
